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Perspective: Mid-Day Commentary for July 1

By: Mike Castle, Market Intelligence - Fertilizer Analyst

July 1 – It’s a mixed day on Wall Street, with the Dow Jones making a fresh all-time high while the Nasdaq reverses course and falls roughly 1% on the day, and the S&P 500 is caught in the middle, up ~0.25% at the time of writing. The VIX has cooled through the session, hovering back around 16 at the time of writing, a two-week low. The dollar has cooled from its morning highs into midday but remains in the green as it hovers near the 101.35 level. Similarly, treasuries have cooled from their highs earlier in the session but remain in the green, with 10-year yields trading at 4.463% and 2-year yields trading at 4.156% at the time of writing. Crude oil has extended today’s decline, with nearby WTI falling to $68.30 at midday, another low since the start of the war, while Brent futures have done the same as they fall to trade at $71.20. The ags remain largely in the green, led higher by the wheat complex following yesterday’s unexpectedly sharp reductions in acreage in both the U.S. and Canada, coupled with weather concerns elsewhere.

Strength in the U.S. manufacturing sector cooled a bit in June, with ISM’s Manufacturing PMI falling to 53.3, below the average estimate of 54.0 but still marking a sixth consecutive month in expansionary territory. It’s worth noting that May’s 54.0 was a four-year high as well. Elsewhere, S&P Global’s Manufacturing PMI was revised down sharply to 53.9 in June from the preliminary 55.7 and representing a notable decline from the 55.1 seen in May. As with the ISM data, however, it’s important to keep in context the recent strength, as this represents an 11th consecutive month in expansionary territory.  

USDA will release their monthly Oilseed Crushings report for the month of May this afternoon at 2:00 PM Central Time. The trade is looking for a decline to 214.9 million bushels of soybeans crushed in May from April’s 218.45 million, though this would easily be a fresh record high for the month, above last May’s 203.7 million. U.S. soybean oil stocks are seen falling to a five-month low at 2.214 billion pounds, following a similar drop on last month’s NOPA report for the month of May that caught the market off guard. Per the USDA’s monthly data, cumulative U.S. soy crush thus far in the ‘25/’26 marketing year sits at 1.784 billion bushels, up 8.7% year-over-year versus the September – April period in ‘24/’25, with USDA now looking for an 8.4% year-over-year uptick after continuously increasing their estimate through the year to now sit at an all-time high of 2.650 billion bushels.

That’s the context that makes potential Chinese buying more impactful, with the U.S. having less available exportable supply amid the rapid expansion in crush capacity in response to supportive EPA policy driving record biofuel demand. The U.S. soybean balance sheet did build in some additional supply following yesterday’s increase of 665k soybean acres; assuming the same harvested percentage and yield from the June WASDE, this would imply an additional ~35 million bushels of soybean production in the ‘26/’27 marketing year. That may sound like a decent chunk, but if China were to actually come anywhere close to the alleged 25 million metric ton (919 million bushel) purchase target, we could be looking at a much tighter supply story given the increased competition in the domestic market. Record South American soybean supply certainly weighs on those prospects from a pure price perspective, but the Chinese government could view that spread as a small price to pay in the broader picture of political relations between the world’s two largest economies. The market will need to see confirmation of business taking place rather than just rumors before getting too excited, but it’s something that will remain front of mind in the months ahead.

U.S. crude oil stocks fell by 3.775 million barrels in the week ending June 26, below the expected 4.466-million-barrel draw and representing the smallest draw in five weeks. This puts total U.S. crude oil stocks excluding the SPR at 408.36 million barrels, taking out the 2022 lows to now sit at the lowest level since late September 2018. Crude oil stocks in the SPR were drawn down another 5.536 million barrels week-over-week, bringing the total to 325.655 million barrels, the lowest level since late May 1983, as shown in the accompanying graphic. On a more positive note, crude oil stocks at Cushing rose 709k barrels, reversing course from a nine-week streak of declines.  

The refined products showed more of a mixed bag, with gasoline stocks unexpectedly falling 2.483 million barrels week-over-week versus expectations of a much more moderate 0.513-million-barrel draw. This was largely driven by a sizable rebound in gasoline exports during the week, with weekly imports dipping to a 5-week low as well. Distillate stocks saw an unexpectedly large build, up 2.483 million barrels week-over-week versus expectations of a 0.513-million-barrel draw. This brings total U.S. distillate stocks to 108.60 million barrels, an 11-week high. Weekly distillate exports fell again, but it’s worth keeping an eye on the weeks ahead, as we’d expect to see an uptick in demand for U.S. diesel given the ongoing attacks on Russian refineries tightening supply there.

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July 1 – It’s a mixed day on Wall Street, with the Dow Jones making a fresh all-time high while the Nasdaq reverses course and falls roughly 1% on the day, and the S&P 500 is caught in the middle, up ~0.25% at the time of writing. The VIX has cooled through the session, hovering back around 16 at the time of writing, a two-week low. The dollar has cooled from its morning highs into midday but remains in the green as it hovers near the 101.35 level. Similarly, treasuries have cooled from their highs earlier in the session but remain in the green, with 10-year yields trading at 4.463% and 2-year yields trading at 4.156% at the time of writing. Crude oil has extended today’s decline, with nearby WTI falling to $68.30 at midday, another low since the start of the war, while Brent futures have done the same as they fall to trade at $71.20. The ags remain largely in the green, led higher by the wheat complex following yesterday’s unexpectedly sharp reductions in acreage in both the U.S. and Canada, coupled with weather concerns elsewhere.

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