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Perspective: Morning Commentary for July 2

By: Mike Castle, Market Intelligence - Fertilizer Analyst

Guest Commentary by Mike Castle

Senior Commodities Economist

July 2 – All eyes are on the labor market to start the day, with the Friday holiday pushing June’s Non-Farm Payrolls report up to the same day, and release time, as weekly Jobless Claims. It was a very ugly headline print for Non-Farm Payrolls with only 57k jobs added in June, effectively only half of the expected 110k. To make matters worse, both April and May were revised lower by 31k and 43k, respectively, to now show a combined 277k jobs added instead of 351k. Despite this negativity, the unemployment rate dropped to 4.2% from the 4.3% seen from March through May, representing the lowest headline unemployment reading since June of last year. However, the drop was largely a function of a collapsing labor force participation rate, falling 0.3% month-over-month to sit at only 61.5% in June, a low not seen since March 2021 during the pandemic recovery. Average hourly earnings came in as expected, up 0.3% month-on-month and 3.5% year-on-year, as did the average workweek at 34.3 hours.

First-time claims for unemployment benefits came in at 215k, below the expected 220k, while the week prior was revised up slightly to 216k from the 215k initially reported. Continuing claims came in a bit higher than expected, however, at 1.814 million versus the anticipated drop to 1.810 million. Prior week continuing claims were revised down to 1.812 million from the previously reported 1.821 million, leading today’s print to show a slight increase instead of decrease. The four-week moving average for jobless claims fell to 222k, down from 224.5k in the week prior that represented a high not seen since November 2025.

Bad news may be good news for the stock market, however, with today’s ugly jobs report potentially bringing back a glimmer of hope for the doves after a sharply higher shift in rate expectations in recent months amid the largely resilient labor market and hot inflation. Stock futures shot higher across the board following the release but have pulled back slightly from the initial highs to point to a mixed open. The VIX fell notably on the release as well, falling back to hang around the 16 level, as did the dollar, pushing to a two-week low and hovering around 100.75 at the time of writing. Treasuries broke lower on the news as well, with 10-year yields now trading around 4.47% after pushing above 4.50% pre-release, and 2-year yields falling back below 4.13% after nearing 4.19% pre-release. Crude oil is finishing a quietly weaker week on a quietly weaker note, with nearby WTI off ~0.8% on the day to trade near $67.50 and nearby Brent off ~1.2% on the day to trade near $70.75, both roughly where they sat pre-war in late February. The ags are looking at a mostly positive open, with soybeans leading the way higher despite some relatively bearish fundamental news in recent days as the potential of Chinese buying and near-term U.S. weather issues provide some tailwinds after the recent price break.

Yesterday afternoon’s Oilseed Crushings report showed the U.S. crush 213.1 million bushels of soybeans in the month of May, falling below the downwardly revised 217.5 million seen in April (previously 218.5 million) and below the average trade estimate of 214.9 million, but still easily an all-time high for the month, surpassing last May’s 203.7 million bushels. This brings cumulative ‘25/’26 marketing year-to-date soy crush to 1.996 billion bushels, up 8.2% year-over-year and easily a record for the stretch—however, this has now fallen slightly behind the needed 8.4% yearly rise to reach USDA’s new crush target of 2.65 billion bushels. In order to reach USDA’s target, U.S. soy crush needs to total 654 million bushels through the final three months of the marketing year, or an average of 218 million bushels per month. That would represent a 9.0% year-over-year increase—certainly possible, but obviously larger than the 8.2% seen through the first nine months. After seeing soy crush run comfortably ahead of the pace needed through the majority of the marketing year, leading to USDA increasing said estimate by a total of 160 million bushels from their first ‘25/’26 balance sheet, this is the first time reaching their target feels uncertain.  

USDA reported 471.8 million bushels of corn used for fuel alcohol production in May, up an impressive 6.2% versus the same month last year and marking a new all-time high for the month. While the strong month helps gain some ground, cumulative usage continues to lag the pace needed to reach USDA’s 5.575-billion-bushel target. September – May corn consumed for ethanol now sits at 4.127 billion bushels, an 8-year high for the period, but up only 1.3% year-over-year with USDA looking for a larger 2.6% increase. As such, it remains a possibility to see this target revised lower again in the months ahead.

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Perspective: Morning Commentary for July 2

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