U.S. Payrolls Turn Negative as Labor Market Hits Stall Speed

July job loss and deep revisions weaken case for a September Fed rate hike

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Link: Beef Prices Are Staying High — and the Kansas City Fed
         Says Ranchers May Keep It That Way
Link: Beef Prices Are Staying High — and the Kansas City Fed
         Says Ranchers May Keep It That Way

UP FRONT

■  TOP STORIES

— U.S. payrolls turn negative as labor market hits stall speed: July payrolls fell 23,000 and prior months were revised sharply lower, strengthening the case for the Fed to hold rates steady in September.

— U.S./Iran war moves toward a Hormuz bargain — but the deal is not there yet: Negotiations are shifting toward reopening Hormuz, but disputes over Iranian control, transit fees, sanctions and insurance keep major oil and fertilizer risks alive.

— India shuts door on U.S. fuel ethanol in trade talks: India says its E20 mandate will remain supplied domestically, sharply limiting prospects for large U.S. fuel ethanol sales while leaving opportunities for DDGs and other farm products.

— Canada/U.S. trade talks intensify as Aug. 19 tariff deadline nears: A 90-minute meeting between Canadian officials and USTR Jamieson Greer signals serious bargaining, but no agreement has emerged to avert threatened 50% U.S. tariffs.

— House GOP gives Greer broad backing for hard line USMCA review: Some 168 House Republicans are backing Greer’s leverage-first approach, strengthening the administration’s hand in seeking new concessions from Canada and Mexico.

— FAO food prices hit three-year high as war, weather rekindle crop inflation: Global food prices rose 0.6% in July to their highest since January 2023 as wheat, sugar and vegetable oils climbed on weather, energy and geopolitical concerns.

— Tuberville left farm bill markup before final vote: Sen. Tommy Tuberville (R-Ala.) attended part of the markup but departed before the final vote; his absence did not change the bill’s defeat.

— Smithfield’s $1.3 billion Sioux Falls plant faces key legal test: Landowners are challenging the permitting process for Smithfield’s proposed pork plant, with the case posing primarily a potential construction-delay risk.

■  FINANCIAL MARKETS

— Equities today: Global stocks advanced on strong earnings and AI optimism, while the weak U.S. jobs report shifted Fed expectations toward keeping rates unchanged in September. The U.S. Dow opened up around 120 points, but then turned negative.

— Equities yesterday: The Dow fell 0.85%, the S&P 500 slipped 0.18% and the Nasdaq eased 0.06% on Aug. 6.

— Copper hits record as global growth and supply tightness intensify: Strong manufacturing, AI and power-grid demand are colliding with shrinking inventories and supply restrictions, making copper both a growth signal and an inflation warning.

■  AG MARKETS

— USDA daily export sales: USDA reported 238,000 MT of soybeans sold to China and 286,097 MT of corn to Mexico.

— USDA August Crop Report: acreage could matter more than yield: With trade yield estimates close to USDA’s existing assumptions, acreage revisions — particularly for soybeans — could provide the bigger Aug. 12 market surprise.

— China clears the runway for a bigger U.S. soybean buying wave: China is reducing Brazilian purchases, clearing reserve storage and increasing U.S. new-crop buying as Beijing works toward its 25-MMT purchase commitment.

— International grain prices: Black Sea shipping and insurance risks are supporting European grain values while depressing Russian FOB wheat prices, creating an unusually wide price spread.

— The “missing million” isn’t missing — it’s still in the feedlot: U.S. cattle-on-feed inventories are above year-ago levels primarily because slower marketings are keeping cattle in feedlots longer, not because domestic cattle replaced missing Mexican supplies.

— Cotton AWP rises to open 2026/27 marketing year: Cotton’s Adjusted World Price rose to 66.29 cents per pound, remaining comfortably above the level that would trigger an LDP.

— Agriculture markets yesterday, Aug. 6: Corn and soybeans posted modest gains, wheat declined and livestock futures fell sharply, led by feeder cattle and live cattle.

■  TRADE POLICY

— U.S. avocado halt exposes Mexico’s cartel problem in key farm export: Mexico deployed 1,557 security personnel to Michoacán after the U.S. withdrew inspectors, highlighting how cartel violence has become a recurring threat to avocado trade.

■  TRANSPORTATION & LOGISTICS

— U.S. retailers extend West Coast shipping peak as trade risks stack up: Big-box retailers are extending the Los Angeles/Long Beach import surge as tariffs, Middle East disruptions and Panama Canal constraints encourage earlier inventory building.

■  WEATHER

— NWS outlook: A stalled frontal boundary will bring repeated thunderstorms and localized flooding risks from the Central Plains into the Midwest while heat builds farther south and west.

— Corn Belt weather stays crop friendly as southern Plains heat builds: Frequent rain and moderate temperatures continue to favor Corn Belt grain fill and soybean pod development, while triple-digit heat raises crop and livestock stress across the Southern Plains.

■  TOP STORIES

—U.S. payrolls turn negative as labor market hits stall speed

July job loss and deep revisions weaken case for a September Fed rate hike

The U.S. labor market delivered a considerably weaker signal than the headline unemployment rate suggests in July, with employers cutting 23,000 jobs and previously reported job growth for May and June revised sharply lower.

Nonfarm payrolls fell 23,000 in July, versus expectations for an 80,000 increase. More importantly, May payroll growth was revised down to 63,000 from 129,000 and June to just 20,000 from 57,000. The revisions erased 103,000 jobs from the prior estimates.

That leaves average payroll growth over the past three months at just 20,000 jobs per month — essentially stall speed for the U.S. labor market and around the lower end of estimates of the hiring needed simply to keep pace with population growth.

The 4.1% unemployment rate, down from 4.2% in June, prevents the report from looking recessionary. But the household survey contains an important warning. Labor-force participation was only 61.4% and has declined 0.7 percentage point since January, while the employment-to-population ratio has fallen 0.5 point over the same period. In other words, the relatively low unemployment rate is occurring alongside fewer Americans participating in the labor market.

There are also reasons not to overstate July’s 23,000 payroll decline. The largest single drag was a 50,000-job decline in local government education, a category that can be volatile around the summer school calendar. But weakness extended beyond government. Retailers cut 19,000 jobs, financial activities lost 14,000 and most other major industries generated little net hiring. Financial-sector employment is now down 121,000 from its May 2025 peak.

Health care remained the principal source of growth, adding 22,000 jobs. Even there, however, hiring has slowed from an average of 36,000 jobs per month over the previous year.

Wages also cooled. Average hourly earnings increased only 2 cents in July to $37.62, leaving annual wage growth at 3.2%, down from 3.5% in June. The average workweek was unchanged at 34.3 hours. The combination of virtually stagnant employment, softer wage growth and unchanged hours points to weakening labor demand rather than merely an unusual monthly payroll calculation.

Fed implications: The report substantially weakens the argument for a September rate hike. Before the employment numbers, markets had been roughly divided between a September increase and no change, after assigning about a 63% probability to a hike only a week earlier. Following the weak jobs figures, stock futures strengthened and expectations for a September hike fell.

But this is more clearly a “hold” report than a “cut” report. The Fed is still balancing deteriorating labor-market momentum against inflation risks, including energy-price pressures associated with the Iran conflict. July’s employment report gives policymakers considerably more reason not to tighten further, but inflation data between now and the September meeting will determine whether weak employment is enough to completely take another rate increase off the table.

Bottom line: The biggest story is not the loss of 23,000 jobs by itself. It is that the labor market looked substantially weaker after the revisions than policymakers believed only a month ago. With May, June and July now averaging just 20,000 new jobs, the economy has moved from slow hiring toward essentially no employment growth. Unless August produces a meaningful rebound, the risk for the Fed is increasingly shifting from doing too little about inflation to doing too much to an already weakening labor market.

—U.S./Iran war moves toward a Hormuz bargain — but the deal is not there yet

A partial reopening could cool oil, diesel and fertilizer costs, but Iran’s terms keep the risk premium alive

The U.S./Iran war is entering a potentially decisive diplomatic phase, but the latest developments suggest negotiators are closer to a framework than to an executable peace agreement. President Donald Trump has held off on another major U.S. attack while Oman and Iran work on arrangements to restore commercial traffic through the Strait of Hormuz. Yet fundamental disagreements over who controls the waterway, whether vessels can be charged for passage and what happens to U.S. sanctions mean the war has not reached a durable endpoint.

The center of gravity has effectively shifted from the bombing campaign to control of Hormuz. A proposal being discussed would allow Iran a significant role in controlling vessels entering the Persian Gulf, while ships would exit through waters controlled by Oman. Reuters reports Tehran has sought fees equal to roughly 5% to 7% of cargo value, Oman has considered about 3%, while the U.S. position remains that transit should be free.

That disagreement is more than a negotiating detail. Shipping executives say the proposed arrangement in its current form may be practically unusable. U.S. sanctions could prevent companies from paying an Iranian-controlled transit authority, while maritime insurance provisions could cancel coverage for vessels making such payments. In other words, a political declaration that Hormuz is “open” would mean little if shipowners, insurers and banks still cannot safely use it.

That is also why crude oil prices are resisting a deeper decline. Early Friday, Brent was around $82 per barrel, won 0.5%, while West Texas Intermediate was around $77, after oil jumped more than $3 Thursday. Markets were reacting partly to an Iranian proposal that could prohibit U.S. and Israeli vessels from using the strait. Roughly one-fifth of global oil and LNG shipments normally moved through Hormuz before the war.

Iran is trying to turn geography into negotiating leverage. Tehran’s strategy is increasingly apparent: make the economic cost of continued U.S. military pressure large enough that Washington and the Gulf states prefer a negotiated arrangement in which Iran retains some recognized authority over Hormuz.

Iran has reinforced that strategy by warning Saudi Arabia and other Gulf governments that renewed U.S. attacks on Iranian infrastructure could result in retaliation against Gulf oil fields, electricity grids, water systems and transportation infrastructure. Gulf governments have consequently pressed Washington toward diplomacy rather than another broad attack.

That represents the biggest remaining escalation risk. A direct attack on Saudi, Emirati, Qatari or other Gulf energy infrastructure would transform the problem from a Hormuz shipping disruption into a physical production-capacity shock, potentially sending oil and refined-product prices sharply higher.

Meanwhile, Washington has its own reasons to pursue an agreement. Reuters reported this week that the U.S. has consumed virtually all of some categories of long-range precision weapons available for the Iran campaign, adding another constraint to an indefinite bombing strategy.

Perspective: That leaves Trump with an awkward choice. He can accept a settlement that restores commerce but gives Iran greater practical authority over Hormuz than Washington originally wanted, or reject those terms and risk another military escalation that could again close the strait and threaten Gulf energy infrastructure. Iran understands that dilemma and is bargaining accordingly.

Agriculture may have as much at stake as the oil market. For agriculture, Hormuz is not simply an oil chokepoint — it is a fertilizer chokepoint. About 39 million metric tons of fertilizer and fertilizer feedstocks moved through the strait in 2024, including 19.2 MMT of urea, 11.1 MMT of sulfur, 3.5 MMT of ammonia and significant volumes of phosphate fertilizers. The Gulf accounted for roughly 43% of global urea exports and 27% of ammonia exports.

The World Trade Organization says fertilizer export restrictions associated with the conflict have affected as much as 15% of global fertilizer trade, while nitrogen fertilizer production has also been squeezed because natural gas is both a feedstock and an energy source for producing ammonia and urea.

The impact is already moving beyond fertilizer markets. FAO economists warned this week that higher crude prices, shortages of Gulf fertilizer, diesel tightness and adverse weather are setting the stage for renewed food inflation. Reuters reported that global wheat and corn plantings were already reduced during the first three months of the Iran war and that some U.S. farmers shifted toward soybeans because they require less fertilizer.

For U.S. producers, the transmission mechanism is straightforward:

• Diesel: A prolonged Hormuz disruption keeps crude and refined-product prices elevated just as combines, grain trucks and fall tillage equipment generate heavy diesel demand.

•Fertilizer: Continued restrictions on Gulf urea, ammonia and sulfur keep upward pressure on nitrogen and phosphate costs heading toward the 2027 crop planning season.

•Freight: War-risk insurance and disrupted shipping routes increase the landed cost of fertilizers and other agricultural inputs even when physical supplies are available.

• Crop economics: Expensive nitrogen disproportionately hurts corn and wheat relative to soybeans, potentially influencing acreage decisions well before spring planting.

There is one countervailing market effect: higher crude prices can improve the relative economics of ethanol and therefore provide some support for corn demand. But for farmers’ balance sheets, the diesel-and-fertilizer penalty is likely to arrive faster and more directly than any ethanol benefit.

Bottom line: The most important development is that another large U.S. strike appears to have been postponed, not permanently removed from the table, while negotiations have narrowed to the politically explosive question of who controls passage through Hormuz. There is a plausible path toward a temporary reopening, but the Iranian fee demands, U.S. sanctions, insurance restrictions and Tehran’s insistence on retaining authority over inbound shipping leave substantial obstacles.

For agriculture, the distinction between a full reopening and a managed, conditional reopening is critical. A credible return to unrestricted commercial shipping could quickly remove part of the risk premium from crude and eventually ease diesel and fertilizer costs. A toll-based system subject to sanctions, insurance exclusions and periodic Iranian restrictions would do something very different: Hormuz would technically be open, but the geopolitical premium embedded in every barrel of diesel and ton of fertilizer would remain. That makes actual tanker and fertilizer-vessel traffic — rather than announcements from Washington or Tehran — the next signal farm markets should watch.

—India shuts door on U.S. fuel ethanol in trade talks

New Delhi protects E20’s domestic supply while other U.S. ag gains remain open

India is pushing back sharply against expectations that a broader U.S./India trade agreement could open a major new market for American fuel ethanol, underscoring that New Delhi views its ethanol mandate as much as an agricultural and energy-security program as a transportation-fuel policy.

India’s Commerce Ministry said Thursday that it has made no concessions or commitments involving imports of U.S. ethanol for gasoline blending. India requires gasoline to contain 20% ethanol, but government policy is designed around domestically produced supplies. “Any suggestion of a policy change to permit large-scale imports of fuel ethanol from the U.S. is misleading,” the ministry said.

That wording is important. India is not simply arguing over an ethanol tariff; it is defending the domestic-sourcing architecture of its E20 program. Opening the market to large volumes of imported ethanol would therefore require a policy change extending beyond the tariff concessions normally negotiated in a trade agreement.

India reached a 20% national blending rate during the 2025-26 ethanol supply year after steadily increasing blending from about 8.1% in 2020-21. The government says domestic ethanol availability has approached 12 billion liters annually as production expanded from sugarcane, corn and other grains. New Delhi explicitly describes the program as a way to reduce crude-oil dependence while increasing income for Indian farmers.

That makes U.S. ethanol politically difficult. Allowing imported corn ethanol to satisfy the E20 mandate could displace demand that India deliberately created for its own farmers and ethanol plants. It would also undercut New Delhi’s argument that replacing imported petroleum with domestically produced biofuel improves energy security.

A setback for one of the biggest theoretical growth markets. For the U.S. ethanol industry, India has long represented an enticing potential market because of its huge gasoline pool and E20 requirement. Even relatively modest penetration by U.S. ethanol could translate into sizable export volumes.

Thursday’s statement significantly lowers expectations that such purchases will emerge from the current negotiations. It does not necessarily mean India could never import fuel ethanol during a domestic supply shortage, but it makes clear that routine, large-scale U.S. participation in India’s gasoline pool is not currently on the negotiating table.

There is an important distinction, however: ethanol may be blocked while other U.S. agricultural products gain access.

The trade framework announced by Washington in February specifically identified dried distillers grains (DDGs), red sorghum, soybean oil, tree nuts, fruits and other agricultural products for Indian tariff reductions or elimination. Fuel ethanol itself was notably absent from that list.

That suggests the more realistic biofuels-related payoff for U.S. agriculture could come indirectly. Greater Indian purchases of DDGs would benefit U.S. ethanol plants by improving the value of their principal feed coproduct, while expanded access for sorghum and soybean oil could create additional outlets for U.S. agriculture without challenging India’s domestic ethanol mandate.

Trade leverage remains, but ethanol is a sensitive line. The statement also demonstrates the limits of U.S. tariff leverage. Washington and New Delhi remain in negotiations over a broader Bilateral Trade Agreement, while the U.S. imposed an additional 10% Section 301 tariff in July on roughly 55% of Indian exports covered by that action. India continues to seek relief and improved access for major export sectors.

That gives Washington bargaining power, but agriculture is among India’s most politically sensitive negotiating areas. New Delhi has historically been reluctant to expose its large farm sector to foreign competition, and ethanol now sits at the intersection of farm income, sugar and grain policy, energy security and billions of dollars of domestic investment.

Bottom line: India’s statement is a meaningful setback for hopes that a U.S./India trade agreement will suddenly produce a large new outlet for U.S. ethanol. Unless New Delhi changes the domestic-sourcing rules governing E20, tariff reductions alone will not unlock the market. The better near-term opportunity for U.S. agriculture appears to be surrounding products — particularly DDGs, sorghum and soybean oil — rather than fuel ethanol itself.

—Canada/U.S. trade talks intensify as Aug. 19 tariff deadline nears

Ninety-minute Greer meeting signals bargaining, but no breakthrough yet

Canada and the United States appear to be moving into a more intensive phase of negotiations as Ottawa tries to prevent a new 50% U.S. tariff from taking effect Aug. 19 — while the Trump administration increasingly uses the tariff threat as leverage in a much broader renegotiation of North American trade rules.

Canada/U.S. Trade Minister Dominic LeBlanc and Canada’s chief trade negotiator to the U.S., Janice Charette, met Thursday in Washington with U.S. Trade Representative Jamieson Greer. The meeting was scheduled for 30 minutes but stretched to roughly 90 minutes, according to LeBlanc’s office. It was their second face-to-face meeting in two weeks.

LeBlanc subsequently called the discussion “constructive and detailed,” saying Canada remains focused on reaching a comprehensive agreement addressing U.S. sectoral tariffs and protecting Canadian workers, farmers and businesses. But neither side announced an agreement, tariff suspension or framework for resolving the dispute.

The length and frequency of the meetings are significant. Ninety minutes at the principals level suggests the two governments are doing more than exchanging positions. With less than two weeks before the tariffs take effect, negotiations are increasingly likely to revolve around specific Canadian concessions and what Washington would require to delay, narrow or withdraw the Aug. 19 measures.

President Donald Trump announced the additional 50% tariffs July 20 using Section 338 of the Tariff Act of 1930, an authority that has rarely been used. USTR says the duties cover nearly $20 billion of Canadian imports and respond to what Washington calls discriminatory Canadian treatment of U.S. automobiles, alcoholic beverages and dairy products.

The tariffs are particularly potent negotiating leverage because they apply to covered Canadian products even when those goods otherwise qualify for duty-free treatment under USMCA. That breaks with much of the administration’s recent tariff structure, where USMCA-compliant Canadian and Mexican merchandise has frequently received preferential treatment or exemptions.

USMCA uncertainty is the bigger issue. The immediate battle is over Aug. 19, but the larger contest is over the future terms of USMCA. The Trump administration declined at the July 1 joint review to automatically extend the agreement for another 16 years. Greer has explicitly said Washington did not want to “rubber stamp” USMCA because the administration wants additional changes from Canada and Mexico.

Importantly, that does not mean USMCA expires now. The agreement remains in force through 2036. Because the three governments did not agree to a 16-year extension at the 2026 review, they can conduct annual reviews and extend the pact later if they reach agreement.

That gives Trump considerable negotiating runway. Instead of settling every dispute in one trilateral negotiation, Washington is conducting intensive bilateral talks with Ottawa and Mexico City. USTR has already completed three negotiating rounds with Mexico and plans a fourth in Washington in September.

Perspective: This increasingly looks less like a conventional USMCA review and more like a rolling renegotiation. Washington can keep the underlying agreement alive while withholding the long-term certainty businesses want, using sectoral tariffs and the annual-review mechanism to extract concessions issue by issue.

Agriculture is directly in the crosshairs. Agriculture is not simply collateral damage in this dispute. Canadian dairy policy is one of the three explicit reasons the administration cited for invoking Section 338. The White House argues Canada discriminates against U.S. cheese through the way it allocates tariff-rate quotas under USMCA, particularly compared with treatment afforded European cheese under Canada’s trade agreement with the EU. That makes dairy market access a likely bargaining chip in the negotiations. U.S. dairy groups have also pressed the administration during the USMCA review to obtain stronger enforcement of Canadian commitments. For the broader U.S. farm sector, however, escalation carries risk. Canada is one of the largest markets for U.S. agricultural products and previously demonstrated its willingness to retaliate against U.S. tariffs. Ottawa has not yet announced a new retaliation package specifically responding to the Aug. 19 duties, but Canadian officials are already discussing possible responses and have pledged to defend Canadian farmers and businesses.

Bottom line: The fact that a scheduled 30-minute Greer-LeBlanc meeting ran 90 minutes is a modestly positive signal: both governments appear interested in negotiating before the tariff deadline rather than simply allowing the duties to take effect. But there is no evidence yet that the central disagreements have been resolved.

The critical date is now Aug. 19. A postponement or narrowing of the 50% tariffs would indicate that Canada has offered enough movement to keep bargaining alive. Allowing them to take effect would mark a substantial escalation and increase the likelihood of Canadian retaliation.

More broadly, the administration appears to be establishing a new negotiating model for North America: keep USMCA legally intact, withhold its 16-year extension and use tariffs outside the agreement to seek additional concessions. For Canada — and particularly its dairy, auto, metals and lumber sectors — that means the July 1 USMCA review was not the end of the negotiation. It was effectively the beginning.

—House GOP gives Greer broad backing for hard line USMCA review

168 Republicans back leverage-first talks on market access and rules of origin

A large majority of House Republicans is giving U.S. Trade Representative Jamieson Greer political cover to keep the U.S.-Mexico-Canada Agreement (USMCA) review open until Washington gets substantive concessions from Canada and Mexico. In an Aug. 6 letter (link) led by Rep. Rudy Yakym (R-Ind.), 168 House Republicans said they “strongly support” Greer’s effort to secure an improved agreement and endorsed his decision to “prioritize outcomes over a deadline.”

That is significant because the lawmakers are not calling for the U.S. to abandon USMCA. Their message is essentially: keep the agreement, but do not automatically renew the status quo. They want unresolved market-access commitments addressed, new Canadian and Mexican trade barriers challenged, tougher defenses against third-country — particularly Chinese — investment and trade practices, and tariff structures reconsidered to make North America more competitive.

The backing is unusually broad. Yakym’s office says nearly 90% of Republican members of the House Ways and Means, Agriculture and Energy and Commerce committees signed the letter, along with 85% of GOP committee chairs. That gives Greer considerable congressional support from lawmakers overseeing precisely the sectors most affected by a renegotiation.

The key shift: USMCA is now a negotiation, not a renewal exercise. The Trump administration formally declined on July 1 to renew USMCA in its current form. That does not terminate the agreement: USMCA remains in force, potentially through 2036, while the countries continue annual reviews and negotiations. But it eliminates the certainty that would have come from immediately resetting the agreement’s 16-year term.

Greer has indicated the administration may pursue interim arrangements with Mexico and Canada by the end of 2026 while leaving tougher questions — especially automotive rules of origin — for 2027. That approach effectively turns the review mechanism into a rolling renegotiation rather than a one-day decision on whether USMCA has worked.

Perspective: The House letter strengthens Greer’s hand because Canada and Mexico can no longer assume Republican lawmakers will pressure the White House to quickly restore long-term certainty. If anything, most House Republicans are telling Greer that uncertainty is acceptable for now if it produces better terms.

Agriculture could be one of the biggest bargaining chips. For U.S. agriculture, the language about obtaining market access that was “promised six years ago but not meaningfully delivered” is especially important. Canadian dairy access is the clearest example. The U.S. has repeatedly challenged Canada’s administration of dairy tariff-rate quotas, arguing that its allocation system restricts the ability of American exporters to use the market access negotiated under USMCA. U.S. dairy representatives continued pressing that issue during the 2026 review process.

The broader agricultural agenda could also encompass Canadian and Mexican sanitary, regulatory and customs measures, along with demands to prevent Chinese companies from using production in Canada or Mexico as a back door into the U.S. market.

That creates a two-sided risk for agriculture. Farmers and ranchers could ultimately gain additional access if Greer extracts meaningful concessions. But extending negotiations also prolongs uncertainty around two of agriculture’s largest export markets, potentially complicating contracting, investment and supply-chain decisions.

Canadian tariffs add another layer of pressure. The USMCA negotiations are also no longer occurring in isolation. President Trump’s separate 50% tariffs on roughly $20 billion of Canadian goods are scheduled to take effect Aug. 19, using Section 338 of the Tariff Act of 1930. The administration has cited Canadian trade barriers, including agriculture, in defending the action.

That means the administration now has two negotiating tracks operating simultaneously: formal USMCA talks and unilateral tariff pressure. The House Republicans’ call to “rationalize tariff structures” suggests tariff relief itself could ultimately become part of the bargaining package — an inference that would give Ottawa another incentive to make concessions.

Bottom line: The Aug. 6 letter substantially reduces the political pressure on Greer to quickly renew USMCA. House Republicans are effectively telling Canada and Mexico that the clock is not Washington’s problem. They support eventually extending the agreement, but only after the administration extracts stronger market access, rules of origin and enforcement commitments.

For agriculture, that raises the stakes considerably. A successful renegotiation could produce better dairy and agricultural market access. But the price of pursuing those gains is a longer period in which North American trade rules — and potentially tariffs layered on top of them — remain unsettled.

—FAO food prices hit three-year high as war, weather rekindle crop inflation

Wheat, sugar and vegetable oils lead gains as meat and dairy provide an offset

Global food commodity prices turned higher again in July, with renewed geopolitical risk, adverse weather and stronger energy markets producing an unusually broad increase across crop commodities even as meat and dairy prices retreated.

The United Nations Food and Agriculture Organization’s Food Price Index rose 0.6% from June to 131.1 points in July, its highest level since January 2023. The index was 1% above a year earlier, although it remained 18.2% below the record set in March 2022 following Russia’s invasion of Ukraine.

The significance of the July report is less the relatively modest 0.6% increase in the headline index than where the inflation is coming from. Cereals, sugar and vegetable oils — three categories highly sensitive to weather, energy and geopolitical disruptions — all moved sharply higher at the same time. Meat and dairy prices provided enough relief to keep the overall increase contained.

That mix leaves global food prices increasingly vulnerable to another supply shock.

Wheat is again the geopolitical pressure point. FAO’s Cereal Price Index jumped 3.4% in July and stood 6.9% above a year earlier. Wheat prices surged 5.8% for the month and were 9.9% above July 2025 as markets priced in continued disruptions to Black Sea exports, damage to export infrastructure and heat-related yield losses in several producing regions.

That represents a major reversal from June, when improving harvest prospects and ample Black Sea supplies had pushed wheat prices lower. The market is shifting from worrying primarily about how much wheat is being produced to whether that wheat can reliably reach world buyers.

That distinction matters. Even a reasonably adequate global crop can generate sharply higher prices when transportation corridors, ports or export infrastructure become unreliable. With Russia and Ukraine among the world’s major wheat exporters, the Black Sea remains one of the quickest transmission mechanisms from military escalation to food inflation.

Corn is beginning to participate as well. World corn prices increased 3.6% in July as hot and dry conditions in parts of the U.S. Corn Belt raised crop concerns. FAO also specifically cited spillover from stronger energy prices amid geopolitical tensions. That energy connection deserves attention. Higher crude prices can support corn through ethanol economics while simultaneously raising fertilizer, transportation and processing costs throughout the food system. It creates a situation in which energy inflation can work on agricultural prices from both the demand and cost sides.

For U.S. grain producers, the FAO report is therefore moderately price supportive, particularly for wheat. But the corn signal is more conditional: U.S. production prospects remain far more important to Chicago prices than the FAO index itself. Continued favorable Corn Belt moisture could overwhelm the international inflation signal, while a meaningful deterioration in U.S. yields would reinforce it.

Vegetable oils are becoming another important inflation channel. FAO’s Vegetable Oil Price Index increased 2% to 195.7 points, its highest since June 2022. Palm and soybean oil led the increase, offsetting declines in sunflower and rapeseed oil.

Palm oil received support from firm Indonesian biodiesel demand and higher crude prices, while soybean oil benefited from robust U.S. biofuel-feedstock demand and stronger international buying. Renewed Black Sea tensions also limited the decline in sunflower and rapeseed oil.

For U.S. agriculture, that is particularly important because soybean oil increasingly sits at the intersection of the food and fuel markets. Stronger renewable diesel and biodiesel demand can tighten available vegetable-oil supplies just as consumers and food manufacturers face higher prices elsewhere in the edible-oil complex.

Sugar recorded the largest percentage increase. FAO’s Sugar Price Index jumped 5.6% in July as persistent hot and dry conditions threatened European yields while El Niño-related weather raised concerns about production prospects in key Asian producing countries. Despite the monthly increase, sugar prices remained 8% below year-earlier levels.

Brazil adds another energy-market dimension. Expectations for stronger ethanol demand following a temporary increase in Brazil’s mandatory ethanol blend could divert additional sugarcane toward fuel instead of sugar production. Improving harvest conditions in Brazil’s Center-South region prevented an even larger price increase.

The common thread running through wheat, corn, vegetable oils and sugar is increasingly clear: energy markets and agricultural markets are becoming more tightly linked at precisely the moment weather and geopolitical risks are increasing.

There was relief on the livestock side. FAO’s Meat Price Index fell 2.8%, its first monthly decline of 2026, after reaching a record high in June. Poultry, pork and beef quotations all declined, while sheep meat reached another record. Global beef prices eased largely because of weaker Asian import demand. Australian prices were pressured by slower shipments to China and South Korea, while Brazilian exports slowed as China’s beef safeguard quota moved closer to being filled.

But U.S. consumers should not interpret the FAO beef decline as a signal that domestic beef prices are necessarily headed sharply lower. The FAO index measures international commodity quotations. U.S. cattle supplies remain historically tight, meaning global export-market weakness and U.S. retail beef prices can move in different directions.

Dairy provided an even stronger deflationary counterweight. The Dairy Price Index slipped 0.7% and was nearly 25% below July 2025. Skim milk powder fell 3.3%, whole milk powder declined 3.1% and butter dropped 2.4%, while cheese rose modestly. Weak Chinese demand, improving export availability and stronger competition among suppliers are keeping pressure on much of the dairy complex.

July FAO Food Price Index at a Glance

Data: UN Food and Agriculture Organization, July 2026 Food Price Index report.

Bottom line: July’s FAO report does not yet signal a return to the food price crisis of 2022 — the overall index remains more than 18% below that peak. But the composition of the increase is a warning sign. The world entered mid-2026 with relatively comfortable aggregate grain supplies. What has changed is the risk premium around those supplies. Black Sea disruptions are lifting wheat, U.S. weather uncertainty is supporting corn, the Iran war and higher crude prices are feeding into biofuel and transportation markets, and El Niño is threatening sugar production.

If those forces persist into the Northern Hemisphere harvest period, the July increase could prove to be more than a one-month rebound. The biggest threat to food inflation now may not be an outright global shortage, but several smaller disruptions occurring simultaneously across crops, energy and transportation.

—Tuberville left farm bill markup before final vote

Alabama Republican attended part of the session, but his reason for departing remains unclear

Sen. Tommy Tuberville (R-Ala.) attended Thursday’s Senate Agriculture Committee farm bill markup but left before the final vote. Tuberville had participated earlier in the session and was among several senators who used proxy votes at points during the lengthy markup. Sen. Mitch McConnell (R-Ky.), who remains on medical leave, was the only committee member who did not appear at all.

No public explanation has surfaced for why Tuberville left before the committee voted on the overall bill, and his office has not publicly identified where he went.

His departure was not ultimately decisive. Even if Tuberville had remained and voted for the package, the final tally would have been 11-11 rather than the 10-11 vote that defeated it — still short of the majority needed to report the bill from committee.

—Smithfield’s $1.3 billion Sioux Falls plant faces key legal test

Landowners challenge permit process as 2027 construction target approaches

A legal challenge to Smithfield Foods’ planned $1.3 billion pork complex in Sioux Falls, S.D., has moved closer to a decision, potentially creating another hurdle for one of the largest meat-processing investments announced in the U.S. in years.

Judge Ann Hoffman heard arguments Aug. 3 in a lawsuit brought by Minnehaha County landowners challenging the conditional use permit, or CUP, for Smithfield’s proposed plant in Foundation Park. The homeowners contend Sioux Falls officials failed to follow required procedures and did not give the City Council sufficient information before the permit was approved. The city maintains that it followed the proper process.

The distinction is important: Hoffman made clear the case is not a referendum on whether a pork plant belongs at Foundation Park. Her review is focused on whether the city’s decision-making process was legally sufficient. That narrows the residents’ path to victory. Concerns about odor, truck traffic, wastewater and property values matter primarily to the extent plaintiffs can show the city failed to properly consider them or otherwise exceeded its authority when granting the CUP.

Plaintiffs have until Aug. 18 to submit additional arguments, with the city given until Aug. 25 to respond. Hoffman is then expected to issue a written ruling.

A ruling against the city could matter more for timing than project economics. The immediate risk to Smithfield is delay rather than necessarily cancellation. If Hoffman upholds the CUP, one significant local legal obstacle disappears. If she finds the approval process deficient, the city could potentially be forced to revisit portions of the permitting process, creating uncertainty as Smithfield works toward beginning construction in the first half of 2027 and production by the end of 2028.

Smithfield itself has acknowledged that zoning approvals, environmental and wastewater permits, utility capacity, community opposition and litigation could delay construction or increase project costs. That makes the litigation more consequential as the calendar advances. A procedural do-over lasting several months would be easier to absorb now than after major construction contracts and infrastructure schedules are locked in.

The city’s CUP approval was required because the roughly 211-acre plant site lies within 1,000 feet of some homes. Residents have argued that the project could reduce nearby property values and increase odor, noise and heavy-truck traffic. One couple told officials their home could eventually sit about 425 feet from an expanded plant footprint.

City officials counter that Foundation Park has been designated for heavy industrial development since 2016 and argue that relocating Smithfield from its century-old urban location to a modern industrial park near I-29 and I-90 should improve transportation and environmental performance.

Wastewater is at the center of both the incentives and neighborhood debate. The city has substantial financial exposure to seeing the project proceed. The City Council approved the CUP unanimously in March, while a $89 million tax-increment financing package passed 7-1. Much of the TIF support is intended to help finance Smithfield’s new wastewater-treatment system. Smithfield plans to treat its own wastewater rather than send it through the municipal reclamation plant.

South Dakota also approved nearly $30 million in sales-tax rebates associated with construction of the new plant, underscoring how strongly state and local officials view the project as an economic-development priority.

Pork-sector implications: replacement plant, but strategically important. For hog producers, the project is significant even though it is primarily a replacement for Smithfield’s existing Sioux Falls plant rather than entirely new slaughter capacity.

The current facility processes more than 20,000 hogs per day, while plans for the new plant contemplate capacity of as much as 23,000 head per day. Smithfield has said the new complex will combine fresh-pork and packaged-meat operations with increased automation and more efficient product flow.

That matters for producers across South Dakota, Iowa and Minnesota, where maintaining large-scale regional slaughter capacity is critical to hog basis and transportation economics. A modern replacement also reduces the longer-term risk that Smithfield eventually decides an aging, more-than-century-old plant is no longer economical to operate.

Smithfield currently employs roughly 3,200 workers in Sioux Falls and pays about $200 million annually in wages, making the relocation important far beyond the packing sector. Moving the plant also would free more than 120 acres near Falls Park for redevelopment.

Bottom line: The Aug. 3 hearing did not put the merits of Smithfield’s $1.3 billion investment on trial. It put Sioux Falls’ permitting process on trial. The project still has considerable political, financial and economic momentum, but a ruling requiring the city to redo the CUP process could inject delay into a construction schedule that Smithfield wants underway next year. For the Upper Midwest pork industry, the larger issue is preserving — and modestly modernizing — one of the region’s most important slaughter outlets for decades to come.
 

■  FINANCIAL MARKETS

—Equities today: Global markets advanced as strong corporate earnings and continued enthusiasm over artificial intelligence outweighed renewed concerns about escalating Middle East tensions, which pushed oil prices higher. The U.S. Dow opened up around 120 points but then turned negative. Investors remain divided over whether the Federal Reserve will raise interest rates next month, putting added emphasis on today’s U.S. nonfarm payrolls report. The weaker-than-expected jobs reading is shifting expectations for the Fed’s next move. CME FedWatch futures have shifted to higher probabilities for a steady rate decision at that meeting, moving past 57% while the probabilities for a rate increase have eased to just over 42%. Now commentary from Fed officials, especially those how have pushed for a rate rise, will be key to monitor to see if they have shifted.

In Asia, Japan -0.1%. Hong Kong +0.5%. China +1%. India -0.6%.
 

In Europe, at midday, London +0.6%. Paris +0.4%. Frankfurt +0.7%.

—Equities yesterday: 

—Copper hits record as global growth and supply tightness intensify

Stronger manufacturing and AI demand meet shrinking inventories and supply risks

Copper prices have surged back toward unprecedented levels, reinforcing the metal’s traditional reputation as a barometer of global industrial activity — but the latest rally is being magnified by an unusually tight and distorted supply picture.

Front-month Comex copper futures settled at a record $6.703 per pound on Aug. 5, surpassing their previous high. In London, the global benchmark three-month contract jumped as high as $14,369.50 per metric ton on Aug. 6, approaching the all-time LME peak of $14,527.50 reached Jan. 29.

The macroeconomic backdrop helps explain part of the move. July data showed global manufacturing production and new orders continuing to expand, while manufacturing employment increased at its fastest rate since June 2024. S&P Global also reported that economic activity across the U.S., eurozone, Japan and UK accelerated in July to its strongest pace in eight months.

That makes copper’s strength an important economic signal. The metal is heavily used in construction, electrical equipment, manufacturing, transportation and power infrastructure, so sustained price strength frequently accompanies accelerating industrial demand. Increasingly, however, copper demand also reflects structural investment rather than simply the traditional business cycle. Data centers, artificial intelligence infrastructure, electrical grids, electric vehicles and renewable-energy projects are all highly copper intensive.

But this is not simply “Dr. Copper” diagnosing a booming world economy. Supply conditions are amplifying the rally. U.S. tariff uncertainty has pulled huge quantities of copper toward American warehouses. CME warehouses recently accounted for 58% of visible global exchange inventories, while Shanghai inventories had plunged from more than 433,000 metric tons in March to about 70,000 tons by late July. LME stocks have also fallen sharply.

China is competing with the U.S. for increasingly scarce available metal. The Yangshan premium, an important gauge of Chinese import demand, climbed to a four-year high in July, while China’s refined-copper imports reached a nine-month high in June.

Another supply concern emerged Thursday when the Democratic Republic of Congo, a major copper producer, prohibited exports of copper and cobalt concentrates as part of an effort to force more domestic processing. Copper jumped as much as 1.8% following the Reuters report. The immediate physical impact may be limited because Congo already exports most of its copper as refined metal rather than concentrate, but the action reinforces concerns about resource nationalism and future supply availability.

Perspective: copper is sending two signals. The first is constructive: world industrial activity appears stronger than it was several months ago. Manufacturing has survived tariffs, Middle East disruptions and high borrowing costs better than many economists expected. That supports demand not only for copper but potentially for energy, transportation and other industrial commodities.

The second signal is more inflationary. Copper supply is not expanding quickly enough to comfortably accommodate growth in traditional industrial demand alongside the enormous electricity requirements associated with AI, data centers and grid expansion. Mine development takes years, while demand can accelerate much faster.

That distinction matters. A gradual copper rally driven by stronger manufacturing would normally be interpreted as straightforward evidence of improving global growth. A record rally driven simultaneously by economic expansion, inventory depletion, tariffs, stockpiling and supply restrictions is instead both a growth signal and an inflation warning.

For agriculture, the implications cut both ways. Stronger global industrial activity is generally encouraging for overall commodity demand and may signal better purchasing power in major importing economies. But record copper also points toward higher costs for electrical wiring, irrigation equipment, grain-handling systems, farm buildings, machinery and renewable-energy installations.

Perhaps more important for markets, persistent strength in copper alongside firm energy and other industrial commodities would strengthen the argument that global inflation pressures are not disappearing. That could keep central banks cautious about interest rates, maintaining relatively high borrowing costs for farmers and agribusinesses.

Bottom line: Copper is flashing a bullish signal about global economic activity, but the record price should not be interpreted as growth alone. AI-driven electrical demand, shrinking inventories, U.S. tariff-related stockpiling and new supply restrictions are turning what would normally be a cyclical rally into a broader warning that the world may be entering a period in which industrial growth increasingly collides with constrained supplies of critical raw materials.

■  AG MARKETS

—USDA daily export sales: 
•238,000 MT soybeans to China for 2026/27 
•286,097 MT corn to Mexico —29,808 MT for 2026/27 and 256,289 MT for 2027/28

—USDA August Crop Report: Acreage could matter more than yield

FSA data may reshuffle acres, with soybeans carrying the bigger surprise risk

USDA’s Aug. 12 Crop Production and WASDE reports are shaping up as an acreage story as much as a yield story. The trade average calls for U.S. corn yield of 182.4 bu. per acre and soybean yield of 52.9 bu. per acre, only modestly below USDA’s July assumptions of 183.0 bu. for corn and 53.0 bu. for soybeans (not based on surveys). USDA will release both reports at noon ET Wednesday.

Using NASS’s June harvested acre estimates, those trade yields would imply roughly 15.94 billion bu. of corn and 4.465 billion bu. of soybeans. NASS currently has corn planted area at 95.3 million acres and harvested area at 87.4 million, while soybeans stand at 85.4 million planted and 84.4 million harvested.

That corn crop would be roughly 1.1 billion bu. smaller than the record 17.02-billion-bu. 2025 crop, illustrating how much of this year’s production decline is already baked in through fewer corn acres rather than a sharp yield setback. USDA’s July balance sheet still projected about 16.0 billion bu. of corn at 183 bu. per acre and 4.475 billion bu. of soybeans at 53 bu. per acre.

The yield guesses themselves are relatively tame. Despite some deterioration in crop ratings, the market is not anticipating a serious production problem. Corn was rated 61% good to excellent and soybeans 63% as of Aug. 2. StoneX this week went the other direction from the trade average, estimating corn yield at 184.8 bu. per acre and production at 16.16 billion bu., while putting soybeans at 53.0 bu. and 4.47 billion bu.

That wide disagreement on corn — from the trade range low of 180.5 to StoneX’s 184.8 — will matter. But an acreage revision could easily overwhelm a modest yield surprise.

Why acres could be the real market mover: At a 182.4-bu. corn yield, every additional 500,000 harvested acres represents roughly 91 million bu. of production. A 1-million-acre change is worth about 182 million bu. — equivalent to slightly more than a 2-bu.-per-acre national yield change. For soybeans, 500,000 acres at 52.9 bu. produces about 26.5 million additional bushels, while 1 million acres produces nearly 53 million.

Those numbers become more important when measured against projected carryout. USDA’s July WASDE had 2026/27 corn ending stocks at about 1.8 billion bu. and soybean stocks at just 310 million bu. Thus, before accounting for demand changes, another million harvested soybean acres could theoretically add bushels equal to roughly 17% of the current projected soybean carryout.

There is also fresh reason not to dismiss a sizable acreage revision. In August 2025, NASS reviewed acreage using the latest FSA-certified data and ultimately put corn planted area at 97.3 million acres, while soybean area was cut to 80.9 million acres. The episode demonstrated how the total acreage picture can remain relatively stable while the allocation among crops changes sharply.

That makes some industry analysts’ expectation particularly noteworthy: soybean acreage could gain more than corn acreage from the June figures. If that occurs while soybean yield stays around 53 bu. per acre, the market could quickly shift from debating whether soybean yield is 52.5 or 53.0 to confronting a noticeably larger supply base.

Corn presents a somewhat different setup. A modest increase in corn acreage combined with a yield near the 182.4-bu. trade average would probably leave production close to 16 billion bu. But if NASS finds another meaningful block of corn acres — as it did last August — even a below-USDA yield could still produce a crop large enough to limit upside price potential.

Bottom line: The headline Wednesday will initially be the national yield numbers, but traders should immediately move to the acreage columns. With trade yield expectations already clustered near USDA’s existing assumptions, the bigger surprise potential may be how NASS reallocates U.S. planted and harvested acres once FSA information is folded into the estimates. A larger-than-expected soybean acreage increase would be the clearest bearish surprise, while corn would need either fewer acres or a yield closer to the bottom of the trade range to materially tighten its 2026/27 balance sheet.

—China clears the runway for a bigger U.S. soybean buying wave

Reserve sales and new-crop purchases suggest Beijing is repositioning toward U.S. supplies

China’s soybean import pace slowed in July, but the headline decline masks a potentially important shift for the U.S. market. China imported 11.48 MMT of soybeans in July, down 1.6% from last year’s 11.67 MMT, as purchases of Brazilian supplies eased and Beijing increasingly turned toward U.S. new-crop beans. Last July’s 11.67-MMT total was a record for the month, meaning the latest volume remains historically large despite the year-over-year decline.

The change also follows record June imports of 13.55 MMT, when Brazilian shipments dominated Chinese arrivals. Brazil shipped 12.08 MMT to China during June while U.S. shipments totaled only 1.27 MMT. That makes July’s slowdown look less like weakening Chinese soybean demand and more like the beginning of a seasonal — and politically encouraged — transition away from Brazil and toward the incoming U.S. crop.

That transition appears to be accelerating. Reuters reported earlier this week that Chinese state buyers purchased at least 13 U.S. soybean cargoes totaling roughly 800,000 MT, lifting estimated new-crop purchases to around 5 MMT. Now traders say state stockpiler Sinograin has bought another 10 to 15 cargoes, with at least 10 scheduled for October-November shipment.

Assuming the newest transactions are additive, another 10 to 15 standard cargoes would represent roughly 600,000 to 900,000 MT, potentially putting reported new-crop buying near 5.6 MMT to 5.9 MMT. USDA also confirmed another 122,000 MT sale to China on Aug. 6 for 2026/27 delivery.

The target is much larger. Under the agreement announced following the Trump-Xi meeting in Busan, the White House says China committed to purchase at least 25 MMT of U.S. soybeans in each of 2026, 2027 and 2028. That means Beijing still has substantial buying to do if it intends to meet the 2026 commitment.

For perspective, 25 MMT equals roughly 919 million bushels. USDA currently projects total U.S. soybean exports for 2026/27 at 1.66 billion bushels, so the Chinese commitment alone is equivalent to about 55% of USDA’s entire export forecast, although the calendar-year pledge and USDA marketing year do not line up perfectly.

Meanwhile, China is simultaneously releasing soybeans from government reserves. Sinograin plans to auction another 516,000 MT of imported soybeans on Wednesday, Aug. 12, continuing a series of auctions that have moved older reserve stocks into commercial channels. Recent auctions have sold significant portions of the beans offered, including about half of 504,000 MT offered July 31 and roughly two-thirds of about 501,000 MT offered Aug. 5.

That activity is important because the reserve auctions should not automatically be viewed as bearish for U.S. demand. China appears to be rotating inventories: older beans are being released to domestic crushers while Sinograin creates storage capacity for newly purchased U.S. supplies. Reuters previously reported that the reserve sales were being used in part to make room for incoming U.S. cargoes.

The remaining question is whether the buying expands beyond China’s state-owned companies. Sinograin and COFCO have driven most of the recent purchases, while private crushers remain much more sensitive to price and tariff differences between U.S. and Brazilian beans. Reuters reports traders are watching for further tariff relief that would make U.S. soybeans more attractive to those commercial buyers.

Market implication: The July import decline itself is mildly negative, but the changing origin of those imports is considerably more important. China appears to be moving from a Brazil-heavy procurement program into the U.S. export window while simultaneously clearing reserve capacity. If Beijing truly intends to reach 25 MMT during 2026, the buying pace will have to remain aggressive through the U.S. harvest. That would provide an important demand floor for U.S. soybean futures and basis just as a large U.S. crop comes to market.

The next bullish confirmation would be continued USDA flash sales followed by private Chinese crushers joining Sinograin and COFCO. At that point, the story would move beyond government-directed fulfillment of a trade pledge and begin to look like a broader restoration of Chinese commercial demand for U.S. soybeans.

—International grain prices: 

Europe firms, palm oil eases, Russian wheat keeps sliding

European grain futures edged higher Friday, with Paris September wheat up €1.50 at €221.25 per metric ton — equal to about $254.90 per ton, or roughly $6.94 a bushel, a gain of near a nickel. November Paris corn also rose €1.50, to €248.00 per ton, which works out to about $285.75 per ton or $7.26 a bushel. Both gains were aided in dollar terms by a euro holding near $1.15, its firmest area of the week. 

• The Paris market continues to carry a geopolitical risk premium tied to disrupted Black Sea logistics rather than any structural shortage: attacks on maritime infrastructure in the Azov-Black Sea corridor have curbed both Russian and Ukrainian shipments, and Ukraine’s agriculture minister has said alternative routes will not fully offset lost port capacity until at least the end of August. That is keeping a floor under EU prices even though the European Commission still rates winter wheat yields above the historical average — with the caveat that French yields are running about 3% below their five-year norm and German output has been trimmed by heat-driven premature ripening. Of note: the USDA attaché in Ukraine lowered the corn exports by 9 million tons due to the issues there.  With Europe requiring large corn imports and if Ukraine has issues exporting, corn export business for the U.S. stands to grow.

•The contrast with Russian values is stark and is the most telling feature of the world wheat market right now. Russian FOB offers continue to decline as export opportunities shrink, with new-crop 12.5%-protein wheat bid at $220 and offered at $227 per ton — about $5.99 to $6.18 a bushel — down from the $226–$230 range quoted at midweek. Surging freight and marine insurance costs in the Black Sea (average freight rates jumped from $5 to $8 per ton in a single week) have stripped Russian wheat of its traditional pricing edge: even at a discount now running roughly $35 per ton under European wheat — a dramatic reversal from a premium of around $9 a year ago — buyers are reluctant to take on the shipping risk.

The result is a two-tier world market: origin risk is being discounted at Russian ports while destination markets like Paris (and to a lesser degree Chicago, where SRW settled Thursday near $6.41) capture the premium. Note the Paris-Russian offer spread of roughly $28 per ton (about 76 cents a bushel) — historically wide, and a signal that if Black Sea freight and insurance costs ever normalize, the arbitrage will compress European and U.S. prices quickly. For now, though, constrained Russian and Ukrainian execution limits the downside for wheat globally even as Northern Hemisphere harvest supplies build; Russia and Ukraine combined harvested about a million tons more wheat than their five-year average, so the issue is movement, not supply.

•In vegetable oils, Malaysian October palm oil futures slipped 8 ringgit to 4,678 ringgit per ton — about $1,144 per ton, or near 51.9 cents a pound — pressured by weakness in Dalian palm olein and Chicago soyoil, with firmer crude oil limiting the losses. The pullback follows Thursday’s profit-taking but leaves the contract with a modest weekly gain, on track for its fourth weekly advance in five weeks, a sign that underlying export demand and expectations of slowing Malaysian production remain supportive despite the day-to-day drag from rival oils.

Bottom line: the international price structure is being set by logistics, not fundamentals. Black Sea risk premiums are supporting European (and by extension U.S.) values at the same time they are hammering Russian FOB prices — a spread that bears watching as the clearest barometer of how long the disruption-driven support lasts.

—The “missing million” isn’t missing — it’s still in the feedlot

Slower marketings — not more cattle — explain a 102% on-feed inventory

At first glance, the numbers appear not to add up. USDA says cattle on feed in large U.S. feedlots totaled 11.37 million head on July 1, 102% of a year earlier, even though the U.S. has effectively gone without its normal flow of Mexican feeder cattle for most of the past year. Mexico historically supplied roughly 1.2 million cattle annually before the New World screwworm restrictions, while USDA’s Foreign Agricultural Service estimates Mexico exported only about 230,000 head in 2025 and virtually none in 2026 under the closure.

So where did enough domestic cattle come from to replace those Mexican animals and still push feedlot inventories above last year?

The answer is: They largely didn’t. The apparent contradiction comes from comparing a flow with a stock. The million or so Mexican cattle normally imported in a year are an annual flow spread over many months. The 11.37 million cattle-on-feed figure is a snapshot of how many animals happened to be standing in feedlots on July 1. Those two numbers cannot be subtracted from one another as though a million Mexican cattle should simultaneously be represented in the July feedlot census.

More importantly, USDA’s own cattle math shows that U.S. feedlots have not been replenishing cattle faster than last year. They have been emptying them much more slowly.

Consider what happened between Jan. 1 and July 1. Large feedlots started 2026 with 11.45 million cattle, 373,000 fewer than a year earlier. From January through June, placements totaled about 9.87 million head, roughly 294,000 fewer than during the same period of 2025. But marketings totaled only about 9.63 million head — approximately 885,000 fewer than last year. Other disappearance was also about 28,000 head smaller. Put those flows together and the arithmetic almost perfectly explains how the industry moved from a 373,000-head deficit on Jan. 1 to a 246,000-head surplus on July 1 without creating a large new pool of domestic feeder cattle.

In other words, the cattle accumulated because the exit door slowed more than the entrance door.

USDA’s Economic Research Service has been flagging exactly that phenomenon. In July, ERS said the slower pace of marketings relative to placements was keeping cattle-on-feed inventories above year-earlier levels. Earlier this year, ERS found cattle had been staying in feedlots unusually long as packers reduced slaughter schedules amid poor margins. At one point, cattle on feed more than 150 days were 22% above a year earlier, with some animals being held beyond 180 or even 200 days. That means the 102% cattle-on-feed figure says considerably more about turnover than it does about underlying cattle supply.

There is another important check on the “mystery domestic cattle” theory. USDA’s July cattle inventory found the supply of calves and feeder cattle outside feedlots at 33.6 million head, down 1% from last year, while the 2026 calf crop is projected at 32.5 million head, down 2%. Beef cows are also down 1%. Those are not the statistics one would expect if the U.S. had suddenly uncovered enough additional domestic cattle to replace roughly a million missing Mexican animals.

Even the composition of the feedlots is revealing. Steers and steer calves on feed July 1 were 7.12 million head, up 3%, while heifers were virtually unchanged at 4.25 million. Nebraska’s inventory was up 4%, Kansas was up 1% and South Dakota was up 10%; meanwhile, Texas was essentially unchanged and Arizona — particularly exposed to Mexican feeder-cattle movements — was down 6%. That pattern is more consistent with cattle being held and redistributed within the domestic feeding system than with some unexpected replacement for Mexican cattle appearing along the southern border.

The market implication is important. A cattle-on-feed number of 102% does not necessarily mean the supply crisis has eased. It may instead mean there is an unusually large inventory of older, heavier and increasingly market-ready cattle waiting to be processed. That can create near-term pressure if packers suddenly accelerate slaughter, but once that backlog is worked through, the underlying supply problem reappears: placements are running lower, feeder supplies outside feedlots are smaller, the calf crop is smaller and Mexican cattle have been largely absent.

USDA plans to begin reopening the Douglas, Ariz., crossing to Mexican cattle on Aug. 24, with additional ports considered later depending on screwworm conditions. But even renewed imports would first replenish the feeder pipeline; they do not instantly become slaughter-ready cattle.

Bottom line: The question is not really, “Where did another million U.S. cattle come from?” They didn’t. USDA’s 102% cattle-on-feed figure is being sustained primarily because cattle are leaving feedlots much more slowly than last year. The Mexican-cattle shortfall is real — but it is showing up in tighter feeder supplies and future placements rather than as a one-for-one hole in today’s cattle-on-feed inventory. That distinction could become especially important once the current backlog of market-ready cattle finally moves through the plants.

—Cotton AWP rises to open 2026/27 marketing year. The Adjusted World Price (AWP) for cotton is at 66.29 cents per pound, effective today (Aug. 7), up from 64.66 the prior week. This the opening AWP mark for the 2026/27 marketing year. Even with the higher loan rate of 55 cents per pound for the 2026/27 marketing year, the AWP remains well above the level that would trigger an LDP.

—Agriculture markets yesterday, Aug. 6:

■  TRADE POLICY

—U.S. avocado halt exposes Mexico’s cartel problem in key farm export

Mexico deploys 1,557 troops to Michoacán as officials seek to restart inspections

Mexico has deployed 1,557 soldiers and National Guard personnel to Michoacán after the U.S. withdrew agricultural inspectors, effectively halting new avocado shipments from Mexico’s dominant export region.

The Financial Times reports Mexican authorities moved security forces into avocado-producing areas Thursday to combat extortion and create conditions for USDA inspectors to return. The U.S. Embassy suspended government activities in Michoacán Wednesday because of a threat to American interests.

Because USDA inspectors must certify avocados before shipment, their withdrawal functions much like an import suspension. The exact trigger remains unclear, although officials cited violence following the arrest of an alleged cartel leader and an unconfirmed report that a USDA inspector was threatened.

The episode highlights how organized crime has become a direct trade risk for one of Mexico’s largest agricultural exports. Extortion, land seizures, kidnappings and killings have plagued Michoacán’s avocado industry.

President Claudia Sheinbaum said Mexico is developing a security plan for avocado growing and packing areas and has asked Washington to discuss returning U.S. inspectors.

Mexico exported more than 1 million metric tons of avocados worth over $3 billion to the U.S. in 2025, with roughly two-thirds originating in Michoacán. USDA expects about 1.2 million metric tons of shipments in 2026.

Jalisco can continue exporting to the U.S., while California and Peru provide alternative supplies, but neither can quickly replace Michoacán’s volume. Near-term grocery supplies should remain adequate because inventories and fruit already in transit can cover demand.

Perspective: The bigger concern is recurrence. This is the third U.S. inspector withdrawal since 2022, including a 2024 incident in which two USDA employees were assaulted and temporarily detained. Violence is becoming a recurring non-tariff disruption to U.S./Mexico agricultural trade.

A brief shutdown would likely have limited market impact, but a suspension lasting several weeks could tighten supplies and push U.S. avocado prices higher.

Meanwhile, California growers are seeking a seasonal tariff-rate quota on Mexican avocados, arguing imports are increasing price pressure during their harvest.

Bottom line: The immediate disruption will likely end once U.S. officials are satisfied inspectors can work safely. But repeated shutdowns expose a larger vulnerability: a multibillion-dollar agricultural trade increasingly depends on Mexico’s ability to keep criminal groups from disrupting crop certification and shipment.

■  TRANSPORTATION & LOGISTICS

—U.S. retailers extend West Coast shipping peak as trade risks stack up

Tariffs, Iran war and Panama limits keep L.A.-Long Beach imports elevated

The traditional summer import rush at the ports of Los Angeles and Long Beach is lasting longer than shipping executives expected, suggesting U.S. retailers are still building inventories even after months of aggressive front-loading to get ahead of tariffs and higher transportation costs.

Port of Los Angeles Executive Director Gene Seroka told the Wall Street Journal that big-box retailers are now driving heavy flows of apparel, electronics and furniture through Southern California. Loaded imports at Los Angeles reached 530,558 TEUs in June, up 13% from a year earlier and the third-highest import month in the port’s history. Total June throughput topped 1 million TEUs for only the third time, while first-half volume reached 5.12 million TEUs, 3% above the same period last year.

Seroka expects July loaded imports of roughly 475,000 to 500,000 TEUs. That would represent a retreat from June’s extraordinary level, but the important point is that traffic is not dropping off as quickly as shipping companies had anticipated. The peak is becoming broader rather than simply moving earlier on the calendar.

Two import waves are overlapping. The first wave came from small and midsize importers that moved orders forward in May and June to get ahead of prospective tariffs and higher ocean-freight costs associated with the Iran war. U.S. container imports jumped 8.2% from year-ago levels in June as companies accelerated shipments ahead of tariff and transportation-cost increases. Yet imports for the entire first half were still down 0.3% from 2025, illustrating how much trade policy has distorted the normal timing of cargo flows.

Now a second wave is arriving: the traditional holiday-season merchandise ordered by the country’s largest retailers. Big-box companies have greater purchasing power, more sophisticated inventory systems and generally more ability than smaller competitors to absorb temporary freight-rate spikes. Their continued buying is effectively extending the peak that smaller companies helped start early.

That distinction matters economically. Heavy port traffic should not automatically be interpreted as evidence of booming consumer demand. Part of what is showing up at the docks is precautionary inventory — companies buying earlier because they fear products will become more expensive or harder to obtain later.

That creates two possible outcomes. If consumer spending remains solid, retailers will have protected themselves against tariffs and transportation disruptions. If holiday demand disappoints, the same inventory buildup could produce heavier discounting and markdown pressure late this year.

Panama could send even more cargo West. A potentially bigger development is emerging at the Panama Canal. The Panama Canal Authority announced this week that the maximum allowable draft for Neopanamax vessels will fall to 48 feet on Aug. 26 and then to 47.5 feet beginning Sept. 3, reflecting current and projected Gatun Lake conditions. The normal maximum is about 50 feet. The authority says the restrictions will not reduce the number of daily vessel transits, but deeper-draft ships may have to carry less cargo.

That creates an advantage for Los Angeles and Long Beach. Asian cargo headed directly across the Pacific to Southern California does not have to transit Panama. Importers shipping Asian merchandise to East and Gulf Coast ports through the canal must weigh lower vessel loading against the alternative of unloading in California and moving goods inland by rail.

Seroka estimates El Niño, Panama Canal constraints and continued disruption of normal Middle Eastern shipping routes could collectively add roughly 5% to Southern California imports.

The weather risk is credible. NOAA says El Niño is already underway and is expected to strengthen through the end of 2026, with a 97% probability that El Niño conditions persist through early spring 2027. NOAA earlier projected the event could reach moderate or strong intensity this fall.

Middle East risk keeps freight costs elevated. Meanwhile, normalization through the Suez/Red Sea corridor remains uncertain. Shipping companies have repeatedly rerouted vessels because of security risks, while the widening Iran conflict and renewed Houthi threats have kept another layer of geopolitical risk embedded in freight and marine-fuel costs.

For retailers, that means the calculation is increasingly about reliability as much as freight rates. Paying more to move merchandise earlier can be preferable to risking a delayed holiday shipment or getting caught by another tariff increase.

Inflation impact may come with a lag. The extended peak has a mixed inflation message. Higher tariffs, bunker-fuel expenses, surcharges and longer shipping routes raise landed costs. Smaller importers in particular have less ability to absorb those increases and are more likely eventually to pass them through.

But aggressive inventory building can temporarily delay some of that inflation. Merchandise brought in before another cost increase gives retailers a cushion from which to sell. Consumers may therefore see the full effect of higher replacement costs only when older inventories are exhausted. That suggests the tariff and freight-cost impact on retail inflation could be staggered rather than immediate.

Agriculture gets a mixed freight signal. For agriculture, the Southern California surge is not merely a retail story. June also brought 345,811 empty containers through Los Angeles, up 17% from a year earlier as equipment was repositioned toward Asia. More inbound containers can theoretically improve equipment availability for containerized U.S. agricultural exports including meat, specialty grains, pulses, cotton, hay and processed foods.

But there is a catch: ocean carriers frequently prefer quickly returning empty containers to Asia when eastbound freight rates are attractive rather than waiting for lower-value agricultural export cargo. At the same time, sustained import volumes can tighten Southern California rail, chassis, warehouse and drayage capacity. The result could be more containers but not necessarily cheaper agricultural transportation.

Bottom line: The extended Los Angeles/Long Beach peak is becoming a useful indicator of how businesses are responding to an unusually complicated trade environment. The original spring surge was largely defensive — importers racing tariffs and Iran-related freight increases. The continuing summer strength is different because major retailers are still bringing in normal seasonal merchandise on top of that earlier front-loading.

Add a strengthening El Niño, tightening Panama Canal draft limits and persistent Middle East shipping risk, and the West Coast could capture an even larger share of Asian imports into the fall.

The biggest takeaway is therefore not simply that Americans are buying more goods. Companies are carrying more inventory and paying for more logistical flexibility because the cost of being caught short has risen. That is bullish for near-term port and intermodal volumes, but it also shifts risks downstream — toward higher transportation costs, potentially excess inventories and delayed tariff-driven inflation later in the year.

Separately, the cyberattack that disrupted North Carolina port operations this week offers another reminder that supply-chain risk is no longer confined to weather, tariffs or geopolitics. Even as normal gate schedules resumed, manual processing illustrates how digital infrastructure has become another potential choke point for U.S. trade.

■  WEATHER

— NWS outlook: The lead story for ag country is a slow-moving frontal boundary draped from southwestern Lake Michigan through the mid-Mississippi Valley into the Central Plains, which stalls out through Friday. Showers and thunderstorms firing along it bring the day’s main heavy-rain threat: WPC carries a Slight Risk (level 2 of 4) of excessive rainfall along that corridor into Thursday morning, with mainly localized flash flooding possible, and a Marginal Risk lingering over the Plains-to-Mississippi Valley zone in the following days as the boundary sits nearly stationary. A Slight Risk (2/5) of severe thunderstorms — chiefly damaging wind and hail, minimal tornado threat — covers the middle Mississippi Valley and central/southern Plains through Friday morning.

For the Corn Belt, this means repeated rain chances across Iowa, Illinois, Missouri, and eastern Kansas/Nebraska — beneficial moisture for filling corn and pod-setting beans unless training storms overdo it locally. The Delta sits mostly on the dry, hot side of the boundary for now, with only marginal rain risk creeping in Thursday–Friday. Elsewhere, monsoonal downpours continue over the Southwest, moderate-to-major heat risk builds there and across the central U.S. into next week, and wildfire smoke degrades air quality in the Northwest and Great Basin.

—Corn Belt weather stays crop friendly as southern Plains heat builds

Frequent rains favor grain fill, while 100-degree heat threatens feedlots

The weather outlook remains broadly favorable for U.S. corn and soybean production, with a persistent west-to-northwest upper-air flow expected to keep thunderstorms moving through much of the Corn Belt while preventing a sustained heat dome from establishing over the heart of the growing region.

The pattern is especially important because crops are now well into their yield-determining summer stages. USDA’s latest Crop Progress report shows corn advancing through the dough stage while soybeans are rapidly setting pods, making adequate moisture and moderate temperatures particularly valuable during the next several weeks.

The latest NOAA Climate Prediction Center outlook reinforces that generally favorable setup. Its Aug. 6 forecast for Aug. 12-16 favors below-normal temperatures from the northern Plains through the Great Lakes, while above-normal precipitation is favored from portions of the central Plains eastward toward the Mid-Atlantic. The Aug. 14-20 outlook maintains near- to below-normal temperature tendencies from the northern Plains through the Great Lakes while continuing to favor increased precipitation chances across portions of the central U.S. CPC rates confidence in both outlook periods at 4 on a 5-point scale.

That combination is close to an ideal August pattern for much of the Corn Belt. Periodic thunderstorms replenish soil moisture, while cloud cover and the absence of prolonged extreme heat reduce moisture demand. For corn, that supports kernel fill and helps protect kernel weight. For soybeans, August moisture can be especially important as plants set and fill pods.

The risk is increasingly too much rain rather than too little in parts of the eastern Corn Belt. Repeated ridge-rider thunderstorms could produce localized flooding or saturated soils across far eastern Iowa, southern Wisconsin, northern Illinois, northern Indiana and northern Ohio. National Weather Service outlooks already highlight locally heavy downpours and ponding concerns in parts of the region.

That is unlikely to outweigh the broader crop benefit unless the storms become repeatedly concentrated in the same areas. But excessive rainfall can produce localized nitrogen losses, shallow rooting, disease pressure and reduced photosynthesis where crops remain waterlogged. In other words, the national crop outlook remains favorable even while individual fields could suffer significant damage.

Southern Plains become the weather trouble spot. The more significant agricultural threat shifts south. Beginning Sunday, temperatures are expected to routinely exceed 100 degrees across portions of Kansas, Oklahoma and Texas, with readings averaging 5 to 7 degrees or more above normal. That puts the southern hard red winter wheat belt and some of the nation’s largest cattle-feeding areas under considerably greater stress than the Midwest.
 

For livestock, several consecutive days of triple-digit heat can suppress feed intake and weight gain while increasing water demand and the importance of nighttime cooling. That makes the Southern Plains heat pattern potentially more consequential for cattle markets than for crops, particularly if overnight temperatures remain elevated.

Crop conditions also leave parts of the region vulnerable. USDA reported that Kansas topsoil moisture was 54% short or very short as of Aug. 2, while subsoil moisture was 51% short or very short. Only 46% of Kansas corn was rated good to excellent, although soybeans were in somewhat better condition at 59% good to excellent.

Rain chances are forecast to expand into portions of the Southern Plains after Wednesday, which could provide meaningful relief. But the timing matters: several days of intense heat will occur first, meaning rainfall may halt further deterioration without necessarily reversing all of the stress already accumulated.

NOAA’s hazards outlook underscores that uncertainty. CPC identifies an extreme-heat risk across portions of the Southern and Central Plains and also flags a rapid-onset drought risk for parts of the Southern and Central Plains and Lower Mississippi Valley. At the same time, it sees increased potential for heavy precipitation across portions of the Plains, Mississippi Valley and Ohio Valley around Aug. 14-17.

Market impact: still difficult to build a Corn Belt weather premium. For grain markets, the forecast remains predominantly bearish from a weather standpoint. There is currently no obvious widespread Corn Belt weather threat capable of materially reducing national corn or soybean yield potential. Instead, the combination of recurring rain, adequate soil moisture and an absence of sustained excessive heat supports yield prospects as crops move deeper into grain fill and pod development.

The wrinkle is geography. Weather risk is becoming increasingly bifurcated: too wet in portions of the eastern Corn Belt and too hot and dry across the Southern Plains. Neither problem currently appears broad enough to overturn the generally favorable national production outlook, but both deserve watching.

The biggest potential change would be if the ridge-rider storm track weakens or shifts north and allows hotter, drier conditions to expand into Iowa, Illinois, Indiana and surrounding states later in August. For now, however, the atmosphere continues to deliver something close to what corn and soybeans need most during grain fill: moisture without sustained extreme heat.

■  REFERENCE LINKS TO KEY TOPICS

Index to links of special reports & other items of note