Walk-Squawk Morning Wire
🌽 Corn Bounces | 🇺🇸 Treasuries Cautious | 🇨🇳 China Drought Threatens Wheat | ⚡ Musk vs Trump
🌽 Corn Rebounds as Final Planting Pushes On
Corn futures rebounded from a six-month low, gaining as much as 1.7% on Wednesday, with traders focused on the final stages of U.S. planting and a shift toward drier weather in the forecast.
US Planting Progress: 93% of corn is now planted, but producers in Indiana, Kentucky, and Ohio are still playing catch-up or replanting after flood damage.
Weather Outlook: Beneficial rains have boosted emergence, but the next two weeks look dry—fueling talk of a potential summer weather rally.
Yield Assumptions: The market is still pricing in a record new-crop yield, putting pressure on weather to deliver.
Demand Watch: USDA is actively courting buyers like Italy and Vietnam, while biofuel quota uncertainty from the Trump administration lingers.
“We are in the window for any sort of summer rally,” said Naomi Blohm of Total Farm Marketing.
📍 U.S. Cash Market Trends – June 4, 2025
🌽 Corn Basis
Firming in the Eastern Corn Belt:
Strong basis gains were noted in Dayton, OH (+10) and Bloomingburg, OH (+10).
Decatur, IL posted a +7 Jun basis, while Fort Recovery, OH and Portland, IN saw modest strength.Steady in the Western Corn Belt:
Most western locations held firm, though Greenville, OH slipped slightly (-4 for Jun, -2 for Jul).River Bids Mixed:
Illinois River was softer (-3 Jun); Mid Miss firmed (+8 Jun, +4 Jul).
Cash corn trends suggest solid interior demand, particularly in Ohio and Indiana, but softness persists in river bids amid competitive Brazilian offers.
🌱 Soybean Basis
Steady Across Most Locations:
Nearly all interior basis bids were unchanged, indicating sideways farmer selling and stable processor demand.Some Pressure in Iowa:
Eagle Grove and Emmetsburg both saw Jul bids fall by 5¢.River Bids Improved:
Ohio River basis rose 4¢ (Jun), 5¢ (Jul). Illinois River softened slightly (-1¢ Jun).
Soybean basis remains remarkably steady in the interior, with minor firming along rivers as end-users prepare for potential export demand shifts.
💰 Crush Margins & Soy Products
Soymeal:
Steady across the board; West remains weak (IA -52N, MN -56N), East stronger (IN -20N, IL -25N).
Cash crush margins are under $1/bu and crushers reportedly own about four weeks of supply.Soyoil:
Basis steady at Gulf and interior.
Central IA DDGs valued at 95% of corn, down from 97% last week — margin pressure noted.
Crushers have ownership, but margin compression may limit aggressive basis moves.
🚢 CIF Bids & Trades
Soybeans CIF Basis (Jun–Nov):
Jun: +69N (+2)
Jul: +73N (steady)
Nov: +76X (steady)
Corn CIF Basis (Jun–Nov):
Jun: +65N (steady)
Nov: +75Z (+2)
CIF soybeans gained modestly in June; corn bids are stable with slight strength into new crop.
🚛 Freight Trends
Illinois and Ohio truck freight held steady this week.
Rates are expected to ease slightly next week, reflecting seasonality and capacity shifts.
FH June: IL at 437.5%, OH at 332.5%
LH June: IL down to 412.5%, OH down to 312.5%
🔎 Quick Take
The U.S. cash grain market is showing signs of quiet strength:
Corn basis is firm in key ethanol and feed regions.
Soybeans are steady, but meal is showing signs of support ahead of expected solid weekly export sales.
River bids and CIF basis are improving modestly as traders eye July/Aug shipment programs.
Crush margins remain tight, potentially limiting new cash bids from processors.
📉 Treasury Market Treads Carefully Ahead of Jobs Data
After a sharp rally, U.S. Treasuries steadied as investors grow cautious before Friday’s non-farm payrolls report.
Two-Year Yield: Rose modestly to 3.89%, paring gains from earlier in the week.
Rate Cut Expectations: Market still prices in two Fed cuts in 2025, but odds of a third have faded.
Deficit Concerns: Moody’s recent downgrade and the passage of a multi-trillion-dollar tax bill are keeping a lid on long-term Treasury gains.
“If we rally toward 4.25% in 10s, we would use that opportunity to reset a short position,” said Jefferies’ Mohit Kumar.
🇨🇳 China’s Wheat Harvest Faces Drought Risk
China's wheat crop may shrink by up to 5% this year due to severe drought in key growing regions like Henan and Shaanxi, possibly triggering renewed import demand.
Lowest Output Since 2018? Forecasts suggest a harvest of 133–135 MMT vs 140 MMT last year.
Tariff Tensions: Despite a March tariff on U.S. wheat, supply shocks could reopen the door to U.S. exports.
Pest Pressure: Heat and dryness are driving early infestations, leading to emergency responses from Beijing.
“The weather is indeed getting abnormal—it doesn’t rain when it should,” said a farmer in Hebei.
⚡ Musk Declares War on Trump’s $2.4 Trillion Tax Bill
Elon Musk is publicly opposing Trump’s tax legislation after failing to preserve EV tax credits, calling the bill a “disgusting abomination” and warning that it could "bankrupt America."
EV Credits Gone: The bill phases out $7,500 EV subsidies by 2025.
Musk’s Political Clout: After backing GOP races with $290M+, his opposition could sway votes in a narrowly divided Congress.
White House Pushback: Speaker Johnson and Senator Marshall dismissed Musk’s concerns as exaggerated.
“He knows if America collapses financially, we aren’t making it to Mars,” said Rep. Thomas Massie in support of Musk.
📉 Why the Dollar Can’t Catch a Bid — And Who’s Really Behind the Move
Since Liberation Day, we’ve seen a striking divergence: U.S. stocks pushing near all-time highs, while the dollar languishes at multi-year lows. That disconnect has traders, asset managers, and strategists all asking one thing:
What are foreign investors doing with their dollar hedge ratios?
💼 DB’s Saravelos Digs In
According to Deutsche Bank’s head of FX strategy, George Saravelos, the answer varies by investor type — but the trend is clear: hedge ratios are shifting.
🇩🇰 Case Study: Danish Pension Funds
As of April, Danish funds materially reduced their dollar exposure, reflecting a growing trend of backing away from USD assets.
But what about the broader asset manager universe?
📊 Reverse Engineering Hedge Ratios
Saravelos turned to an academic methodology: using return sensitivity to FX to estimate hedge ratios for nearly 3,000 non-U.S. fixed income and equity funds investing in U.S. markets.
🧠 Key Takeaways from DB’s Analysis
Elevated Dollar Exposure Was Cyclical, Not Structural
Hedge ratios were near record highs into 2023.
That makes the current unwind more tactical than transformational.
Equity Hedging is Passive, Fixed Income is Active
Equity funds adjust exposure based on the cost of hedging.
Bond funds behave more discretionarily, responding to FX trends directly.
Recent Spike? Don’t Trust It (Yet)
The dollar’s correlation with stocks and bonds has broken down.
DB warns that beta estimates may be skewed, and more data is needed.
🧩 Why This Matters
FX hedge ratios impact stock, not just flow, of foreign capital into the U.S. With the dollar’s weakness dragging on, hedge adjustments are part of the puzzle — but not the full story.
💬 Enter JPMorgan’s Nick Panigirtzoglou
JPM’s flow expert offers a skeptical view: don’t blame cross-border borrowing. There’s little sign of:
A major unwind in yen or euro-funded trades
Sudden asset selling by foreign holders of U.S. securities
Hedging pressure in cross-currency basis swaps
Instead, macro hedge funds are the prime suspects.
🕵️ Who’s Really Driving the Dollar Down?
JPM’s read:
Specs are heavily long euro and yen
The dollar’s recent weakness is more about crowded macro trades than structural realignments
The risk? One catalyst could cause a sharp reversal as crowded short-dollar trades unwind
🔚 Final Word
Hedge ratios do matter, but in the near term, this dollar decline is being driven more by positioning than fundamentals. The question isn’t if the dollar will bounce — it’s what triggers the reversal.
Until then, watch the spec crowd. When they blink, the dollar bites back.
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