The US dollar index jumped to its highest level in more than two years overnight, while gold extended this week's rally through early Friday morning.
Both were in response, presumably, to Russia firing missiles back at Ukraine while continuing to make threats toward the United States.
The Grains sector seemed to take it all in stride, with attention again turning toward the wheat sub-sector.
Morning Summary: Thanks to my friend’s advice earlier this week, the second order of business for me each morning, after an initial check of markets, is a quick Google of “Russia”. This time around the clock it was easy to guess what I would see. Why? The US dollar index ($DXY) was showing an overnight gain of as much as 1.10, an impressive move as the greenback posted a high of 108.07, its highest level since October 11, 2022. That was a good indicator something was brewing globally, so I next turned to gold. Here we see the February contract (GCG25) rallied as much as $36.40 (1.3%) and was sitting within sight of its session high at this writing. When we see the US dollar index and gold moving higher together, the opening lyrics to Aerosmith’s “Livin’ on the Edge” come to mind, “There’s something wrong with the world today. I don’t know what it is.” Then I check on Russia and see the Madman Across the Water (Vladimir Putin, not Elton John) launched missiles back at Ukraine as the situation in the Black Sea region continues to deteriorate at the end of 2024. If there was one surprise pre-dawn it would be the Energies sector didn’t show much interest in overnight developments.
Corn: The corn market was in the in the green early Friday morning on light trade volume. March (ZCH25) posted a 2.0-cent trade range, nearly all of it above Thursday’s close, and was sitting 1.5 cents higher on trade volume of less than 15,000 contracts as of this writing. Given Ukraine is the fourth largest global exporter of corn, the argument could be made the latest headlines sparked a round of buying from Watson. Speaking of which, it will be interesting to see what the latest CFTC Commitments of Traders report (legacy, futures only) has to say this afternoon. Recall the previous update showed funds holding a net-long futures position of nearly 178,000 contracts. March corn then closed 2.5 cents lower from Tuesday-to-Tuesday this past week. While on the subject of reports, USDA will be releasing outdated Cattle on Feed numbers for November 1 later today as well. Both the Dec-Feb and Feb-April live cattle futures spreads have collapsed this month, while corn spreads have grown more bullish. This tells us what is going on with cattle’s real fundamentals: There is more head needing to be fed longer-term. Technically, March corn continues to consolidate between $4.4775 and $4.29 on its short-term daily chart, sitting at $4.38 to start the day.
Soybeans: It was more of the same overnight in the soybean market. Within the first 15 minutes after the open Thursday night, the January issue (ZSF25) hits its session high of $9.8350, up 5.75 cents from yesterday’s close. Then, as expected, the contract started the process of grinding lower. By 3:15 (CT), or 17:15 Beijing time (you know, Happy Hour), January had slipped to a low of $9.7525. As of this writing, January was back in the green by 0.5 cent on total overnight volume (so far) of less than 12,000 contracts. What does all this tell us? There was some early commercial interest from Eastern Hemisphere buyers, but not in a huge quantity. The general tendency is for the world’s largest buyer to pick up some secondary supplies from the US following a selloff, and January futures closed 12.75 cents lower Thursday. Will we see an announced sale from USDA later this morning? Maybe. Again, this isn’t the first time around the block for the world’s largest buyer and it knows if it keeps purchases below the 100,000 mt level then no daily announcement is necessary. The latest weekly export sales and shipments update showed China had 4.2 mmt (154 mb) of 2024-2025 US soybeans on the books.
Wheat: The true Missiles Markets of the Grains sector, aka wheat, had climbed into the green over the course of Friday morning. A couple things to point out: First, the more global Chicago (SRW) market was unchanged pre-dawn with the March issue (ZWH25) registering fewer than 5,000 contracts traded as of this writing. That isn’t a great deal of concern shown by either commercial or noncommercial traders to start the day. Second, Minneapolis (HRS) was showing solid trade volume with 1,250 contracts of the March issue (MWH25) traded overnight. What stands out to me about Minneapolis futures is the previously reported noncommercial net-short futures position was roughly 21,000 contracts, with total open interest (futures) reported at 75,200 contracts. By comparison, the net-short in Chicago of 38,500 contracts was part of reported total open interest of 447,000 contracts. As for Kansas City (HRW), the noncommercial net-short was 17,000 contracts with total open interest coming in at 272,300 contracts. The bottom line is the noncommercial net-futures position in Minneapolis looked to be overloaded to the short side, bringing to mind a potential Poseidon Predicament. This tells us when everyone is on the same side of the boat, the boat tends to roll over.
