There was nothing surprising in the news over the weekend as the geopolitical situation continues to play out as expected.
Gold found renewed buying interest on the latest developments, again not a surprise.
Grains were quietly mixed to start the holiday-shortened trading week, with attention turning to new-crop winter wheat.
Morning Summary: “I read the news today, oh boy…And though the news was rather sad. Well, I just had to laugh…”. Those lines are from the Beatles song, “A Day in the Life”, but they bring to mind a quote from Abraham Lincoln, “I laugh because I must not cry, that is all, that is all.” There’s no need for me to go into particulars, for when I do it tends to raise some hackles among those with fragile psyches. As for markets early this Tuesday morning, it’s similar to what we’ve seen most days. The US dollar index ($DXY) firmed overnight, strengthening by as much as 0.47 and sitting with a gain of 0.33 at this writing. Meanwhile, gold was stronger with the April issue (GCJ25) adding as much as $28.10 (1%) and near its session high pre-dawn. This isn’t a surprise given what’s going on geopolitically[i]. In the Energies sector, markets were generally in the green with one exception, and you don’t need many guesses to come up with which one is the outlier. The spot-month natural gas contract (NGH25) dropped as much as 17.1 cents (5%) and was still down 12.0 cents at this writing. On another note, May sugar (SBK25) gapped higher to start the week.
Corn: The corn market spent much of the overnight session quietly in the red, but as I started to put this Commentary together contracts climbed into the green by fractions. The more active May issue, based on open interest, added as much as 1.0 cent early Tuesday after slipping as much as 3.25 cents overnight, though trade volume was light at less than 9,000 contracts. For the most part, the corn market continues to be an example of Newsom’s Rule #4A: A market that can’t go down won’t go down. As we head into this holiday shortened week, some of the key factors remain unchanged. Watson continues to hold a sizeable net-long futures position, reported at 424,769 contracts as of a week ago today. However, last Friday’s CFTC Commitments of Traders report showed funds had decreased this position by 37,612 contracts. Since last Tuesday, the May issue was up 10.0 cents through last Friday’s close. Fundamentally the market is mixed. The National Corn Index ($CNCI) was calculated Friday evening near $4.6425, putting national average basis at 32.0 cents under March and 44.5 cents under May futures. The previous 5-year and 10-year low weekly close for the first week of March is 40.75 cents under May. Meanwhile, the May-July futures spread covered a bullish 11.5% calculated full commercial carry.
Soybeans: The soybean market was quietly in the red to start the day, but I’m not reading much into the overnight move. Trade volume was relatively light as March registered 16,200 contracts traded while May was showing 15,600 contracts changing hands. May slipped as much as 10.25 cents overnight, hitting a session low of $10.4250, but held last week’s mark of $10.4125, at least for now. The latest Commitments of Traders report (legacy, futures only) showed Watson decreased its net-long futures position by 30,385 contracts, leaving it at 6,781 contracts as of Tuesday, February 11. The soybean market seems to be at a crossroads, from a noncommercial point of view. Does Watson have a reason to defend what’s left of its net-long futures position or work on moving back to a net-short? Fundamentally the market remains neutral to bearish. The National Soybean Index ($CNSI) was calculated Friday evening near $9.7275 putting national average basis at 63.25 cents under March and 80.0 cents under May futures. The former was roughly 10 cents weaker than the previous 5-year low weekly close for last week while the latter is within sight of the previous 5-year low weekly close for the first week of March at 81.5 cents under May.
Wheat: The wheat sub-sector was in the red to start the day and week, though the canvas remains nearly blank for any sort of picture to be painted. (I channeled the late Bob Ross for a moment.) The HRW market was showing the largest loss to start the day with both the hybrid May (part old-crop, part new-crop, all headache) and new-crop July (KEN25) issues both down 5.75 cents at this writing. Trade volume was decent overnight, though, with May registering 6,900 contracts and July 2,400 contracts changing hands. Fundamentally, the new-crop HRW market remains bearish with last Friday’s close showing the July-September futures spread covering 72% calculated full commercial carry while the September-December covered 65%. Recall I use 67% as the bearish threshold (though this could be and has been rounded to 70% in the past). We do have a drinking game available as we move into the last half of February: Take a shot of your favorite beverage, whatever it might be, anytime you hear and/or read a talking head in agriculture mention “Winter Kill!” in either winter wheat market. Trust me. It helps these last couple weeks of February go by faster. As for the SRW market, May was down 4.75 cents and July was off 5.0 cents pre-dawn.
[i] I talked about this with Kitco News for last Friday’s Gold Poll: (LINK)
