- This week started off with a selloff in gold, an indicator some of the potential Chaos heading into the weekend didn't happen.
- The soybean market saw its usual initial rally, again indicating likely export sales to Eastern Hemisphere buyers.
- The wheat sub-sector was lower across the board, another indicator nuclear weapons didn't fly over the weekend.
Morning Summary: As last Friday came to a close, it was uncertain whether the Blue Marble we call earth would still be turning through Monday morning. After all, Russia’s Vladimir Putin had been threatening the use of nuclear weapons in response to Ukraine firing missiles back into Mother Russia, with the approval of the Biden Administration. A quick check of weekend headlines shows there wasn’t any major changes across the Black Sea region and eastern Europe. Those of us who watch markets for a living knew this without the aid (hinderance?) of global media. The first thing I noticed when I fired up the quote screen Monday morning was February gold had lost as much as $52.70 (1.9%) and was still down $28 (1.0%) at this writing. As I talked about with Kitco News in its weekly poll last Friday, it was not going to be surprising if the February contract (GCG25) took a breather within its short-term uptrend. But I wasn’t going to step in front of a possible nuclear attack and say gold should start to trend down. The stage is now set for a Benjamin Franklin Fish Analogy[i] to play out through Wednesday’s close and the uncertainty of what might happen during the US Thanksgiving holiday Thursday.
Corn: The corn market was quietly lower to start the week. This isn’t overly surprising given the US is heading toward its Thanksgiving Day holiday, with the following weeks through the end of the year generally a time when traders lose interest in King Corn. This year could be different because of all that is going on in the world, with Vlad the Invader still wanting to use some of his nuclear arsenal. Additionally, the US president-elect is the same person who thought a similar invasion by the US into Mexico was a good idea. This could keep Mexico buying, and shipping, US corn through the end of the year at least. We can continue to see the commercial interest in our reads on real fundamentals, starting with the National Corn Index ($CNCI) (national average cash price). The index was calculated last Friday near $4.0650, as compared to the previous weekly settlement near $4.0350 indicating available stocks-to-use had tightened slightly. Also, this put national average basis at 19.0 cents under December and 28.75 cents under March futures, as compared to the previous Friday’s calculations of 20.5 cents under and 31.75 cents under respectively. Meanwhile, 2024-2025 marketing year futures spreads generally covered bullish levels of calculated full commercial carry.
Soybeans: The overnight market chef added another layer of lasagna fixings[ii] to the soybean market to start the week. The January issue (ZSF25) jumped 7.0 cents shortly after Sunday night’s open (9:00 Beijing time), posting an initial high of $9.9050. This time around the clock, though, the lasagna layer was a bit different as January would then post a new high of $9.9325 around 0:45 (CT)/14:45 (Beijing) meaning Eastern Hemisphere buyers had a bit more business to do after lunch. Monday’s pre-dawn hours find January soybeans sitting at $9.89, up 5.5 cents on trade volume of 23,200 contracts. Fundamentally, not much has changed with the soybean market of late. The National Soybean Index was calculated near $9.3225 last Friday, putting national average basis at 51.25 cents under January futures as compared to the previous Friday’s final figure of 53.5 cents under and the previous 5-year average weekly close for last week of 49.0 cents under January. Last Friday also saw the Jan-March futures spread cover a bullish 32% calculated full commercial carry while deferred spreads were still comfortably in neutral territory between 33% and 67%. This continues to tell us short-term global demand is strong with question marks hanging over the US industry once the calendar page turns to 2025.
Wheat: The wheat sub-sector also indicated the world hadn’t blown up over the weekend with all three markets in the red overnight through early Monday morning. Then again, I don’t know if a nuclear war would be enough to turn US wheat markets fundamentally bullish. Last Friday’s calculation of National Cash Indexes showed both winter wheat markets lower than where they were calculated at the end of October meaning available stocks-to-use have grown during November. Spring wheat is interesting with its Index ($CRSI) calculated at $5.66, as compared to the end of October’s $5.64. We’ve also seen spring wheat national average basis firm, a seasonal move but stronger than average during November. Futures spreads have been slow to respond to the move in basis, so far, with neutral readings seen across the board in Minneapolis (HRS). Watson remains bearish as well with last Friday’s CFTC Commitments of Traders report (legacy, futures only) showing large net-short futures positions in all three wheat markets. However, it was interesting to see the Kansas City (HRW) position actually decreased by 560 contracts from Tuesday-to-Tuesday. At the same time, the Chicago (SRW) position increased by 7,510 contracts and the Minneapolis position grew by 6,200 contracts.
[i] Like guests and fish, markets start to stink after three days/weeks/months (whatever timeframe is being studied) of moving against the trend.
[ii] A reference to the Lasagna Likeness: Markets that repeat themselves. In this case, soybeans rally shortly after the overnight open then drift through the morning.
