Early Wednesday market activity hints at something was said by the US administration since Tuesday afternoon, though in the grand scheme of things it doesn't matter.
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Looking ahead, the Fed fund futures forward curve continues to indicate no change in rates at the end of next week's meeting of the US Federal Open Market Committee.
Commodity Bulletin: From crude oil to coffee, this FREE newsletter is for industry pros and rookies alike The recently concluded positioning week for noncommercial traders indicates there was some buying interest in the Grains sector.
Morning Summary: After an initial look at markets Wednesday morning, the first thing that crossed my mind was the question, “What did the US president say now?”. This was immediately followed by, “What difference does it make?” One thing I should’ve learned at this point is regardless of what is said, a retraction will soon follow, or if not the original statement will be swept away by something more outlandish. That’s the world we live in. I would say thank goodness for Watson, but as we’ve seen, algorithms are having to relearn the lesson of ignoring just about everything said and done by the US administration. So let’s move on. Speaking of Watson, Wednesday means the first day of the new-positioning week for funds, often leading to some interesting market activity. A look at the quote screen this morning shows the US dollar index showing a small gain of 0.08 while April gold is down $0.30. US stock indexes closed mostly lower Tuesday, the outlier being the Nasdaq, with stock index futures in the green again pre-dawn. A week out from the conclusion of the next meeting of the US Federal Open Market Committee and the Fed fund futures (ZQH25) forward curve (see above) still shows no change in rates this time around.
Corn: Given I watch the corn market closer than any other, for investment purposes these days, it was naturally the first one that jumped out at me Wednesday morning. The May issue (ZCK25) dropped as much as 6.25 cents overnight and was one tick off its session low at this writing, on still light trade volume of 22,000 contracts[i]. This being the first day of the new positioning week for Watson, we can put a bow on last week’s activity. From Tuesday-to-Tuesday the May issue closed 18.75 cents higher indicating funds were adding back some of their recently liquidated long futures positions. Recall last Friday’s CFTC Commitments of Traders report (legacy, futures only) showed the noncommercial net-long position decreased by 105,700 contracts, including a liquidation of long futures by 104,800 contracts. Technically, May broke below $4.70 and is quickly moving toward the next round number of $4.60, posting an overnight low of $4.64 (so far). As I mentioned yesterday, May corn still looks to be in an intermediate-term downtrend on its weekly chart meaning it should take out its previous low of $4.4250 from last week. Fundamentally, national average basis was calculated Tuesday evening at 35.5 cents under May futures, as compared to last Friday’s 37.0 cents under May.
Soybeans: The soybean market was also under pressure early Wednesday morning with May (ZSK25) falling as much as 8.25 cents overnight on trade volume of only 15,500 contracts. Looking back at the recently concluded positioning week we see May closed 12.25 cents higher from Tuesday-to-Tuesday indicating a round of noncommercial short-covering. The latest Commitments of Traders report showed Watson held a net-short futures position of 34,280 contracts, an increase of 23,730 contracts. From a technical point of view, the May issue looks destined to take out last week’s low of $9.91 in the not-too-distant future. Overnight trade saw the contract hit a low of $10.03 as of this writing. Fundamentally the market remains neutral-to-bearish. The National Soybean Index was calculated near $9.46 Tuesday evening putting available stocks-to-use at 17.7%, as compared to the end of February’s 17.4% and the March 2024 ending number of 10.6%. National average basis was calculated at 65.25 cents under May futures with the previous 5-year low weekly close for this week at 86.0 cents under and the previous 5-year average weekly close at 47.25 cents under May. The May-July futures spread covered a neutral 52% calculated full commercial carry heading into Wednesday’s session as compared to last Friday’s close of 54%.
Wheat: The wheat sub-sector was in the red to start the day. Again. Just like yesterday. Tuesday afternoon I received a call from a friend in ag media wanting to talk about the latest USDA guesses and what they meant for the wheat markets. My friend knows me well, so he knew what my initial Paul Lynde-like smarmy answer would be. But then we got down to brass tacks and discussed how the reads on real wheat market fundamentals are bearish across the board. He asked what it would take to change the situation, turning our discussion to weather and winter wheat coming out of dormancy. There are a couple possible events that could happen: 1) An early spring freeze, though a look at the latest 6-to-10-day weather forecast doesn’t show this as much of a threat. Also, today’s forecast calls for above normal temperatures across much of the US Plains. 2) An increasing drought situation across key winter wheat growing areas. The extended forecast does show below normal precipitation for much of the US Southern Plains, an area that consistently shows drought readings on weekly US Drought Monitor maps. July HRW (KEN25) was down 5.0 cents pre-dawn with the same SRW issue showing a loss of 5.25 cents.
[i] Truth be told, I haven’t given much thought to my classification of overnight trade volume. What makes activity light, heavy, other? I take the same approach as US Supreme Court Justice Potter Stewart did to obscenity/pornography back in 1964 when he famously said, “I know it when I see it.”
