It's a Wednesday, meaning it's the first day of the new positioning week for funds, this time coinciding with the late stages of a Goldman Roll.
The Energies sector was lower across the board with futures spreads indicating pressure was coming from commercial traders as well.
The soybean market remained under pressure as the May-July futures spread has been indicating a growing confidence in Brazil's 2025 crop.
Morning Summary: A quick check of markets early Wednesday morning shows there isn’t much to talk about. Given the chaotic situation the world is in at this time, that isn’t necessarily a bad thing. Pre-dawn trade finds the US dollar index with a small gain while US stock index futures are showing small losses. US Treasury futures are also in the red to start the day, though not by much. Energies were a bit more active overnight with markets in the red across the board. What stands out to me here, at least as of this writing, is selling was tied to the commercial side, as indicated by futures spreads. The spot-month WTI crude oil contract (CLH25) lost as much as $0.92 while the backwardation (inverse) in the spot spread had weakened by about $0.06. We see deferred spreads are “synchronized”[i], meaning the backwardation is consistently weakening indicating commercial interests were selling overnight. Metals were also lower across the board with April gold slipping as much as $24.40 (0.8%) through early Wednesday morning. It’s interesting to note both steel and aluminum were in the red to start the day. Lastly, it is a Wednesday meaning it’s the first day of the new positioning week for Watson.
Corn: The corn market was higher pre-dawn on moderate-at-best overnight activity. March posted a 2.75-cent trading range, from down 0.5 cent to up 2.25 cents on trade volume of 24,000 contracts and was sitting 1.5 cents higher at this writing. May followed suit with a trading range of 2.5 cents while registering 14,000 contracts changing hands. Again, it’s Wednesday, so we can take a look back at the past week (Tuesday-to-Tuesday) to get an idea of what funds were up to. In corn we see March finished the week 10.5 cents lower while May was down 6.75 cents. This fits with the ongoing Goldman Roll as Watson was getting out of its long March futures positions. However, we also saw the carry in the May-July futures spread strengthen from 2.0 cents (Tuesday, February 4) to 3.25 cents (Tuesday, February 11) indicating there was some commercial selling thrown into the mix as well. Speaking of commercials, the National Corn Index ($CNCI) came in near $4.52 Tuesday evening, down 7.0 cents for the day, and putting national average basis calculations at 32.0 cents under March and 46.0 cents under May, both roughly 0.75 cent firmer than last Friday’s figure. This week’s previous 10-year low weekly close is 38.75 cents under March.
Soybeans: The soybean market was lower to start the day. March slipped as much as 5.75 cents overnight on trade volume of 20,000 contracts and was down 4.75 cents at this writing. We see similar activity in May (ZSK25) as it lost as much as 5.0 cents through early Wednesday morning and was still within sight of that mark. As expected, the market didn’t see much interest from Eastern Hemisphere buyers overnight. We know Brazil’s 2025 harvest continues to progress, despite some delays where rains are falling. We also know, by tracking the May-July futures spread, the market is growing more comfortable with Brazil’s production. Recall the May-July covered 37% calculated full commercial carry the third weekly close of January, within sight of the bullish threshold at 33%, before finishing last Friday covering 55%. At Tuesday’s close this same spread covered 56%, with the bearish threshold of 67% growing more visible on the horizon. As for immediate-term fundamentals, my Tuesday evening basis calculations came in at 64.0 cents under March and 80.75 cents under May futures, the latter slightly weaker than last Friday’s figure of 80.5 cents under May. This isn’t overly surprising as interest in US supplies tends to become extinct by late February.
Wheat: The wheat sub-sector was higher across the board. What do I make of this? I’ll start by once again saying it is Wednesday and Watson likely still holds large short and net-short futures positions in all three markets. Given this, it makes sense for the sub-sector to show gains to start the new positioning week. We’ll see what happens after the commercial side gets its first cups of coffee. As of this writing March SRW was up 4.25 cents and the May issue showed a gain of 3.75 cents after rallying as much as 6.0 cents and 5.75 cents respectively overnight. As I mentioned in yesterday’s Afternoon Commentary, March SRW closed unchanged from Tuesday-to-Tuesday, truly a wheat-like move while the May issue finished 1.25 cents higher. Both the March and May HRW issues were sitting 3.25 cents higher at this writing after adding as much as 5.25 cents overnight through early Wednesday morning. With little expected to change in regard to old-crop HRW fundamentals, attention is making a sloth-like turn toward new-crop (KEN25). Here we see the both the July-September and September-December futures spreads on the bearish side of the 67% calculated full commercial carry threshold. March HRS was up 5.0 cents to start the day.
[i] This is proof that even old dogs can learn new tricks. My young friend from Greece discussed the idea of “synchronized” spread activity to go along with “mixed” that we often talk about when spreads are inconsistent. I like it. After all these decades, I never thought of phrasing it that way.
