The Softs sector was strong again to start the week led by solid rallies in cocoa (1.8%) and coffee (1.7%).
With the Grains sector quiet overnight, mostly, my attention returned to last Friday's Commitments of Traders report for Corn.
The key feature of the Soybean market is March now showing the most open interest.
Morning Summary: To stick with the holiday theme of the Holly (red berries) and the Ivy (green leaves), though I have no idea if Sir Isaac Newton[i] was overly concerned about festive decorative plants, I’ll say Monday morning’s Barchart Future Market Heat Map was bedecked with mostly ivy. That was my Stephen King[ii] way of saying there was more markets in the green than red to start the week. As has become customary when looking at commodity complex sectors, we see Softs leading the way, this time with a cumulative gain of 0.6%. Within the sector, and of the markets that trade overnight, we see cocoa with a gain of 1.8% followed closely by coffee, still red hot and up 1.7%. March cocoa (CCH25) has posted an early high of $11,599 (per metric ton), the futures market’s all-time high of $12,261 from this past April growing clearer on the horizon. As for sectors not in the green we have Metals near unchanged (purple) and Energies showing a cumulative loss of 1.7%. There are no surprises within the latter as natural gas led the way with a loss of 4.1%. US forecasts have heated up with above normal temperatures expected across the Plains, Midwest, and creeping toward the Eastern Seaboard.
Corn: The corn market was one of those markets decked out in green to start the week, and as usual contracts were quiet overnight through the pre-dawn hours. March (ZCH25) posted a 2.75-cent trading range, from down 0.75 cent to up 2.0 cents on trade volume of about 12,500 contracts. That isn’t much, so let’s spend no more time on it. Instead, let’s revisit last Friday’s CFTC Commitments of Traders report (legacy, futures only), for it was impressive. Noncommercial traders reportedly held a net-long futures position of 224,423 contracts as of Tuesday, December 10, an increase of 87,195 contracts. This was the largest net-long futures position since the week of February 21, 2023 and included a long futures position of 465,800 contracts, the most since the week of June 21, 2022 (504,170 contracts). Recall I’ve been talking about corn becoming a more attractive market for investors since August, due in large part to its increasingly bullish real fundamentals (intrinsic value, basis, futures spreads). However, as we saw late last week, the strong rally in futures brought a round of selling from the commercial side. Last Friday’s national average basis calculation came in at 26.0 cents under March futures as compared to the previous week’s 24.5 cents under March.
Soybeans: The soybean market was also quietly higher early Monday morning with January rallying as much as 5.25 cents on trade volume of 13,000 contracts and sitting 2.75 cents higher at this writing. Last week saw the March issue (ZSH25) easily surpass January as the issue with the most open interest, coming in Friday showing 355,800 contracts to 209,600 contracts. Given this, it’s time to shift our focus to the first deferred as well. The overnight session saw March add as much as 4.5 cents while registering 11,600 contracts changing hands. Did the market see some interest from Eastern Hemisphere buyers? It’s possible, but by all appearances it doesn’t look like much to get excited over. The latest weekly export sales and shipments update showed total sales (total shipments plus unshipped sales) of 1.37 bb, up 12% from the same week the previous marketing year but still well below the pace projection for total 2024-2025 shipments of 2.0 bb. This means the US will have to continue making sales before the world’s largest buyer turns its attention back to Brazil. National average basis came in Friday at 49.5 cents under January futures and 55.0 cents under March, as compared to the previous week’s 52.0 cents under and 58.5 cents under respectively.
Wheat: The wheat sub-sector was in the green pre-dawn, led by Kansas City (HRW), at least in terms of overnight change. March (KEH25) rallied as much as 6.25 cents on trade volume of less than 2,500 contracts and was sitting on its session high at this writing. Again, I’ll go back to last Friday’s Commitments of Traders report where we see Watson was reportedly holding a net-short futures position of 19,500 contracts, a decrease of 3,225 contracts from the previous week. What does this tell us? The bottom line is funds continue to cover some of its net-short futures position despite the fact the long-term fundamental picture remains bearish. Recall the new-crop July-September futures spread closed last Friday covering 71% calculated full commercial carry, comfortably beyond the threshold of 67%. March Minneapolis (HRS) (MWH25) was up 5.0 cents at this writing while registering 450 contracts traded. Here funds reportedly held a net-short futures position of 25,860 contracts, a decreased of 1,540 contracts from the previous week meaning more short-covering is possible. Over in Chicago (SRW) we see March (ZWH25) with a gain of 4.0 cents after rallying as much as 4.5 overnight on trade volume of less than 7,000 contracts. Funds were holding a net-short futures position of 59,290 contracts as of last Tuesday.
[i] Yes, Sir Isaac Newton was reportedly actually born on 25 December 1642. As far as I know, his birthdate was not adjusted to coincide with the Roman festival of Saturnalia.
[ii] The legendary horror writer was known for using 10 words when one would do.
