Written Commentary
SOYBEANS
The soy complex may struggle to hold its ground early this week after China announced over the weekend that 100% tariffs would be implemented on Canadian canola meal and canola oil imports starting March 20th in retaliation for Canadian tariffs on Chinese EVs, aluminum, and steel. China was the #1 buyer of Canadian canola meal and oil. Supplies of both in Canada are expected to rise quickly, resulting in limit down canola prices overnight and significant pressure on bean oil. Soymeal prices are steady as domestic usage could rise as tariffs decrease Canadian canola meal imports into the US. In addition, China’s 10% tariff on US bean imports begins today. No talks between President Trump and China’s President Xi are scheduled. In Trump’s 1st term, China waited nearly 6 months before agreeing to the Phase 1 deal. A Missouri judge ruled in favor of the state, ordering China to pay $24 billion for its role in the Covid disaster. This is important since it could allow Missouri to seize Chinese-owned assets in the state to satisfy the judgment and could add further tensions to the trade war. Commitments of Traders data showed funds flipped from net long to net short in beans, added to their net short in meal, which now stands at 10-week high in bearish bets, and the bean oil net long was reduced significantly to a 7-week low.
SOYBEAN MEAL
The soy complex has started the week in mixed fashion, with sharp weakness in bean oil pulling beans lower, and minor strength in soymeal. The soybean meal market is dealing with significant uncertainty regarding the effects of China’s new 100% tariff announcement on Canadian canola meal and canola oil imports set to go into effect on March 20th. China is Canada’s largest export market for canola products, and typically, any excess buildup of Canadian stocks due to the tariffs would flow into the US. However, the situation is much more complex this year, with the US set to impose 25% tariffs on Canadian goods, including canola products, on April 2nd. In the meantime, US domestic soymeal will replace some Canadian canola meal imports, which could increase domestic soymeal usage, at least until the next tariff deadline on April 2nd. China’s 10% tariff on US bean imports begins today.
CORN
There is some minor strength at the start of this week after funds sold a massive 118,000 contracts as of Tuesday of last week, dropping one-third of their net long in the 2nd largest selling week on record. The US dollar remains near its 4-month low and is a supportive factor for corn prices. USDA may raise corn exports again in tomorrow’s Supply & Demand report after the US Census Bureau reported record-high exports for January. US ending stocks are expected to be near 1.516 billion bushels, down from 1.540 billion in February. The US is still reportedly considering a port fee for Chinese-built or Chinese-flagged vessels that dock at US ports in a move to drive ship manufacturing back to the US. Currently, China accounts for 50% of global shipbuilding.
WHEAT
There is moderate strength in wheat to start the week as the precipitation outlook for the Plains remains worrisome. Light precipitation is expected over the next 5 days in the northern Plains, with a few heavier pockets in the far north. Mostly dry conditions are forecast in the South with the 6-10 day outlook similar. Some beneficial rains did fall in the central and southern parts of Oklahoma over the weekend. Farmer selling is slow but will pick up as we move into April and May when bin space will be at a premium once harvest begins. There were 10 Chicago wheat deliveries overnight.
CATTLE
Live cattle and Feeders saw heavy buying throughout Friday’s session on bullish technicals and concerns that US beef and cattle imports will decline as the US is a net importer from Canada and Mexico. Live cattle open interest rose by nearly 3,000 contracts on Friday. Cash cattle also improved Friday from prices earlier in the week, with the north trading at 197 – 202.50 and the South trading at 197 – 198. The 5-area, 5-day weighted average for the week ended at 199.59, up from the previous week at 197.60. CFTC data showed Managed Money reduced the net long in live cattle by nearly 11,000 contracts to a 15-week low, but still holding nearly 111,000 contracts long.
HOGS
Tariff news is the week’s feature, as China’s 10% tariff on US pork imports begins today. In addition, over the weekend, China hit Canada with a significant tariff on Canadian pork imports. Normally, China’s tariffs on Canadian pork would be bullish on the possibility of an increase in US exports, but China’s tariff on US pork is an offsetting factor. 30% of US pork production goes towards exports. Creating even more uncertainty, Canada suspended some pork imports from the US Smithfield Foods North Carolina plant due to an issue with certain offal shipments.
MILK CLASS III
April Class III milk finished with a substantial weekly loss after falling to a new contract low on Thursday. The USDA said US farm-level milk production is strengthening as spring flush approaches.
ENERGIES
While May crude oil has held last week’s low to high recovery of three dollars early today, significant headwinds from soft demand should leave thick resistance hanging over prices. Clearly, with US equities showing aggressive declines this morning, energy prices will see macro pressure as a global slowing theme resulting from trade war fears seems to be gathering momentum.
The product markets remain subdued as they closed Friday with sizable daily and weekly losses. RBOB and ULSD have followed through to the downside and are close to their 2025 lows, with moderate losses early this week. US import tariffs remain unsettled after this week’s “flip flops” that continue to pressure RBOB and ULSD prices as they erode the prospects of near-term demand.
While the natural gas market is explosively overbought from a two-day low to high rally of nearly $0.80 and overbought from a seven day rally of $1.13, the last COT positioning report showed the spec’s still holding a net short of 54,130 contracts
DOLLAR INDEX
The U.S. dollar index declined for a sixth consecutive session in light of increasing concerns over the escalating trade war.
COCOA
While May cocoa has managed to generally respect even-number support around $8,000 throughout last week, the range-down trade this morning shifts the path of least resistance down especially with global macroeconomic influences tempering cocoa demand prospects. Furthermore, Ivory Coast arrivals have reached 1.4 million metric tons for the season which is a 14.8% increase from the same period last year. Fortunately for the bull camp, CIT & noncommercial/nonreportable traders have aggressively reduced their net long positioning which could begin to temper what we think will be an upcoming downward thrust in cocoa prices. The Commitments of Traders report for the week ending March 4th showed Cocoa Managed Money traders reduced their net long position by 2,119 contracts to a net long 14,763 contracts.
COFFEE
While the key growing areas in Brazil received precipitation over the last seven sessions, traders concern over dryness remains in place. On the other hand, the overall production outlook for the 24/25 season has improved and should leave the bear camp with an edge. However, global coffee stock levels remain tight but could be adequately factored into prices with the recent trade above 425. In our opinion, buyers balked at paying up for supply above 400 as indicated by a significant drop in open interest and trading volume into the early February highs. From a longer-term perspective, the trade expects overall supply to build slightly in the new crop from expanded Vietnamese production.
COTTON
Clearly, the cotton market is not concerned about significant demand losses from a developing US Chinese trade war as December cotton prices sit three cents above the low posted last week. Obviously, a plunge in the US dollar provided some support for cotton last week but we suspect the primary driving force for the rally was stop-loss buying from record short positions held by noncommercial/no CIT and noncommercial and nonreportable traders. The March 4th Commitments of Traders report showed cotton Managed Money traders hit a new extreme short of 79,957 contracts. Managed Money traders added 11,504 contracts to their already short position and are now net short 79,957.
SUGAR
While May sugar appears to have found support/value at the 18 cent level and has managed to “bounce”, the preponderance of market forces remains in favor of the bear camp. However, the production outlook has deteriorated in India, Brazil and Thailand which likely has created a shelf of support at the $0.18 level. Unfortunately for the bull camp, a portion of support for sugar came from the ongoing dryness in Brazil and recent precipitation has tempered supply side concerns there.
PRECIOUS METALS
April gold futures are lower despite weakness in the U.S. dollar but stayed close to record highs as ongoing trade tensions continued to influence market sentiment. Investors were focused on upcoming U.S. inflation data this week, which could offer clues about the Federal Reserve’s next policy steps. Adding to the uncertainty, was President Donald Trump suggesting reciprocal tariffs on Canadian dairy and lumber might be on the horizon.
April silver futures are unchanged on Monday despite a weakening U.S. dollar, as trade tensions continue to dominate headlines.
May copper futures are lower for a second consecutive day as weak economic data from China dampened market sentiment. Data released over the weekend showed that both consumer and producer prices in China declined in February, highlighting ongoing deflationary pressures in the world’s largest copper consumer.
EQUITIES
Stock index futures are lower as current geopolitical and economic concerns are exerting downward pressure on stock index futures.
INTEREST RATES
Futures are higher across the board on the belief that the Federal Open Market Committee will more aggressively move to accommodation this year. There are no Federal Reserve speakers this week since the pre-FOMC ‘blackout’ period just started.
Please contact us at 1.877.690.7303 or via email at sales@admis.com for any questions or comments on this report or would like more information about ADMIS research.
>>Explore more here
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
