Written Commentary
SOYBEANS
Soybean prices started the week in negative territory after Friday’s strong weekly close. EU deforestation rules, which ban the import of soybean products from deforested areas, go into effect at the end of this year, and the scramble for supplies pushed soybean meal prices to a three-month high Friday.
The Quarterly Grain Stocks report showed September 1 soybean stocks at 342 million bushels (the highest since 2020) versus an average expectation of 347 million bushels and a range of expectations from 323 to 360 million. Futures had a minor rally as the report was released, but fell back to a couple cents lower on the day post-report.
SOYBEAN MEAL
Soymeal futures closed out on a high note last week, with a significant rally on Friday. Daily meal trading volume on Friday was the highest since June 25th. The rally was attributed to 2 issues: the potential for soy processing shutdowns due to the heavy rains from the remnants of Hurricane Helene and the EU’s deforestation rules that go into effect next year. Several soy processing plants in the southeast, including the large Valdosta, Georgia facility, were shut down for the storm. Operations are expected to return to normal later this week, but it takes time to catch up once a facility falls behind in production.
CORN
Corn prices closed out last week at their highest level since July 25th. Hedge fund commodity inflows have been very strong lately, which has boosted grain prices as funds view the lower interest-rate environment as bullish for commodities.
The Quarterly Grain Stocks report showed September 1 corn stocks at 1.760 billion bushels (the highest since 2020) versus an average expectation of 1.846 billion bushels and a range of expectations from 1.754 to 2.017 billion. Futures prices moved up to their highest level since June 28th post-report.
WHEAT
Wheat prices are in positive territory this morning after bouncing off moving average support again overnight. Continued dry conditions in southern Russia, eastern Ukraine, and the southern US Plains are supportive weather factors.
The Quarterly Grain Stocks report showed September 1 wheat stocks at 1.986 billion bushels (up 12% from year ago) versus an average expectation of 1.992 billion bushels and a range of expectations from 1.8 to 2.03 billion. The Small Grains Report showed 2024/25 All Wheat production at 1.971 billion bushels, versus an average of 1.983 billion and a range of 1.959 and 2.02 billion. All Winter Wheat production came in at 1.35 billion bushels, versus an average of 1.36 billion and a range of 1.34 and 1.382 billion. Wheat stocks were a bit higher than the guesses, as was the All US Wheat production number, but post-report price action has been friendly, nonetheless.
CATTLE
December live cattle hit a new 2-month high Friday before closing lower. Last week’s cash trade ended 2-$3 higher in the north and 1-$2 higher in the South. Cash cattle traded in the north on Friday at $185-$187 and the 5-area, 5-day weighted average for the week rose to 186.00, up from 183.93 at the end of the prior week. CFTC data showed managed Money increased their net long in live cattle to a 7-week high.
HOGS
December hogs had a wide trading range Friday but closed lower. CFTC data showed Managed Money increased their net long in the hog market to a 19-week high. Funds have recently been significant buyers on the uptrend, supporting minor breaks. If prices begin to break down, fund selling could exacerbate the pullback.
MILK CLASS III
November Class III milk closed Friday with a weekly loss after hitting a two 1/2-week low earlier in the session.
The USDA reported that farms across the United States are seeing varied volumes of milk production. East region producers are seeing steady to lighter milk production, the Central region is seeing stronger production, and the West is seeing steady to stronger production.
METALS
December gold futures are higher and are trading at a new record high. The yellow metal continues to be supported by expectations of further interest rate cuts from the Federal Reserve and rising geopolitical tensions.
December silver futures on Friday advanced to the highest level since July 17 after the Federal Reserve’s pivot to accommodation at its policy meeting last Wednesday. However, prices are lower today due to increasing prospects of a weakening U.S. and global economy, which could lower industrial demand for silver. A major silver consuming country in Asia lowered its key interest rate today, which appears to have had virtually no bullish impact on the price of silver.
On Friday December copper futures advanced to the highest level since July 18 with much of the strength last week linked to the Federal Reserve’s pivot to accommodation. However, today futures are only marginally higher despite increasing prospects of a more aggressive Federal Reserve easing of credit conditions this year.
ENERGIES
November Crude Oil was near unchanged overnight after just barely pushing through Thursday’s high. Israel reportedly hit more than 300 Hezbollah targets in Lebanon in two rounds of strikes overnight, which indicates that the war is expanding into a new phase. The market had discounted concerns about supply interruptions, but that could change. Shell said yesterday that it would shut production at two oil facilities in the Gulf of Mexico ahead of a potential tropical depression or tropical storm that could form in the next couple of days. US oil rigs in operation were unchanged at 488 rigs last week. This was down from 507 rigs a year ago but above the five-year average of 486.
November Natural Gas gapped higher this morning and traded to its highest level since August 15. US natural gas rigs in operation were down 1 rig to 96 last week. This was down from 118 rigs a year ago and below the five-year average of 120. The market saw a strong recovery on Friday following a recovery bounce on Thursday. US gas storage came in above the median expectation last week, but the surplus to year ago levels continues to decline.
STOCK INDEX FUTURES
Stock index futures are higher. The August Chicago Federal Reserve national activity index was 0.12 when 0.0 was anticipated. The 8:45 central time September PMI composite flash is anticipated to be 53.0.
DOLLAR INDEX
The U.S. dollar index is higher even though it appears likely that the Federal Open Market Committee will more aggressively lower its fed funds rate this year.
INTEREST RATES
Minneapolis Federal Reserve Bank president Neel Kashkari today said last week’s 50 basis point reduction in the fed funds rate was the right decision. Federal Reserve speakers today are Austan Goolsbee at 9:15 and Neel Kashkari at 12:00.
SOFTS
December Cocoa was higher overnight and was approaching the upper end of the relatively narrow range of the past two weeks. The market has been steady recently as it has been awaiting the west African main crop. World Weather Service says that west-central Africa rainfall is expected to increase over the next couple of weeks, with some of the driest areas in southern Ivory Coast and southern Ghana getting some significant rain after a lengthy period of dryish weather.
December Coffee recovered overnight following Friday’s steep selloff. Perhaps the market had become overbought on the dry weather theme from Brazil, with the wetter forecast for this past weekend likely inducing the selling on Friday. Southern Minas Gerais did receive some rain over the weekend, with isolated areas receiving heavier amounts, but the northern parts stayed dry. Parana and Motto Grosso do Sul received heavier rainfall.
December Cotton was a bit higher overnight, but it held below Friday’s 2 ½ month high. A wetter than normal trend in the US Delta and southeastern states could slow the harvest and cause additional damage to the crops. World Weather Service says an upper-level low pressure system over the Delta and southeastern states will merge with a tropical cyclone that is expected to move out of the Caribbean to northwestern Florida later this week, eventually to the Tennessee River Basin and/or southeastern states.
March Sugar is near unchanged this morning after pushing above Friday’s high slightly overnight. Some rains reached the Center-South region of Brazil over the weekend. Last week, Wilmar cut its projection for Brazil center-south production to 38.8-40.8 million metric tons from an initial estimate of 42 million. The extremely dry conditions in Brazil this year have raised concerns about tight supplies in the first quarter of next year.
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