Written Commentary
SOYBEANS
Last week’s strong close may support further gains early this week after several morning flash export sales pointed to better demand. Additional support may come from Brazil’s National Disaster Monitoring Center, Cemaden, saying Brazil is seeing its worst drought since 1981, and there may be planting delays in Mato Grosso due to lack of moisture. The dry season started a month early and may extend longer than normal.
SOYBEAN MEAL
Soymeal prices are starting the week stronger, and USDA announced another US bean sale to China this morning, following several similar sales last week. Over the weekend, China opened an anti-dumping investigation into Canadian canola imports in retaliation for Canada’s EV tariffs. Over half of Canada’s canola is exported to China, and the investigation has pushed US bean oil sharply lower as more canola oil may enter the US market but is offering some support for soybean meal. The potential for China to turn to the US for additional canola supplies and US soymeal has increased if China’s canola crush is reduced.
CORN
December corn closed strong last week as US export demand continues to track higher, and dry weather across the Midwest is not the ideal finish for the crop in some areas. The Rosario Grain Exchange says recent rains in Argentina will boost planting conditions. CFTC data showed that Managed Money traders exited 16,000 contracts of their net short position as of Tuesday of last week.
WHEAT
Friday’s close in Chicago wheat formed a potential weekly upside reversal, similar to corn, and we give the edge to the bull camp to start the week. Although ABARES increased Australian wheat production to 31.8 million tonnes, 20% above the 10-year average, dryness in the Black Sea region is hampering winter wheat planting. Some recent rains in Argentina have reduced wheat stress there, but dryness is expected for the next two weeks. Ukraine says they are limiting wheat exports for the new season to 16.2 million tonnes, down from 18.3 last year.
CATTLE
December live cattle closed stronger Friday but faces headwinds on a further rally with increasing carcass weights and continued concerns about consumer demand. Cash cattle trade was weaker last week, and the 5-area, 5-day weighted average for the week was 183.57, down from 185.19 the previous week. The estimated average dressed cattle weight last week was 849 pounds, up from 847 the previous week and 825 a year ago. The 5-year average weight for that week is 825 pounds. Estimated beef production last week was 517.8 million pounds, down from 518.9 million a year ago. The USDA estimated cattle slaughter came in at 120,000 head on Friday and 14,000 head on Saturday.
HOGS
December hogs closed very strong late last week. CFTC data showed that Managed Last week’s strong export sales were one of the catalysts for the rally. Money traders bought over 21,000 contracts as of Tuesday of last week, extending their net long position to 29,000 contracts. The heavy buying by Managed Money traders may be close to running its course as the current December price rally has reached equal legs to the rally seen in the last half of July.
MILK – CLASS III
September Class III Milk found early solid support as it rallied to a new contract high before having a sizable pullback, and then regained upside momentum to finish the week with a considerable gain. The USDA reported that milk production continues slowly declining throughout most of the nation. Mild late-summer weather has kept milk output steady in the Pacific Northwest, while cooler weather and hearty feedstuffs keep milk drawdowns in check in the Midwest and Northern Plains. Bottlers are beginning to replenish school pipelines as most states have school districts in session or starting no later than this week.
METALS
December gold futures are lower, continuing to retreat from recent record highs, despite increasing prospects of a more aggressive Federal Reserve pivot to accommodation. Traders are awaiting this week’s economic reports, especially Friday’s employment numbers to adjust their expectations for the size of likely Federal Reserve interest rate reductions.
December silver futures are lower despite the likely Federal Reserve interest rate reduction this month. Much of today’s weakness appears to be linked to increasing prospects of a weakening global economy and, therefore, lesser demand for industrial commodities.
December copper futures are sharply lower and are now at the lowest level since August 15 in light of increasing inventories and soft the demand from a large copper consuming country in Asia. Copper inventories in LME warehouses increased recently by 8,700 tons. In addition, there has been pressure on copper due to recent gains in the U.S. dollar.
ENERGIES
October Crude Oil was sharply low overnight as concerns over demand from China apparently outweighed the interruptions to oil production in Libya. Chinese PMI in August at 50.4 beat trade expectations calling for 50.0 and was better than the 49.8 registered in July, but the trade apparently focused on a decline in new export orders, the first in eight months. Oil exports at major Libyan ports were reportedly halted on Monday, and production was curtailed across the country amid a standoff between rival political factions over control of the central bank and oil revenue. Libya’s oil production has fallen by more than half since the standoff began last week, when western factions moved to oust veteran Central Bank of Libya Governor Sadiq al-Kabir and replace him with a rival.
October Natural Gas is near unchanged this morning after trading to its highest level since August 23 overnight. The market ran up against resistance at the 21-day moving average and the 50% retracement of the selloff from the August 15 high to last week’s low. The 6-10 and 8-14 day forecasts call for above to much above normal temperatures in the western half of the lower 48 but mostly normal to below normal in the east. Gas prices in Europe were lower today.
STOCK INDEX FUTURES
Stock index futures are lower today, although S&P 500 futures remain above a recent upside breakout that took place on August 29.
The 8:45 central time August manufacturing PMI is expected to be 48.0.
DOLLAR INDEX
The U.S. dollar index is higher and is above a steep downtrend line that started in early August.
INTEREST RATES
Futures were lower in the overnight trade but are higher this morning on limited news. There are no Federal Reserve speakers scheduled for today.
SOFTS
December Cocoa gapped lower overnight but bounced off its lows. The market continues to await the arrival of the new crop. Farmers interviewed by Reuters said on Monday that heavy rains in most of Ivory Coast’s main cocoa-growing regions last week boosted the development of the October-March main crop, which is expected to start early and be longer and larger than last season. This was an improvement over the reports of dry conditions for the previous couple of weeks. The International Cocoa Organization’s quarterly statistics release on Friday showed a 2023/24 production deficit of 462 million metric tons versus 439 million in the second quarter update.
December Coffee is near unchanged this morning overnight after falling to its lowest level since August 23 earlier in the session. The market reached a new contract high a week ago but experienced a setback after ICE warehouses had a large number of arabica beans submitted for grading. This has allowed ICE stocks to increase by more than 16,000 bags over the past two sessions to reach their highest level in at least four months. However, there has been not ben any large submissions since the 76,000 that were submitted last week. London robusta prices were higher overnight after a two day selloff from record highs.
December Cotton was lower overnight after failing an attempt to take out the 50-day moving average. US equity futures point to a lower open, and crude oil is sharply lower, both of which are negative for cotton. The dollar was higher overnight, having staged an impressive recovery from a one-year low last week, and this reduces US export prospects. Poor demand expectations have undermined the market recently despite recent stressful weather for the US crop.
October Sugar fell to its lowest level in a week overnight but bounced off that level and was back near unchanged later in the session. The market may have gotten a bit overbought after an 8-session rally off 17-month lows that came in the wake of a UNICA report on Brazilian sugar production for the first half of August that was lower than expected. There were reports last week that producer sales in Brazil had picked up after the recent rally.
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