The commodity complex was a mix of activity overnight, not a big surprise given the lack of clear guidance from manufactured headlines for algorithms.
That being said, the last day of the noncommercial Tuesday-to-Tuesady positioning week should be interesting…
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all while the Varsity Meeting between the US president and China's Xi draws near.
Morning Summary: “Do you remember, the 21st night of September?” This was the question asked by Earth, Wind, and Fire back in 1978. A look at the quote screen early Tuesday morning and we can see that Monday’s explosive rally may have been led by some pretenders, it wasn’t necessarily “love” that changed their minds while “chasin’ the clouds away”. Though not perfectly clear pre-dawn, there was some initial Turnaround activity, particularly in the Indices (US stock index futures), Softs, and Grains (more on this in a bit). Meanwhile, the Energies and Metals were in the red again this morning, mostly, extending Monday’s selloffs. Early morning headlines don’t provide algorithms much guidance heading into this last day of the noncommercial positioning week. Of course, there is talk of the upcoming varsity meeting between the US president and China’s Xi, along with the obligatory “U.S. Treasury yields ease as investors await fresh jobs data, Fed comments” nonsense. Then there’s this head scratcher, “(The US president) to press Zelensky for energy truce, says Russia has ‘lost control’ of oil due to Ukraine war”. What about his own war on Iran that has done nothing but drive diesel fuel and fertilizer prices higher? As the Traveling Wilburys sang, “Last night. Talking about last night.”
Corn: The corn market gave back a small part of Monday’s strong rally overnight through early Tuesday morning. The 2026-27 marketing year contracts, December 2026 (ZCZ26) through July 2027 (as well as September 2027) were all down about 4.75 cents at this writing with Dec26 the only issue showing double-digit trade volume pre-dawn. Dec posted a 7.0-cent trading range, from up 1.5 cents to down 5.5 cents while registering 32,000 contracts changing hands. Recall Dec closed Monday with a gain of 15.5 cents while the carry in the Dec-March futures spread weakened by 0.25 cent. After the dust had settled, the National Corn Index came in at $5.0125, up 15.75 cents from Friday meaning national average basis firmed fractionally. For the record, this was the highest Index price since $5.0350 on August 24, 2023. Based on the economic Law of Supply and Demand, with the Index being market price, this would imply supplies are now the tightest in relation to demand in more than 3 years. All while national average basis remains weak. Taken together, something doesn’t add up. This means the Index has likely been skewed by funds moving to a record large long, and possibly net-long, futures position during this rally.
Soybeans: Another look back at Monday’s close and we see the oilseed sub-sector was dark green across the board. Recall soybean meal led the way as the December issue settled $9.80 (2.7%) in the green and gained $1.50 on January, trimming the carry in the spread to only $0.30. Early Tuesday morning finds the sub-sector in the red, this time led by soybean oil where the December issue is down about 0.9 cent (1.3%). Yes, this was due in part to the continued slide in diesel fuel with the spot-month contract (HOV26) sitting 17.25 cents lower at this writing. What’s interesting about diesel is while futures continue to break, the national average cash price reported by AAA is climbing, reported at $6.5275 Tuesday morning as compared to Monday’s $6.51. As for soybeans, the November issue (ZSX26) posted a 9.5-cent trading range overnight, from up 1.25 cents to down 8.25 cents on trade volume of 25,000 contracts and was sitting 7.0 cents in the red to start the day. Nov finished yesterday’s session 24.5 cents higher on only 0.5 cent off its session high, putting it up 9.25 cents for the Tuesday-to-Tuesday positioning week heading into today’s session. Last Friday’s Commitments of Traders report showed funds held a net-long futures position of 261,180 contracts.
Wheat: As you likely guessed, the wheat sub-sector was also in the red across the board early Tuesday morning, this time led by HRW. Here we see the December issue (KEZ26) down 11.25 cents after dropping as much as 12.0 cents overnight on trade volume of fewer than 3,000 contracts. Meanwhile, the new-crop July issue (KEN27) was down 9.0 cents, 1.0 cent off its overnight low while registering 350 contracts changing hands. What does all this mean? Given the low trade volume, nothing really. It wouldn’t take much more than a sneeze (computer virus?) to spark a rally heading into Tuesday morning’s intermission. Over in SRW the December issue (ZWZ26) was down 9.5 cents after losing as much as 10.5 cents overnight on trade volume of less than 10,000 contracts. A key takeaway from Monday’s session, when Dec closed 12.5 cents higher for the day but was still down 1.75 cents for the positioning week, was the carry in the Dec-March futures spread firmed by 0.25 cent. This had the spread covering a bearish leaning 64.5% calculated full commercial carry. Last night, the National SRW Index came in at $6.5525, up 12.25 cents for the day meaning national average basis weakened fractionally, which was to be expected.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.