Similar to what has been seen so far this week, the Energies sector was under pressure pre-dawn while Grains continued to rally.
Fund money is coming out of one, Energies, and into the other, Grains, as a new noncommercial positioning week gets under way.
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The overnight session saw Dec26 corn hit $5.30, the highest mark for a December corn contract since July 2023.
Morning Summary: It was more of the same overnight through early Wednesday morning with the Energies sector under pressure while Grains continued to rally. Regarding the former, according to headlines, “Iran and Oman prepare Hormuz deal as U.S. holds back on secondary sanctions”. How will this end? Recent history will tell us there is no real deal, but we’ll see. The market seems to think otherwise as WTI crude oil (CLV26) lost another $2.74 (3.3%) overnight and diesel fuel (distillates) (HOV26) was off 12.5 cents (3.0%) at this writing. We need to keep in mind this is a Wednesday, the first day of the new noncommercial positioning week, so Watson tends to be more aggressive coming out of the blocks. As for gold, the December issue (GCZ26) was down $15 (0.3%) pre-dawn after settling $3.30 lower yesterday but still up $273.90 for the Tuesday-to-Tuesday positioning week. Granted, much of this was due to the new US trade war with Canada, a situation that didn’t make many new headlines overnight. On the financial side, US Treasury yields were higher to start the day with US stock index futures mostly in the red. The US is three weeks out from the next FOMC announcement on interest rates, with the Fed fund futures forward curve now indicating no change is expected.
Corn: As mentioned in the opening Summary, the Grains sector was higher, nearly across the board overnight through early Wednesday morning. Starting with King Corn, the December issue (ZCZ26) posted an 8.75-cent trading range, from down 2.25 cents to up 6.5 cents on solid trade volume of 62,000 contracts and was sitting 4.75 cents higher at this writing. Dec26 hit a high of $5.30 overnight (note the Round Number Reliance), the highest mark for a December futures contract since the Dec23 issue posted a high of $5.7225 back in July 2023. A look back at yesterday’s session and we see Dec26 closed 8.0 cents higher for the day and 35.5 cents higher for the Tuesday-to-Tuesday positioning week. This tells us Watson added to its net-long futures position, last reported at 302,140 contracts. On the commercial side, the Dec-March futures spread settled yesterday’s session at a carry of 15.0 cents, fractionally stronger than Monday’s close but still covering a neutral 49% calculated full commercial carry. For the record, the September-December finished at a carry of 23.0 cents and covered 73% telling us the US has ample supplies heading into the end of August, the end of 2025-26 marketing year, with harvest just ahead.
Soybeans: Given the continued break in the Energies sector, we could expect the oilseed sub-sector to be lower early Wednesday morning as well. A look at the quote screen tells us we would be half right with both canola and soybean oil, the two markets most connected to diesel fuel, in the red by $4.40 (0.6%) and 1.15 cents (1.7%) respectively. On the other side of the ledger, soybean meal posted the strongest gain as December rallied as much as $5.30 and was sitting $4.30 (1.3%) higher at this writing. A look at Dec meal’s (ZMZ26) daily close-only chart is interesting in that the contract has added $18.30 from its low daily close on Tuesday, August 11 through its latest high daily close of $329.20 on Tuesday, August 25. Last Friday’s Commitments of Traders report showed funds held a net-long futures position of 116,900 contracts on August 18, an increase of 11,230 contracts from August 11. As for soybeans, the November issue (ZSX26) was up 3.0 cents at this writing after rallying as much as 5.75 cents overnight on trade volume of roughly 25,000 contracts. The soybean market has been interesting this week in that it has rallied, but seemingly if left to its own devices it would have continued to sink lower.
Wheat: The wheat sub-sector saw solid follow-through buying from yesterday’s Turnaround Tuesday session overnight through early Wednesday morning. The spotlight remains on the SRW market where December (ZWZ26) added as much as 14.75 cents overnight on trade volume of 17,000 contracts and was sitting 11.25 cents higher to start the day. So far this calendar week the Dec issue closed 0.25 cent higher Monday and 3.75 cents in the green Tuesday, pushing its positioning week gain to 22.0 cents. Recall the previous positioning week saw Dec add 33.0 cents, yet Watson still reportedly held a net-short futures position of 18,765 contracts as of Tuesday, August 18. This was a decrease of only 6,145 contracts. If there is a market in the Grains sector Watson has been reluctant to go long, it is SRW. Why? The easy answer is fundamentals with the September-December futures spread closing Tuesday covering a bearish 71% calculated full commercial carry while the Dec-March covered a more bearish 74%. What’s interesting it this hasn’t stopped the market from rallying with December up the previously mentioned 55.0 cents the past two positioning weeks. Over in HRW we see the December issue up 12.75 cents after rallying as much as 16.25 cents overnight on trade volume of 4,800 contracts.
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.
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