The Energies sector continued to climb higher overnight as global headlines remain unchanged.
The monthly Cold Storage numbers for September 30 could be interesting if they show follow-up to last month's indication US consumer demand was moving away from beef.
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As for Grains, the spotlight was on the wheat sub-sector where December SRW was headed for its 8th straight lower weekly close.
Morning Summary: Yes, there is a lot of week left today, but a look at the Barchart Futures Market Heat Map early Friday morning shows the commodity complex wearing colors other than green. The outlier is Energies where strong commercial buying was seen in crude oil (both Brent and WTI), diesel fuel, and RBOB gasoline. Against my better judgement, I decided to check financial news to confirm my thoughts of what was driving Energies sector, and sure enough I found, “…Iran says it’s prepared for warfare” and “(The US president) invokes Defense Production Act for oil production, refining”[i]. In related news, “Russia and Ukraine trade fresh strikes despite renewed peace talks push”. [ii] For the record, the spot-month diesel fuel futures contract (HOX26) hit a high near $5.0250 overnight, within sight of its all-time high of $5.05 from September 15. A sector that has been ignored for much of this week is Livestock, only because trends have held with cattle up and lean hogs down. Friday afternoon will see the release of the October 1 Cattle on Feed and September 30 Cold Storage numbers. Of the two, the latter is more interesting in that it could show a continued move away from beef to lower priced proteins by US consumers.
Corn: The corn market was in the red to start the last day of the week. The December issue (ZCZ26) was sitting 2.5 cents lower and on its session low while registering a still light 21,000 contracts changing hands overnight. Recall Dec26 closed 2.75 cents lower Thursday, with the National Corn Index coming in near $4.2175, also down 2.75 cents for the day, meaning national average basis held steady at 38.75 cents under December futures as compared to last Friday’s final figure of 39.0 cents under and the previous 5-year low weekly close this week, also at 39.0 cents under December. The bottom line is national average basis is still weak. Could a change be on the horizon? Possibly, with the weather forecast clear across the US Midwest again Friday, combines are expected to be running full speed to get the 2026 harvest completed. My guess is much of what is left will be tucked away in on-farm storage meaning merchandisers may have to start pushing the cash price slightly to source supplies to meet demand. The Dec-March futures spread closed Thursday covering a neutral 46% calculated full commercial carry. Technically, Dec slipped back below the $4.60 round number overnight with Wednesday’s low down at $4.5350.
Soybeans: As of this writing the spot-month diesel fuel contract has backed off its overnight high, sitting 4.0 cents in the green after gaining as much as 9.0 cents. The oilseed sub-sector is quietly lower to start the day with November canola down $2.00, December soybean oil off 0.03 cent, and December bean meal sitting $0.20 in the red. But again, there is a lot of week left today. Over in soybeans we see November, January, and March all fractionally lower at this writing, but that could change with the next computer blip. November (ZSX26) posted a 6.25-cent trading range overnight from up 5.0 cents to down 1.25 cents on trade volume of 11,000 contracts. Recall November finished Thursday’s session 7.75 cents in the green and gained 1.25 cents on January, hinting at possible support from commercial interests. The National Soybean Index came in last night at $11.9425, up 8.25 cents meaning national average basis did firm to close out the day. What makes this more interesting is I’ve heard from a friend in central Nebraska that some terminals have shut off trucks bringing in soybeans due to being full and/or having nowhere to go with the soybeans. Theoretically, this should weaken basis.
Wheat: And for the red cherry on top, the wheat sub-sector was mostly lower to start the day, with HRS the outlier on solid overnight trade volume. Checking headlines on the Barchart site, I saw where the social media team had posted to the site formerly known as Twitter, “Wheat on track for its 8th straight red week, it’s longest losing streak[iii] since 1997”. My Blink reaction was a sadistic laugh thinking of the newbies who had been pulled into wheat via prediction websites, basically unregulated online casinos. There is a better than average chance many of these new gamblers are learning why one of wheat’s nicknames is “Poverty Grass”. What would it take for Dec SRW (ZWZ26) to avoid its 8th straight lower weekly close? It would have to get back above last Friday’s settlement of $6.60 (would’ve been more appropriate if the contract had closed 6 cents higher last week at $6.66). A look at the quote screen shows Dec closed at $6.2475 Thursday afternoon meaning it needs to finish today’s session with a gain of at least 35.25 cents. Given we are talking about wheat, and the CME’s daily price limit is 45.0 cents, it’s possible Dec could close higher, but not probable.
[i] A move that will pay off nicely not only for his energy investments, but also his financial backers in the petroleum industry.
[ii] I continue to wait for someone, anyone, to point out to two of the Three Amigos that many of the world’s economic problems could be solved if one got out of Ukraine and the other Iran. But then again, global economic and political disruption has been the goal of the Three Amigos all along.
[iii] I’ll have to visit with the social media team, again pointing out traders can be long OR short futures meaning 8 weeks in the red would be considered a WINNING streak.
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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