The latest 6-to-10-day forecast calls for more winter-like temperatures across the US East Coast, a possible catalyst for the latest rally in natural gas.
Reported US boxed beef prices soared Thursday afternoon, putting the spotlight on the debate of if this market can be viewed as a reliable economic indicator.
The Grains sector was quiet, led by Soybeans giving back a small part of this past week's rally.
Morning Summary: It would be easy to devote most of this morning’s discussion to two markets: Our old friend natural gas and US boxed beef. Starting with the Widow Maker, overnight trade saw the February contract (NGG25) gain as much as 13.5 cents (4.1%), activity likely tied to colder 6-to-10-day forecasts for the US East Coast. To be honest, though, natural gas doesn’t need a reason to move 5% or more, that’s why it’s called the Widow Maker. As for boxed beef, Thursday afternoon’s reported prices had choice at $320.39, up $4.41 for the day while select added $2.02, coming in at $288.77. These were the highest daily reported prices since late October, and if counted as the monthly close it would be the highest choice price since this past June. I’ve talked before about how boxed beef could be used as an economic indicator market of US consumerism. If so, think about what it might be trying to tell us as 2024 comes to an end. Granted, there is an equally strong case made that these numbers are not reliable as they are generated daily by USDA. That fact is hard for me to ignore. Still, if nothing else, the different aspects of the cattle market all seem to be headed in the same direction at this time.
Corn: The corn market was quietly lower overnight through pre-dawn Friday. March (ZCH25) posted a 1.25-cent trading range on trade volume of 12,200 contracts and was sitting 1.0 cent lower at this writing. That’s about as exciting as it gets. If I had to pick a point of interest it would be March continues to hold above the nearest round number of $4.50 after making a clean break of that mark during Thursday’s session. Technically, March finds itself in overbought territory as its daily stochastics climbed well above 80%. Fundamentally the market hasn’t changed much. The National Corn Index (national average cash price) came in near $4.2650 last night, as compared to the end of November’s $4.0675. This is the key read telling us available stocks have tightened in relation to demand. But the new year will soon be upon us, bringing with it the possibility of increased cash sales. Additionally, national average basis was calculated at 27.25 cents under March futures as compared to last Friday’s final figure of 26.5 cents under March. This is setting up to be the third consecutive weaker weekly close to the market, setting the table for a discussion of a change in trend versus a Benjamin Franklin Fish Analogy[i].
Soybeans: The soybean market was also quietly lower to start the day, not a huge surprise given the rally seen this past week. The March contract (ZSH25) has rallied more than 50 cents off its low of $9.47 on Thursday, December 19 through the overnight high of $9.9825. Keep in mind this move covers a holiday shortened session (Tuesday) and day off (Wednesday). The National Soybean Index was calculated at $9.37 Thursday evening putting national average basis at 60.25 cents under March futures as compared to last Friday’s figure of 56.25 cents under March. This tells us US producers holding cash soybeans have been using this past week’s rally as a selling opportunity. On the other side of the ledger, we’ll get our latest weekly export sales and shipments update later this morning for the week ending that same Thursday, December 19. The previous update showed total sales (total shipments plus unshipped sales) of 1.422 bb, still more than 500 mb below the pace projected export demand of 1.968 bb. As we know, this situation is set to get more interesting by late January as new tariffs and old trade wars are fired up again.
Wheat: The wheat sub-sector was in the red to start the day, but as I often say this tells us nothing about how the three markets might head into the morning’s intermission, let alone close this afternoon. As cliché as it sounds, it is what it is at this snapshot in time. That being said, recall from Thursday’s Afternoon Commentary when I talked about how commercial traders didn’t seem to be taking part in the buying that drove all three markets higher coming out of the holiday. Overnight through early Friday morning we see March Kansas City (HRW) losing as much as 5.75 cents while the carry in the March-May futures spread firmed. But honestly, we can’t read much into this given March registered trade volume of 1,100 contracts while May was showing only 410 contracts changing hands. Let’s see how the rest of the day plays out. March Chicago (SRW) (ZWH25) was down 2.5 cents after slipping as much as 3.75 cents overnight on trade volume of 3,750 contracts. The more interesting aspect of the SRW market is the running daily average of the March-May futures spread for this Variable Storage Rate tracking period is roughly 49% calculated full commercial carry, below the low end 50%.
[i] The Benjamin Franklin Fish Analogy tells us, “Like guests and fish, markets start to stink after three days/weeks/months (whatever time frame is being studied) of moving against the trend.”
