Gold rallied to start the week, not a big surprise given the recent selloff and long-term vulnerability of other market sectors.
The Soybean market showed signs of commercial buying interest early in the overnight session, hinting at China covering more secondary supply needs.
Overnight trade in the wheat sub-sector was so illogical it made sense.
Morning Summary: The title of today’s Commentary, “A Golden Morning”, is more figurative than literal given it’s still dark outside here in Omaha and I doubt the sky will be “golden” when the sun starts to rise. Early rains across the US Southern Plains are expected to expand to the north and east, covering much of the US Midwest before the end of the day. My Morning title reference is to King Gold as we head into another week of trade. The February contract (GCG25) rallied as much as $31.80 (1.2%) overnight and was still $26.60 (1.0%) higher at this writing. As I talked about for last week’s Kitco News gold poll Friday, the reality of coming chaos is starting to set in meaning gold could find renewed safe-haven buying from investors as a hedge against other market sectors. Most notably equities, which still look vulnerable to me. It’s interesting to note the latest CFTC Commitments of Traders report (CoT, legacy, futures only) showed the noncommercial net-long futures position in gold decreased by another 18,900 contracts the week ending Tuesday, November 12, playing into the idea the market is moving into position to see renewed buying interest. The general consensus is inflation is expected to fire up again over the coming years, despite projected lower energy and grain prices.
Corn: The corn market was quiet overnight through early Monday morning. If you are surprised by this opening line, then you aren’t familiar with King Corn. The December issue posted a trading range of 1.75 cents on trade volume of less than 12,000 contracts as of this writing. Fittingly enough, Dec24 was unchanged pre-dawn while March (ZCH25) was off 0.25 cent to start the day. Not much has changed about the corn market as buying continues to come from both commercial and noncommercial traders. Last Friday’s close showed futures spreads covering less calculated full commercial carry (cfcc) than the previous week with the Dec-March at 35% and the Dec-July at 31%. The bullish threshold is 33%. Additionally, the National Corn Index was calculated near $4.0350 putting available stocks-to-use at 12.9% as compared to 13.3% at the end of October. National average basis firmed last week, coming in Friday evening at 20.5 cents under December futures. It’s interesting to note this year’s market is following the seasonal pattern of a strong basis market despite being neutral-to-weak. This tells us there are ample supplies and stronger than usual demand. The latest CoT report showed Watson[i] added 75,000 contracts to its net-long futures position, making it the largest since the week of February 21, 2023.
Soybeans: The soybean market was under pressure early Monday morning, though it could be argued there was some commercial buying interest at Sunday night’s open. January (ZSF25) initially rallied as much as 6.0 cents on trade volume of 3,000 contracts. (And when I say initially, January opened 4.0 cents higher before hitting its peak and falling back, all within the first 15-minute segment of the session.) As of this writing, January was sitting 5.0 cents lower after falling as much as 7.0 cents, while trade volume added up to 16,000 contracts. Is the world’s largest buyer, the one over in the Eastern Hemisphere, still booking secondary supplies through the end of the year? My Blink[ii] reaction is yes. Last Friday’s weekly sales and shipments update, for the week ending Thursday, November 7, showed China had roughly 166 mb of US soybeans on the books for 2024-2025, as compared to the same week the previous year of 202 mb. Meanwhile, the US had shipped 331 mb to China versus, 30 mb behind the same week last year. Watson reportedly decreased its net-short futures position by 11,900 contracts, but still showing no sign of wanting to go long the market.
Wheat: The wheat sub-sector was in the green pre-dawn. In a way, this makes sense. How? Because it’s wheat. Think about it for a moment: The three markets were made up of almost all bearish factors at the end of last week, so the most illogical response would be to rally coming out of the weekend. And the most logical move by any wheat market is the illogical one. (Wheat is one of the most twisted versions of Game Theory I can think of.) What did we know about wheat at the end of last week? Selling was coming from both commercial and noncommercial traders, the latter shown in the latest CoT report where funds increased net-short futures positions in all three markets. Fundamentally, there wasn’t much to get excited about with old-crop markets as Dec-March and March-May spreads for all three covered neutral levels of cfcc. Looking out at new-crop winter wheat, the Kansas City (HRW) July-September spread headed into the weekend covering 78%, with the bearish threshold at 67%. As I mentioned in the opening Summary, rains are moving across the US Southern Plains HRW growing area and are expected to spread to the Midwest SRW crop.
[i] What I like to call the algorithm-driven investment industry in commodities.
[ii] Based on the Malcolm Gladwell book Blink. The theme of the book is our initial thought is correct before we spend time talking ourselves out of it.
- Is Gold on the Horizon for the Commodity Complex Early Monday Morning?
- Is the Cocoa Rally Over?
- Did the Full Moon and "Shooting Star" Influence Markets Overnight?
- Why Does the Grains Sector Smell Like a Fish Market Thursday Morning?
