Early Monday morning finds the US dollar index under pressure though having erased much of its overnight weakness as of this writing.
Gold continued to move higher, not surprising given its role as a safe-haven market.
The Grains sector was under pressure across the board, led by continued commercial pressure.
Morning Summary: As the curtain rises on this last week of February, the last week of meteorological winter, the commodity complex is generally seeing follow-through pressure from last Friday. The big mover overnight was natural gas as the spot-month contract (NGH25) fell as much as 23.5 cents (5.6%) and was still showing a loss of 21.6 cents (5.1%) at this writing. What got into the Widow Maker overnight? We could ask that, while acknowledging this is pretty much what the market does routinely, with the answer most likely being a turn to more spring-like weather this week across the United States. This raises an even more important question: Was Punxsutawney Phil wrong?! Think of all that could mean. Anyway, I digress. The US dollar index ($DXY) spent the evening yo-yoing back and forth across unchanged with the greenback in the red by 0.04 pre-dawn Monday. Gold (GCJ25) was higher, shockingly enough, as the April issue gained as much as $10.50. As I’ve told Kitco News the last number of Fridays, we can throw both technical and fundamental analysis of the gold market out the window at this time. It’s a safe-haven play meaning both investors and hedgers should remain active for the foreseeable future.
Corn: The corn market was under pressure to start the week. With first notice day for the March issue fast approaching, attention has turned to May. Here we see support at $5.00 continued to hold overnight as May (ZCK25) posted a low of $5.0050, down 4.5 cents from last Friday’s settlement on solid trade volume of 30,000 contracts. All eyes should be on the May-July futures spread this week following last Friday’s settlement at a carry of 4.5 cents, taking out the previous low daily close of 4.25 cents carry. Yes, it still covered a bullish 21% calculated full commercial carry, but what we can read from this is the commercial side of the corn market is growing more comfortable with Brazil’s safrinha – second – crop. (I saw some chatter about Brazil’s equivalent of NASS Crop Progress reports and planting progress. Yes, the Brazilian version of the Kardashians.) In other news, the latest CFTC Commitments of Traders report showed Watson increased its net-long futures position by 43,955 contracts as of Tuesday, February 18, putting it at 468,724 contracts. This was the largest net-long futures position since the week of May 17, 2022, with a reported 473,743 contracts. Meanwhile, national average basis remains weak, coming in at 44.75 cents under May futures last Friday.
Soybeans: The soybean market was quietly lower to start the week with May (ZSK25) showing a loss of 5.0 cents and near its overnight session low early Monday morning. Trade volume was moderate-to-light as May registered 18,000 contracts changing hands. One of the numbers that stood out to me in last Friday’s Commitments of Traders report (legacy, futures only) was Watson’s switch from a net-long to net-short futures position in soybeans. The latest numbers came in at a net-short of 5,640 contracts, as compared to the previous week’s net-long of 6,780 contracts, a switch of 12,420 contracts. Was this surprising? Maybe a little given May closed only 4.75 cents lower from Tuesday-to-Tuesday. On the other side of the ledger, the commercial side, we see the May-July futures spread held steady from Tuesday-to-Tuesday as well, covering a neutral level of calculated full commercial carry. As for basis, the National Soybean Index came in near $9.7775 last Friday, roughly 79.5 cents under May futures. This was slightly firmer than the previous week’s 80.0 cents under and still within sight of the previous 10-year low weekly close for the first week of March at 81.5 cents under May. I don’t see much reason to get excited about the soybean market, but we’ll see how this week unfolds.
Wheat: The wheat sub-sector was in the red to start the week as well, with all three markets showing solid losses on moderate trade volume. The May SRW issue lost as much as 8.5 cents while registering less than 11,000 contracts changing hands and was down 8.0 cents at this writing. From a technical point of view, May completed a bearish reversal patter on its weekly chart last week, one of a number such patterns seen at last Friday’s close and raising the debate over classic technical analysis once again. Fundamentally, old-crop winter wheat markets are about to lose one of their reads on real supply and demand once March moves into delivery this week leaving us only the May futures contract to track. Over in new-crop, the focus is on HRW where the July-September futures spread closed last Friday at a carry of 13.75 cents – a new low daily close – and covering 82% calculated full commercial carry. If you have any doubts about the commercial view of new-crop winter wheat, that should answer them. As for last Friday’s Commitments of Traders report, Watson decreased its net-short futures positions in all three wheat markets, but not by as much as might’ve been projected.
