The commodity complex was relatively quiet overnight through early Friday morning.
Natural gas posted the largest loss in the Energies sector, naturally, though it was tame by Widow Maker standards.
January soybean oil showed solid strength, hinting at increased buying interest from the Eastern Hemisphere.
Morning Summary: A look at the Friday morning Barchart Futures Market Heat Map showed the commodity complex was mostly lower to start the day with all sectors but Indices (US stock index futures) and Financials (US Treasury futures) in the red. But that statement comes with an asterisk as the three major US stock index futures were all showing small losses, offset by gains in the minor Russell 2000 and S&P 500 Midcap mini markets. On the other end of the scale, we have Energies with a cumulative loss of 0.8%. I’ll give you 5 guesses as to which market led the way, and the first 4 don’t count. Yes, our old friend natural gas (NGF25) was showing the largest loss of 5.0 cents (1.6%), but by Widow Maker standards it could be considered a quiet morning. One market that stands out to me pre-dawn is soybean oil. Here we see the January issue (ZLF25) showing a gain of as much as 0.72 overnight and sitting 0.44 higher (1.0%) at this writing. I know, there’s nothing spectacular about that, but Jan also registered trade volume of nearly 12,000 contracts through early Friday morning. This is more than January soybeans (9,000 contracts) and running with March corn (12,300 contracts), indicating there was likely some Eastern Hemisphere buying interest overnight.
Corn: The corn market was quietly higher on what looked to be follow-through buying from Thursday’s close. The overnight session saw March (ZCH25) equal yesterday’s high of $4.36 and was sitting one tick off that mark at this writing. As I mentioned above, March was showing light trade volume to start the day, a reflection of normal Holiday Season disinterest from the fund side. On the other hand, we know commercial traders remain active by tracking the National Corn Index, national average basis, and futures spreads. Thursday evening’s NCI was calculated at $4.1050, as compared to last Friday’s $4.0675, putting national average basis at 24.5 cents under March futures. Last week closed with basis at 26.25 cents under March. On the futures spread front we see the March-May covered a bullish 26% calculated full commercial carry (cfcc) versus last Friday’s 32%, with 33% or less considered bullish. The bottom line is our reads on REAL market fundamentals continue to indicate solid demand to close out 2024, and possibly beyond given the May-July futures spread covered a bullish 12%. Thursday’s weekly export sales and shipments updated showed the US was on pace to ship a marketing year total of 2.8 bb, up 31% from last year’s reported 2.14 bb.
Soybeans: The soybean market was quietly lower to start the day with the January issue (ZSF25) slipping as much as 4.5 cents on trade volume of less than 10,000 contracts through early Friday morning. As I mentioned in the opening Summary, it looked like Eastern Hemisphere buyers were more interested in soybean oil overnight with Jan soybeans only able to gain as much as 1.0 cent before sliding lower. If we go back to this past Tuesday’s close we see the Jan issue settled at $9.9175, up 8.25 cents from the previous Tuesday. This indicates Friday afternoon’s CFTC Commitments of Traders report (legacy, futures only) should show Watson decreased its net-short futures positions, last reported at 105,940 contracts, an increase of 19,600 contracts from the previous week. We need to keep in mind much of the recent support has come from the commercial side. That same Tuesday-to-Tuesday timeframe saw January gain 4.5 cents on March futures, a solid move over one week’s time. Changing our view to Friday-to-Friday we see the Jan-March spread covered 24% cfcc as last week ended and 19% at Thursday’s close. Lastly, national average basis was calculated Thursday evening at 49.75 under January futures as compared to last Friday’s final figure of 52.0 cents under January.
Wheat: And then there’s the wheat sub-sector. (I haven’t used that opening line in a while but thought it fitting for today.) All three markets were showing small losses pre-dawn with March Chicago (SRW) (ZWH25) down 2.25 cents after dipping as much as 3.0 cents overnight on trade volume of less than 6,000 contracts at this writing. Similarly, March Kansas City (HRW) (KEH25) slipped as much as 2.75 cents and was down 2.5 cents to start the day on trade volume of 1,300 contracts. That isn’t much. It has been an interesting week for the winter wheat markets, putting the spotlight on its tendency toward the Head Fake Phenomenon[i]. The March Kansas City issue posted new contract lows last Friday and Monday before rallying as much as 19.75 cents through the overnight high of $5.5475. Technically, Thursday’s move took out the previous 4-day high, generally viewed as a bullish signal, only to fall back into the red by early Friday. March Chicago posted its new contract low Wednesday before rallying as much as 20.25 cents through Thursday’s high (equaled overnight through early Friday) before also falling back. Fundamentally both markets remain neutral-to-bearish, indicating most of the support has come from noncommercial short-covering.
[i] Wheat markets and/or contracts tend to take out support or resistance before immediately reversing back the other direction.
