What Were Markets Doing the Monday Morning After?

• The US dollar index firmed while US Treasury futures weakened overnight, still an interesting combination given last week's developments, while gold remained under pressure. 

• Meanwhile, US stock index futures continued to find buying interest pre-dawn.

• In Grains, the spotlight was on a round of commercial interest from the world's largest buyer at Sunday night's open. 

 

Morning Summary: A new week has begun, though I don’t think all that happened last week will be forgotten any time soon. Sunday night through early Monday morning found the US dollar index firming again, the greenback adding as much as 0.47 and sitting near its session high at this writing. As one would expect given the continued firming of the dollar, US Treasury futures were under pressure to start the week. As I talked about last week, this combination both does and does not make much sense. Based on the idea US inflation is going to heat up again due to more tariffs and trade wars, the argument could be made interest rates will have to go back up and the US dollar should strengthen. However, the president-elect has previously said he wants a weak dollar, negative interest rates, and all decisions on interest rates should be made by him. We’ll see how this plays out over time. US stock index futures extended their rallies as well with all three major market showing solid gains pre-dawn. On the other hand, gold was under pressure, as expected, the December contract (GCZ24) still in a short-term downtrend on its daily chart. Crude oil was also lower to start the day, also not a surprise. 

 

Corn: The corn market was quietly lower early Monday morning after trading both sides of unchanged overnight. December posted a trading range of 2.75 cents, from up 1.0 cent to down 1.75 cents, on trade volume of less than 17,000 contracts at this writing. As expected, Dec24 (ZCZ24) continues to hover near the $4.30 level to start the week. Last Friday’s CFTC Commitments of Traders report (legacy, futures only) showed funds increased their net-long futures position by 19,344 contracts, the change dominated by the addition of new long futures positions (17,615 contracts). Keep in mind this is a more bullish change than one driven by short covering. Also recall corn futures turned long-term bullish at the end of August, an open invitation to investment traders. Speaking of bullish, we can see a change in futures spreads as well as the March-May closed last week covering 34% calculated full commercial carry, knocking on the bullish threshold at 33%. The May-July covered 16% while the Dec-July forward curve covered 32%. My Friday evening national average basis calculation came in at 22.75 cents under December futures as compared to the previous Friday’s figure of 28.0 cents under. That is a substantial change given Dec24 futures closed 16.5 cents higher for the week. 

Soybeans: It was a predictable, yet still interesting start to the week in the soybean market. The January issue rallied as much as 11.25 cents within the first 45 minutes of Sunday night’s trade, coinciding with early morning business in Beijing. Overnight trade volume was decent at 28,400 contracts, with 14,100 of that occurring during the initial rally. Of that, roughly 4,400 contracts changed hands in the first five minutes following the open. This certainly gives the appearance that the world’s largest buyer wanted to get some additional US supplies on the books early in the week. However, I’m still an advocate of the Joe Friday Fact that tells us, “It’s just a fact, the next Friday’s close is more important than Sunday’s open”. As a good friend likes to say, there is a lot of week left. The most recent Commitments of Traders report showed Watson decreased its net-short futures position by 3,080 contracts, still holding a net-short of nearly 89,000 contracts as of Tuesday, November 5. Friday’s national average basis calculation came in at 56.5 cents under January futures as compared to the previous Friday’s final figure of 61.0 cents under January. 

 

Wheat: The Grains sub-sector that continues to show the most consistent reaction to last week’s US presidential election is wheat. It’s a foregone conclusion the second thing the president-elect will do once he takes office is lift all sanctions on Russia for its illegal invasion of Ukraine. While I don’t think it changes fundamentals all that much, it does mean there isn’t much chance of the US supply and demand situation growing more bullish unless Mother Nature gets involved. Recall from the end of October the US available stocks-to-use readings (based on national cash indexes) for the three wheat markets were 44% (SRW), 43.3% (HRW), and 43.9% (HRS). There continued to be ample US wheat supplies to meet demand, with the relationship expected to grow more cumbersome over the coming years. Early Monday morning finds the December Chicago (SRW) issue down 10.75 cents, after falling as much as 12.25 cents, on combined selling from commercial and noncommercial traders. December Kansas City (HRW) dropped as much as 12.0 cents and was still showing a loss of 9.75 cents, also on combined pressure from both sides of the market. December Minneapolis (HRS) was down 7.25 cents to start the day after sliding as much as 9.5 cents overnight. 

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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.