Did Weather Play a Role in Wednesday Morning's Markets?

• The US dollar index continues to hold firm, though this time was joined by US Treasury futures and Gold through Wednesday's pre-dawn hours. 

• Fundamentally, the Corn market continues to grow more bullish, as indicated by our REAL fundamental reads of basis and futures spreads. 

• Tuesday's session indicated new export sales of US soybeans were made. 

Morning Summary: This was the second consecutive Wednesday morning when I was awakened shortly after midnight, though this time around was much more pleasant as it was due to a boom of thunder signaling some much-needed rain moving into the Omaha area. What’s that you ask? Last Wednesday morning? In true 21st Century style, my cell phone buzzed with a message from my son telling me the result of the US presidential election. That’s all I’ll say about that. As for this morning’s markets, the US dollar index was still firm pre-dawn after adding as much as 0.18 overnight. US Treasury futures were also in the green meaning it will be interesting to see which of these market sectors changes direction first as the day progresses. US stock index futures were showing small losses of about 0.25%. A look at global equities shows mixed results with Asian markets mostly lower (the outlier being China’s Shanghai Composite) while European markets were higher. Speaking of being in the green, that’s where we find most the colorful Metals this morning with Dec gold up $10 (0.4%) and Dec silver 29.1 cents (1.0%). The Energies sector was mostly higher as well with spot-month WTI crude oil showing a gain of $0.54 (0.8%). 

 

Corn: The corn market was quiet overnight through early Wednesday morning. Notice I left out “higher” or “lower”. This was intentional. December (ZCZ24) posted a 3.25-cent trading range while registering less than 20,000 contracts changing hands as of this writing and was sitting squarely on unchanged at $4.2850. What stands out to me about the overnight range was Dec24 showed a low of $4.2650, increasing the intrigue at that price level. Since last Friday’s session, Dec24 has posted lows of $4.2675, $4.2650, $4.2675, and $4.2650. From a technical point of view, something should happen sooner rather than later with daily stochastics (a momentum indicator) telling us this floor could give way. We’ll see. When it comes to technical patterns and signals, we need to keep in mind Newsom’s Rule #6: Fundamentals win in the end. While the commercial side wasn’t active overnight, the market has recently seen steady buying indicated by the weakening carry in the market’s futures spreads. This has followed the trend of firming basis with the National Corn Index calculated at $4.0675 Tuesday evening, coming in 21.75 cents under December futures as compared to last Friday’s final figure of 22.75 cents under with the previous 5-year low weekly close for this week is 24.5 cents under December. 

 

Soybeans: Well, the Mad Chef in charge of markets took a break from the lasagna making process[i] in the soybeans overnight through Wednesday morning. The January issue (ZSF25) could only muster a rally of 1.0 cent shortly after Tuesday evening’s open before falling as much as 7.25 cents. If this was another layer of Garfield’s (the famed cartoon cat, not the 20th president of the United States) favorite dish, it was seriously lacking cheese though showing plenty of red sauce. However, as of this writing January had climbed back into the green on trade volume of nearly 23,000 contracts for the session. Going back to Tuesday’s Afternoon Commentary, the weakening carry seen in futures spreads sets the stage for potential export sales announcements to Western Hemisphere buyers later this morning. Yes, this could include unknown destinations as well. Fundamentally the US soybean market remains neutral, according to futures spreads, while national average basis continues to run neutral-to-weak. The National Soybean Index came in near $9.5550 Tuesday evening, sitting 55.0 cents under January futures as compared to last Friday’s 56.5 cents under January. Technically, Jan25 once again tested its downside target near $10.0250 with its overnight low of $10.0325. If the contract closes lower Wednesday, it would be the third consecutive lower daily close[ii]. 

 

Wheat: The wheat sub-sector continues to show no desire to play along with the drama going on in corn and soybeans. All three wheat markets were lower overnight through early Wednesday morning, though trade volume stayed solid similar to Tuesday’s session. This by itself is telling as it indicates Watson was not afraid to continue adding to its net-short futures positions as a new week got under way. As for the end of the previous week, December Chicago (SRW) closed 20.25 cents lower from Tuesday-to-Tuesday, December Kansas City (HRW) was down 30.25 cents, and December Minneapolis (HRS) fell 32.75 cents. It’s easy to see funds can read the newly elected situation, complete with an almost immediate lifting of sanctions against Russia once the calendar page turns to January. The commercial side hasn’t changed its view all that much with winter wheat basis markets continuing to run near previous 5-year lows. The National HRW Wheat Index (national average cash price) ($CRWI) was calculated at $4.9150 Tuesday evening, equating to available stocks-to-use[iii] of 44.2%, what would be the largest end of month figure since September 2020. SRW national average basis was calculated at 59.75 cents under December Chicago as compared to this week’s previous 5-year low weekly close of 60.25 cents under December.

[i] The Lasagna Likeness in markets: Markets that repeat themselves, similar to the process of making lasagna. For example, trade higher overnight only to move lower during the day. 

[ii] Bringing to mind a possible Benjamin Franklin Fish Analogy: Like guests and fish, markets start to stink after three days/weeks/months (whatever time frame is being studied) of moving against the trend. 

[iii] No, not the “ending stocks-to-use” the rest of the industry talks about based on USDA’s imaginary supply and demand numbers. The idea of available stocks-to-use is based on the economic idea Market Price = The intersection of supply and demand lines. 

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• Stock Indexes Slightly Higher as They Consolidate Below Record Highs

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.