Written Commentary
SOYBEANS
Ideal US harvest weather and expected rains in Brazil this week will put the bull camp to the test. Weather models are finally indicating the long-awaited monsoon rains in Brazil will start later this week. IMEA says planting progress in Mato Grosso is 2.1% done, compared to 14% a year ago, but overall Brazil planting, according to Safras, is 4.1% complete, compared to 7.8% last year but not far from the 5-year average of 5.5%. The planting pace needs to be farther behind to be a significant worry if rains begin to increase as forecast this week. Water levels hit a 122-year low at the Brazilian port of Manaus in the Amazon region.
SOYBEAN MEAL
Soymeal had volatile price action last week, hitting its highest level since June 17th. However, several market-moving news headlines mid-week sent prices tumbling. First, the US longshoremen strike was suspended late last week. Second, harvest weather continues to be ideal across the entire US, and the chances of rain in Brazil are increasing. Last and most important was the EU proposal for a 1-year delay in implementing their deforestation rules. The delay is expected to be ratified, putting a damper on ideas that US soymeal could supplant some South American meal exports to the EU. The effects of Hurricane Helene are still having an impact as the Valdosta, Georgia, soy processing plant remains closed due to power issues. Another hurricane is expected to move into the Western parts of Florida this week but is not likely to disrupt processors in any significant way.
CORN
Corn prices are pulling back for the 3rd session in a row, pressured by near-perfect US harvest weather with dry conditions and warm temperatures. The US Dollar had a significant rally last week and looks to have set at least an interim bottom, adding to the corn weakness. Ukraine says a Russian missile struck a civilian ship carrying Ukrainian grain out of the Pivdennyi port. SovEcon cut Ukraine’s 2024 corn production to 23.5 million tonnes, down from 24.6. Managed Money traders were major buyers according to the Commitment of Trader’s data, showing their net short hit a 14-month low at 67,700 contracts after buying 63,000 as of Tuesday of last week. Remember, Managed Money held a record short of 354,000 contracts in July.
WHEAT
Prices are holding steady after pulling back sharply late last week. Global tenders are showing up on this latest price break. Saudi Arabia, Egypt, and Bangladesh are all looking to buy or have purchased wheat in the last few days. Saudi Arabia bought 307,000 tonnes to boost their strategic reserve. Russia’s Ag Ministry says they will adjust their crop estimates this week and will take into account weather and difficulties in harvesting in war-affected regions. Eastern Ukraine and Western Russia remain too dry, while other areas of the Black Sea region have seen better rains. Ukraine’s grain exports since the marketing year started July 1 have reached 11.2 million tonnes, up from 7.2 in the same timeframe last year. The conflict in the Middle East was cited as one reason why Egypt bought 3.18 million tonnes in a private deal last week, and other countries may get the same idea as prices pull back.
CATTLE
Cash trade late last week was mostly $1 higher in the major areas, and the 5-area, 5-day weighted average for the week ended at 186.30, up from 186.05 the previous week. CFTC data showed Managed Money traders were significant buyers for the 2nd week. They now hold a net fund long of 63,404 contracts as of Tuesday of last week, up 11,180 from the prior week and up 25,000 in the previous 2 weeks.
HOGS
December hogs hit their highest price since late May on Friday, closing the week very strong. Estimated US pork production for the week ending October 5 was strong at 548.8 million pounds, up from 539.7 the previous week and up from 541.5 a year ago. Year-to-date production is 20.94 billion pounds, up from 20.60 last year. Open interest has been rising lately as funds have been buyers. CFTC data showed Managed Money longs at 57,052 contracts as of Tuesday last week, up 5,500 from the previous week. Clearly, the Fed rate cut a couple of weeks ago has encouraged commodity buying. No technical top formation has been seen yet.
MILK CLASS III
November Class III milk ended last week at a six-week low after hitting a one-and-a-half-week high earlier in the week.
The USDA reported that farm-level milk outputs vary throughout the nation. In the Southeast, milk volumes and demand are lower as weather issues disrupt production and transportation in the region. The Northeast, mid-Atlantic, Central, Mountain, and Pacific Northwest are seeing steady volumes, while there was lighter output in California and Arizona. Class I demand was strong in the West and East regions and steady in the Central region.
GOLD, SILVER & COPPER:
December gold futures are higher but remain in a 10-day congestion pattern. Futures are holding up well despite recent economic reports suggesting the Federal Open Market Committee may be less aggressively lowering its fed funds rate.
December silver futures are lower today after on Friday hitting the highest level since May 29. Price gains in the last few weeks can be attributed to economic stimulus plans recently announced by a large silver consuming country in Asia. In addition, underpinning the market remains silver’s safe haven status in light of ongoing geopolitical issues.
December copper futures remain in a symmetrical triangle pattern after topping at 4.790 on September 30 when a one-day reversal pattern to the downside on the daily chart was made. Futures currently remain in a broadly based eight-day trading range.
ENERGIES
November Crude Oil traded to its highest level since August 13 overnight higher overnight on news that Hezbollah rockets had hit Israel’s third largest city, Haifa, thus feeding concerns that the escalation of hostilities in the Middle East would at some point affect supply. So far that has not happened, but there are concerns that Israel could target Iranian oil infrastructure. Iran is a member of OPEC+ with production around 3.2 million barrels per day or 3% of global output. However, that the group is believed to have enough spare capacity offset a disruption in Iranian supplies. Libya’s national oil company said last week that all of its oil fields and export terminals were being reopened after a dispute over the leadership of the nation’s central bank was resolved.
November Natural Gas had a key reversal lower on Friday, and it has extended that selloff this morning. The weekly Baker Hughes rig count on Friday showed US natural gas rigs in operation were up 3 rigs to 102 last week, which is the highest they have been since July 19. This was also the second straight week with an increase. Rigs are still down from 118 rigs a year ago and below the five-year average of 118.6. EIA storage injections during July-September were at record lows for that time of year going back to at least 1997, which has helped narrow the surplus to year ago and five-year average levels. However, the two straight weeks of increases in the rig counts may have traders thinking this trend will end. Tropical Storm Milton is expected to strengthen into a Hurricane this week as it proceeds across the Gulf and heads towards Florida. At this point it does not look like LNG loading facilities will be affected.
STOCK INDEX FUTURES
After Friday’s strong gains, stock index futures are lower today. The 2:00 central time August consumer credit report is expected to show a $12 billion increase. Traders are looking ahead to this week’s inflation reports. The September consumer price index report will be released on Thursday and is anticipated to show a 0.1% increase, and the September producer price index report will be released on Friday and is estimated to show a 0.2% advance.
DOLLAR INDEX
On Friday the U.S. dollar index advanced to its highest level since August 16. However, prices are a little lower today. Last Tuesday the U.S. dollar index broke out above a downtrend line that started in July.
INTEREST RATES
It is widely expected that the Federal Open Market Committee will reduce its key interest rate again at its November meeting. However, the Federal Reserve may less aggressively lower its fed funds rate.
SOFTS
The cocoa market has been under pressure recently on what has generally been favorable weather for key producers Ivory Coast and Ghana. Many growing areas in those countries and Nigeria and Cameroon received light to moderate rain over the weekend, which is viewed as beneficial for production, as long as there are also periods of sunshine. The main crop harvest begins this month, and growers are expecting strong production through December. Ivory Coast cocoa arrivals totaled 13,000 metric tons last week, which down from 50,000 for the same period a year ago and counter to recent trends. The pace of arrivals will be watched closely over the next few weeks to see how the harvest is advancing.
December Coffee extended last week’s selloff overnight and trade to its lowest level since September 9, as the market continued to see pressure from the forecast for Brazil to finally see some relief from drought this week. World Weather Service says rain is expected to develop a little more significantly in Brazil coffee areas Wednesday through Friday. Sufficient amounts should occur to induce some flowering, although the daily precipitation is expected to be light. The region needs to see the rainy season emerge in full force to ease stress on trees and help the new crop develop. Southern India and portions of southern Indonesia will continue to experience a greater frequency of rain that will ease long term dryness. Brazil exported 4.05 million bags of green coffee (253,057 tons) in September, 36% more than last year.
December Cotton was higher overnight and could be headed to a test of the September 24 high. Sharply higher crude oil prices lend support to cotton on ideas this makes man-made fibers more expensive. The tentative settlement of the port workers strike on Friday eased concerns about export disruptions. Tropical storm Milton is forecast to hit Florida on Wednesday as a Category-3 hurricane. The current path is centered around Sarasota and does not appear to pose much of a threat to cotton growing areas. The storms does not look very wide and is fast moving, which could lighten the overall damage. Citrus areas could see damage from wind and excessive rain. Most cotton growing areas look dry this week, which should help the harvest advance.
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