Written Commentary
SOYBEANS
Bearish fundamental statistics remain a significant problem for the bean market, and USDA’s record yield last week and ballooning new crop US carryout will keep sellers active on rallies. DTN’s crop tour found slightly lower yields than USDA in Indiana, Iowa, and Illinois, higher yields than USDA in Minnesota and South Dakota, and mixed results in Ohio and Wisconsin.
SOYBEAN MEAL
The last two weeks have been unkind to soymeal prices, with the December contract dropping more than $35 a tonne from the August 6th high to last week’s new contract low. Ideal crop weather in much of the US Midwest and bearish USDA bean-ending stocks have pushed bean prices to new contract lows, resulting in a significant drag on meal prices lately. NOPA crush for July, released late last week, came in at 182.881 million bushels or 5.899 million/day.
CORN
December corn prices set a new contract low last week, but the USDA supply/demand balance sheet shows corn supplies are less burdensome than wheat and beans. US corn exports are competitive, and US exports and domestic use will be very strong through the end of the year at least, and stronger demand will be critically needed to dispose of the expected bumper crop. The annual Pro Farmer crop tour will be moving across the Midwest starting today, with final results expected on Thursday. DTN’s crop tour found slightly lower yields than USDA in the 3 “I” states.
WHEAT
Wheat price action last week was disappointing after Russia struck the Odesa port with missiles, but the initial rally failed to carry. August 22nd, both of Canada’s main railways may shut down as workers strike for better pay. There has been little progress in negotiations, and significant logistics issues are expected in the United States if the strike goes ahead. The US could see an uptick in export business off the Pacific Northwest coast if western Canadian ports cannot receive railway shipments.
CATTLE
December live cattle prices took it on the chin late last week, nearly erasing all the gains since the upside reversal low on August 9. CFTC data showed Managed Money traders reduced their net long of almost 9,000 contracts but still hold a significant net long position of 45,000 contracts.
HOGS
December hogs finished last week with an inside day on Friday, and we may see some follow-through selling starting this week. The cash hog Index was down $2.60 for the week, and pork production was significantly higher last week than the previous week, and that trend is likely to continue through the 4th quarter.
MILK – CLASS III
September Class III Milk found early support as it extended its August rally to a new contract high. While there was a pullback on Friday, it finished the week with a considerable gain.
The USDA reported that milk volumes are lower as many regions have had above-normal temperatures, while milk availability has tightened for bottling and processing needs
METALS
Gold prices advanced to record highs on Friday, driven by strong demand for safe-haven assets, while traders focus on the Federal Reserve’s policy outlook.
September silver futures advanced to the 29.19 level, hitting an over two-week high.
September copper futures advanced to the $4.20 area today, reaching a two-week high as strike activity in Chile threatened to disrupt production of copper.
ENERGIES
October Crude Oil was lower overnight but held Friday’s lows. The market has been disappointed with China’s economic data and reduced prospects for oil consumption. However, lower inflation numbers in the US appear to have opened the door for a Fed rate cut next month. The trade will be parsing Fed Chair Powell’s comments from the Jackson Hole gathering this week. There are also persistent concerns about supply being interrupted if the Israel-Hamas conflict spreads or the Russia-Ukraine war escalates. Chinese gasoline exports totaled 790,000 metric tons in July, down from 930,000 tons in June and 1.22 million in July 2023. Poor refiner margins were blamed, and this is another reason traders to be apprehensive about China’s crude oil demand.
October Natural Gas managed a mild recovery overnight following Friday’s selloff. A warming trend across much of the lower 48 over the next couple of weeks could allow for a late season surge in cooling demand. World Weather Service says the US will see a warmer than normal temperature bias and higher than usual cooling fuel demand through the next two weeks. The Baker Hughes gas rig count increased by 1 last week to 98 but was down from 117 a year ago. US supply is still running ahead of last year and the five-year average, but the surplus has been declining through the summer. EIA gas storage actually fell 6 bcf last week, which is unusual for this time of the year.
STOCK INDEX FUTURES
Futures are performing better than the news would suggest, indicating traders are looking beyond recent economic reports to some other not yet obvious bullish fundamental.
DOLLAR INDEX
The U.S. dollar index is lower. The euro currency advanced to the highest level in almost eight months, as expectations for a Federal Reserve interest rate cut pressured the U.S. dollar.
SOFTS
December Cocoa has traded in a narrow range over the past week, as the market has been supported by tight global supplies but limited by expectations for a decent crop this fall. World Weather Service says rain in west Africa will continue to increase in many areas, as a series of disturbances moves across the region in the next ten days to two weeks. The moisture boost will be greatest in northern cocoa areas, leaving some areas near the coast with limited rainfall for a while longer.
December Coffee extended Friday’s rally overnight and was approaching last Monday’s five-week high. Safras & Mercado said on Friday that Brazil’s 2024/25 coffee harvest had reached an estimated 96% of the crop as of last Tuesday versus 91% a year ago and a five-year average of 93% for this time of year, which suggests that harvest pressure is easing. Arabica harvest was 94% complete versus 87% a year ago and an average of 89%. Robusta harvest was basically complete.
December Cotton fell to new contract lows on Friday but bounced enough to close slightly higher on the day, and it extended its rally overnight. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 2,569 contracts of cotton for the week ending August 13, reducing their net short to 49,454. This is only slightly off the record net short of the previous week and leaves the market vulnerable to a short covering rally if the market psychology were to switch to bullish.
October Sugar was near unchanged overnight after a rally on Friday gave up most of its gains by the end of the session. The market is hovering near its 16-month lows from early this month, as it expects stronger production out of Asia and awaits some sort of setback in Brazilian output, as the dry conditions this year are expected to eventually take a toll. A report from the Indian Sugar and Bio-Energy Manufacturers Association has indicated sufficient stocks to support domestic ethanol production and resume exports.
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