Written Commentary
SOYBEANS
The week is starting on a bullish note, with soy complex prices bouncing this morning on a return of heat to the Midwest in the 6–10 and especially 8–14 day forecast. Much of the US crop area has seen favorable to nearly ideal weather this growing season. Still, the bean crop is made in August as pods are set and filled, and hot temperatures look to be moving into the bulk of the Midwest early next week and will extend into early August.
SOYBEAN MEAL
Soymeal has plummeted recently but nearly reached critical support last week after December soymeal fell $75.60 per ton since the May highs, similar to the break from November 2023 to February 2024, which was $84.10 per ton. Open interest has risen on the break, hitting its highest level since last November and indicating new shorts have been entering the market at lower prices. However, the extended break sent technical indicators to deeply oversold levels, and the new shorts may quickly get nervous as the market rebounds, as it is doing today to start the week. In addition, the weekly December meal continuation chart shows a key long-term support trendline going back to the 2009 lows at 304.0.
CORN
A positive start to the week as prices are stronger on above normal temperatures heading into the Midwest starting next week and extending into early August. In addition, prices have fallen to attractive levels for global buyers, and we expect U.S. exports will remain elevated. The E.U. crop monitor slashed 2024 E.U. corn yield from 7.55 tons per hectare to 7.24. CFTC data showed that Managed Money traders reduced their record short position from last week by 10,000 contracts to 343,000 contracts short. Short covering could be significant if prices can break out of the recent range of 416 1/2 on December futures.
WHEAT
Prices are starting the week slightly higher on spillover strength from strong corn and beans. The weekend escalation of events in the Middle East, with Israel bombing Yemen Houthi sites in retaliation for the Tel Aviv bombing, has the potential to increase shipping risks in the Red Sea area. French wheat conditions hit an 8-year low last week at 52% good/excellent, and harvest was way behind at 14% last week compared to the 43% average, which is supportive. EU wheat posted an upside weekly reversal on Friday.
CATTLE
Overall, Friday’s Cattle on Feed report was a bit negative for the front month of the live cattle, while October and December contracts are likely to see some gains to start the week. On Feed was neutral at 101% of last year, compared to the average estimate of 101%. Marketings came in at 91% of last year, which was also right on the pre-report guesses and was lower than usual because there were two fewer weekdays in June this year than last year. The placement number was the surprise, coming in at 93%, compared to the average guess of 97%, the lowest since 2016.
HOGS
December hogs extended their gains Friday and closed the week, forming a weekly upside reversal. Last week’s low was likely an important turning point, and 38% retracement resistance to the June 3rd high is 67.57, and 50% retracement stands at 69.35. Look for further gains this week. Cash markets firmed last week, and the front month August contract had its highest weekly close since early June.
MILK – CLASS III
August Class III Milk fell to a two-week low last week before regaining upside momentum and finishing higher.
The USDA reported that milk output is seasonally lower throughout the country. Demand for Class I milk is also in a seasonal lull as school districts are on summer break. Hurricane Beryl created some transportation difficulties for milk haulers in the East region. The Midwest region has seen a slight uptick in milk availability. Condensed skim availability has tightened recently, particularly in the East region.
METALS
August gold futures were higher in the overnight trade but recently declined to lower on the session. On Friday the precious metal came under pressure due to the bearish influence of a recovery in the U.S. dollar. Strength in the greenback was linked to stronger-than-expected manufacturing growth in the U.S., although some of this influence was offset by Thursday’s larger than expected jobless claims report.
September silver futures fell to the $28.93 per ounce level on Monday. Some of the recent weakness can be linked to the recent recovery in the U.S. dollar index. However, gains in the greenback are likely to be limited in light of increasing prospects of the Federal Reserve pivoting to accommodation this year with the increasing probabilities of two interest rate cuts in 2024.
September copper futures declined to near the 4.16 per pound level today, falling for the 5th consecutive session to the lowest level since April 3 due to weak industrial demand and a lack of new stimulus measures in a top consumer In Asia. On the supply side of the equation, copper inventories in LME warehouses increased to the highest since September 2021.
ENERGIES
September Crude Oil was slightly lower overnight after its steep selloff on Friday, when it fell to its lowest level since June 17. Disappointing economic data from China last week raised concerns about demand, and those concerns were reaffirmed yesterday with a report that China’s total fuel imports for the first half of 2024 fell 11% from a year ago. June imports were down 31% from May and 45% from a year earlier.
September Natural Gas was sharply higher overnight, and has expanded on its recovery from a contract low last week. Hotter than normal temperatures are expected to return to the Plains, Midwest, and Northeast over the next two weeks, with the mid-South being closer to normal and the area of cooler than normal temperatures shrinking to only a portion of Texas
STOCK INDEXES
Stock index futures are higher across the board. The June Chicago Federal Reserve national activity index was 0.05 when 0.10 was expected.
CURRENCIES
The U.S. dollar index is slightly lower and is showing limited reaction to increasing political uncertainties in the U.S. The European Central Bank recently left its policy unchanged, with President Christine Lagarde stating that the next policy decision on September 12 is “wide open.
INTEREST RATES
There are no Federal Reserve speakers with the Federal Reserve’s blackout beginning this weekend. The ‘blackout’ policy from the Federal Reserve limits the extent that Federal Open Market Committee members and staff can speak publicly or grant interviews.
SOFTS
September Cocoa saw an outside day lower on Friday despite positive second quarter grind data for North America, as the recent mixture of sun and rain in west Africa has boosted crop expectations. The North American second-quarter grind was up 2.2% from a year ago at 104,781 metric tons, and Asia’s was down 1.45% from the same period a year ago at 210,968 tons. Europe’s second quarter grind data was released the previous week, and it was up 4.1% from a year ago at 357,502 after being 2.9% lower in the first quarter.
September Coffee broke below recent consolidation on Friday and traded to its lowest level since July 9. Robusta premiums in Indonesia were lower last week with the advance of the harvest. The weekly Commitments of Traders report showed managed money traders were net sellers of 3,892 contracts of coffee for the week ending July 19, reducing their net long to 62,933. Despite the selling this last week, the net long was still relatively close to the record high of 71,811 from April, which leaves the market vulnerable to more long liquidation
December Cotton was slightly higher overnight, following Friday’s steep selloff. Recent rains in the southeastern US have eased drought conditions there, and west Texas is seeing some rain as well, and this eases concerns about the US crop this season. World Weather Service reports that west Texas will benefit from coming rain and mild temperatures but that warming will eventually be needed. They also said wetter weather in the southeastern United States and Delta should be welcome for a while as long drier and warmer conditions return again later this month or early next.
October Sugar extended its selloff overnight to trade to its lowest level since June 3, and it is approaching a 13-month low that it set in May. Last week, Czarnikow raised its 2024/25 global sugar production forecast to 189.7 million metric tons, up 3.2 million from its previous estimate, and they forecast a global production surplus of 8.8 million, the highest since 2017/18. They pointed to increased output from India, Thailand and EU that would more than offset an expected decline from Brazil.
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