- The US dollar index started the new week, month, and season with a round of buying, putting pressure on gold coming out of the weekend.
- Seasonally, both WTI crude oil and distillates post low weekly closes in early December before rallying through next spring and summer.
- The National HRW Wheat Index (national average cash price) continues to indicate supply and demand is as bearish as it has been in over four years.
Morning Summary: The calendar page turned from November to December this past weekend, meaning the meteorological seasonal flipped from fall to winter in North America, spring to summer south of the equator. As you know, I often quote the late Gary Wilhelmi, with another of his old sayings being, “Weather patterns can change with the seasons.” It will be interesting to see what happens over the next three months as South America, most notably Brazil, takes center stage in the play known as Weather Derivative Markets (ag production markets in general). We’ve already seen previews by tracking key Brazilian markets of coffee, sugar, and orange juice. Next to take their turn in starring roles will be soybeans and corn. As for North American markets, both WTI crude oil (CLF25) and distillates (HOF25) post low weekly closes this first week of December before embarking on seasonal winter rallies. Spot-month crude tends to gain 16% through the last weekly close of June while distillates add an average of 11% (10-year index) to 14% (5-year index) through the last weekly close of April. As for Monday morning’s markets, the US dollar index ($DXY) jumped again, gaining as much as 0.71 overnight while February gold (GCG25) dropped as much as $36.50 (1.4%).
Corn: The corn market was quietly lower coming out of the weekend with March (ZCH25) slipping as much as 3.25 cents on trade volume of less than 20,000 contracts and sitting 1.75 cents lower as of this writing. We can see most of the overnight activity, what little there was, came from noncommercial traders with futures spreads generally unchanged. The latest CFTC Commitments of Traders reports will be released Monday afternoon due to last Thursday’s US holiday. Recall Watson held a net-long futures position of 163,300 contracts in corn as of Tuesday, November 19, a decrease of 14,345 contracts. From Tuesday-to-Tuesday, ending November 26, March corn was down 9.75 cents. This tells us funds were continuing to liquidate long positions, likely more than might be expected given continued buying coming from the commercial side. Last Friday’s close showed 2024-2025 corn futures spreads all covering bullish levels of calculated full commercial carry while national average basis firmed to 26.25 cents under March futures. The previous Friday’s final figure was 28.75 cents under with the previous 5-year average weekly close for this week at 17.25 cents under March. Seasonally, the US basis market tends to flatten versus March futures from the first weekly close of December (this week) through the last weekly close of February.
Soybeans: The soybean market was also quietly lower to start the day/week/month/quarter with January (ZSF25) showing a loss of 1.0 cent after dipping as much as 5.0 cents overnight on trade volume of less than 13,000 contracts early Monday morning. It should be noted the US market did not see the usual commercial buying interest coming out of the weekend with January able to muster an early rally of only 1.0 cent before sliding lower. That’s not to say there won’t be export sales announced by USDA later this morning. Given what we saw in the Jan-March futures spread late last week, we know sales were being made. The spread moved from a carry of 10.5 cents at last Tuesday’s close to Friday’s settlement of 6.5 cents carry. This had the spread covering a bullish 24% calculated full commercial carry heading into the weekend as compared to the previous week’s 32% and the Friday before that 38% (with 33% the bullish threshold). Here’s where things get fun, though, for last week saw national average basis weaken slightly with my calculation coming in at 52.0 cents under January futures as compared to the previous Friday’s figure of 51.25 cents under January.
Wheat: The wheat sub-sector was also in the red to start the season, not a big surprise given what I like to call the Krampus Countdown. From my years of dealing with wheat, I learned (often the hard way) one doesn’t want to be long wheat in December, despite seasonal studies telling us that idea may be more myth than reality. I still believe in Krampus, as in the Countdown. In other news, while putting together my monthly analysis and commentary this past weekend, what stood out to me was the National HRW Wheat Index ($CRWI) (national average cash price). The Index was calculated last Friday near $4.73, its lowest monthly settlement since August 2020’s ending price near $4.48. What does this tell us? If we apply the Law of Supply and Demand from Economics 101 we know market price is the point where the quantity demanded equals quantities available. Given the national cash index is the market price, we can conclude available supplies in relation to demand are the largest in over four years. We can also see this in HRW national average basis with Friday’s calculation coming in at 67.75 cents under March Kansas City futures as compared to this week’s previous 5-year low weekly close of 59.75 cents under March.
