Written Commentary
SOYBEANS
Beans are under mild pressure this morning, with no fresh market-moving news over the weekend. Clear, dry harvest weather across the Midwest and Plains will continue this week, followed by normal-to-above-normal rain chances in the 6-15 day outlook.
SOYBEAN MEAL
Meal is lower to start the week as harvest quickly moves forward, and processors are awash in newly harvested bean supplies. Friday’s weekly export sales for meal were strong and will draw meal from Western plants to ports in the Pacific Northwest, competing with processors for supplies. However, Gulf exports may pick up as EU demand for US meal rises, likely due in part to EU deforestation regulations that are limiting demand for South American meal.
CORN
Corn saw a very small overnight range, highlighting the lack of trading interest. There was little fresh news over the weekend, and prices are drifting lower. Friday’s close was the lowest since mid-August, and the downtrend appears to be strengthening as December reached a new monthly low. It was a clear harvest weekend, and this week will also feature ideal harvest conditions.
WHEAT
Chicago wheat ended last week at its lowest level since August 11th, and the trend remains down. This morning’s light pressure may be attributed to Ukraine President Zelensky saying he is ready for fresh peace talks, and to ongoing discussions with Turkey, India, and Egypt about safe shipping. Meanwhile, Russia hit several Ukrainian power substations over the weekend and seems uninterested in ending the fighting.
CATTLE
The cattle complex closed higher on Friday and at its highest level since August 5th for December live cattle. Cash trade finally broke out to the upside of the range seen over the last month. The trend is higher, and fundamentals have a bullish bias as well. This week, December is likely to challenge the 3-month highs from early August at 229.45. COT data indicated Managed Money traders cut their net long positioning in live cattle to a 3-week low of just over 48,000 contracts, but feeder cattle net longs jumped to a 3-month high
HOGS
Hogs followed through Friday after Thursday’s upside reversal from new contract lows, improving the near-term technical outlook. Open interest fell a little over 2,600 contracts on light short covering by Managed Money traders. Bulls will want to see follow-through early this week after national base cash prices plummeted $4.61 on Friday and the index was lower again, although cutout rose $3.
MILK CLASS III
November Class III milk finished last week with a very large gain after reaching a 6-week high on Friday.
CRUDE OIL
December Crude Oil made new contract highs early Tuesday as the market prices in the prospect of continued interruptions in global supply. Reports of more Houthi attacks on Saudi energy, airport and military targets this week and a report that an oil tanker exploded after striking a mine in the Strait of Hormuz over the weekend have dashed the optimism that Mideast supply on its way back. Reports of Iran’s imminent demise were apparently premature, and Saudi Arabia is apparently seeking help from Egypt in its fight against the Houthis.
NATURAL GAS
December Natural Gas is back approaching contract lows, as mild weather limits heating demand prospects, and US output appears to be coming back after recent interruptions. On Monday, LSEG said average gas output in the US Lower 48 states averaging around 111.3 bcfd for the month, which while down from record highs of 113.3 August and September, was up from the 110.8 bcfd reported on Friday. The 6-10 and 8-14-day forecasts call for above normal temperatures over most of the lower 48 states, with near normal along the eastern seaboard at times and normal to below normal from the PNW into the Rockies.
DOLLAR INDEX
The USD index fell 0.25% to 101.72. The currency market has been assessing the impact of last Wednesday’s AI sell off, noting that the market’s moves may be a hint of the reaction function to a major AI-driven selloff, with the dollar falling instead of attracting safe-haven demand. The dollar index looks to be finding strong resistance at the 102.50 level.
PRECIOUS METALS
December gold contracts eased as rising oil prices stoked inflation concerns, while traders continued to look ahead to next week’s Fed meeting after last week’s inflation data.
December silver contracts are up 0.25% to $57.43.
: Copper prices were little changed in a tight range overnight, as uncertainty over US tariffs and the rise in oil prices dented risk sentiment. LME copper was up 0.1% at $14,355, while US prices were little changed at $6.5725. Supportive of copper has been a tighter scrap market in China, which in turn has led the country to draw down in refined copper inventory, even as more copper continue to head to the US.
EQUITIES
Equity index futures were lower overnight; technology shares are under pressure again, threatening to interrupt Monday’s recovery as doubts about AI spending collide with another rise in oil prices. The weakness follows a disappointing debut for South Korean data-center infrastructure company Elice, whose shares plunged 32%. The Kospi fell nearly 4%, with memory-chip producers Samsung Electronics and SK Hynix among the decliners. Investors remain sensitive to the valuations and funding requirements that underpin the AI investment cycle.
INTEREST RATES
Yields edged higher at the front end and lower at the long end overnight. The two-year/10-year spread is approximately 33.60 bps, compared with 38 bps on Monday. December Brent is near $111 and December WTI is above $100 as shipping threats and regional attacks sustain a sizable risk premium. Prices remain supported despite relatively strong Persian Gulf flows, underscoring the gap between current supply availability and the risk of disruption. Markets continue to favor an October Fed hold followed by further tightening later.
COCOA
December Cocoa has stalled around the $6000 level despite strong demand readings and dry weather concerns in West Africa. Ivory Coast farmers interviewed by Reuters on Monday expressed concerns that the dry weather last week may have caused damage to pods for next year’s harvest. World Weather Inc. has reported rain in Ivory Coast and Ghana but they have describe it as “erratic” and not enough to prevent net drying. The overriding concern is that El Nino will reduce rainfall amounts in what’s left of the wet season and make the dry season drier.
COFFEE
December Coffee rallied up into a gap from August 24 on Monday, and closing that gap may be the main target for the market. The Brazilian real gained against the dollar in recent weeks with the strong performance of Bolsonaro in the upcoming Presidential election, and supports coffee on ideas that the strong currency lowers the incentive to export. Despite what appeared to be strong Brazilian exports, ICE exchange stocks have increased only marginally off their lows.
COTTON
December Cotton is in a consolidating pattern with reports of mill buying offsetting concerns about the slow export pace. The weekly Crop Progress report released late Monday indicated that the harvest is ahead of normal, with 41% of the crop harvested as of October 18, up from 31% the previous week and above the four-year average for this date at 37%.
SUGAR
Sugar is consolidating after rallying off declining supply expectations, many of which are being blamed on El Nino, after a drought in Europe this summer that severely damaged their beet crop, a poor monsoon performance in India, and excess rains in Brazil that have interrupted harvest and crushing and lowered sugar production. The market may be looking the next supply concern to make a new leg higher.
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