Written Commentary
SOYBEANS
An overnight gap lower has beans starting on the defensive this morning after leftist Lula won a surprise victory in yesterday’s Brazilian election, despite opinion polls showing the conservative candidate Bolsonaro ahead. The Brazilian currency plummeted versus the US dollar overnight, which typically weighs on US bean prices by reducing US competitiveness and generally prompting more selling by Brazilian farmers.
SOYBEAN MEAL
The meal market started the week under significant pressure after the Brazilian Real fell sharply following Lula’s surprise win in yesterday’s Brazilian election. For Brazilian crushers, a weaker Real raises the local-currency value of beans because export prices are denominated in US dollars. That encourages Brazilian farmers to sell more aggressively, improving the physical availability of beans for crushers. For US crushers, the weaker Real is somewhat negative because it makes Brazil more competitive for soybean and soy-product exports. Leading up to the weekend election, bean origination in Brazil had been slow, and the weaker real is likely to spur more selling by Brazilian farmers, potentially tilting the competitive advantage for soy exports back to Brazil in the near term.
CORN
The corn market came under pressure at the start of last night after Lula’s surprise win in the Brazilian election, which sent the Brazilian Real sharply lower against the dollar. The currency move will make Brazilian corn more competitive and is seen as bearish for US prices overall.
WHEAT
Wheat prices have flatlined over the last few sessions, with prices stuck in a $0.10 range. Attacks continued across the Black Sea over the weekend, but US, Russia and Ukraine talks reportedly may begin in a few weeks, building towards leader-level talks in the future. This keeps a bearish cloud over the market.
CATTLE
There was a higher start for the cattle complex today after the bullish Cattle on Feed report on Friday, as placements fell to their lowest level since COF records began in 1996, reinforcing the idea that cattle supplies will remain tight into 2027. In addition, the monthly Cold Storage report leaned bullish, with US frozen beef stocks coming in 1% below September a year ago. COT data showed Managed Money increased their net long position by 5% in live cattle and by 18% in feeders. The Columbus, New Mexico border crossing is expected to reopen today.
HOGS
The hog market finished near unchanged on Friday following Thursday’s contract low close. National cash prices rose nearly $1, but primal cuts fell again, and the lean hog index hit its lowest level since late January.
MILK CLASS III
November Class III milk finished last week with a sizable gain after reaching a 4 1/2-month high on Tuesday.
CRUDE OIL
December Crude Oil was lower early Monday but inside Friday’s range. News that top officials from Saudi Arabia, Turkey, and Pakistan were to meet Iran’s leaders today offered some hope of movement towards an agreement to increase oil flows of some sort. On the other hand, the Houthis said they struck pumping stations on Saudi Arabia’s East-West pipeline, as well as the airport in Riyadh.
NATURAL GAS
December Natural Gas was sharply lower early Monday, extending its selloff from Friday to its lowest level since June 2021. The nearby contract fell to its lowest level since April. The warm trend continues, with the 6-10 and 8-14 day maps showing above normal to much above normal temps from the Great Plains to the East Coast, and this keeps demand expectations low. US production recovered last week after interruptions earlier in the month. LSEG said average gas output in the lower 48 states last week was 113.3 bcfd, which matched the record highs from August and September.
DOLLAR INDEX
The USD index is little changed at 101.87. The dollar is broadly steady ahead of five central bank decisions this week, though the Fed is expected to hold rates steady. Instead, focus will center around the composition of the votes on the FOMC for signals on how far the Fed could raise rates. There have been several officials who have suggested that their preferred path in policy would be patience at the October meeting, so a consensus 12-0 to hold should not be taken as a reluctance to hike again in the coming meetings.
PRECIOUS METALS
December gold contracts are little changed following Friday’s selloff. The $4,000 level is being taken as a strong support/buying level. Lower oil prices are offering some support to gold, however, this week’s Fed decision is likely limiting gains as markets anticipate further tightening over the coming months.
December silver contracts are down 0.65% to $53.585.
LME copper was little changed at $14,327, while US prices rose 0.28% to $6.5255. Teck Resources’ Highland Valley copper mine is experiencing a workers strike, though the market has reflected little impact. In China, the Yangshan copper premium rose to $178 a ton, its highest level since 2014 after data showed SHFE copper stocks dropped 25% to 54,356 tons, contrasting with LME inventories, which rose 20% over last week to 273,750 tons. Data-center investment, the energy transition, mine-supply challenges, and US stockpiling ahead of potential tariffs continue to underpin prices despite uncertainty about whether US levies will actually be imposed.
EQUITIES
Equity index futures are higher as a drop in oil prices offered immediate relief ahead of a busy week of tech earnings and a Fed decision. Meta announced that it plans to raise up to $95 billion in equity, brining AI financing and the eventual returns of AI infrastructure spending back into focus for big tech. The company launched approximately $35 billion of common-stock and convertible-preferred offerings and plans a separate program of up to $60 billion after its non-voting Class C shares begin trading, expected in early 2027. The planned capital raising comes after Meta reported its first negative quarterly free cash flow in more than a decade, despite revenue growth exceeding expectations.
INTEREST RATES
Yields saw a flattening move to start the week. The market does not and has not expected policy action from the Fed at this week’s meeting for some time. PCE data for September will follow the meeting on Thursday and could test the Fed’s message, with forecasts expecting third-quarter GDP growth of approximately 3.2% and headline PCE inflation accelerating to 3.6% year over year from 3.4%. A firm combination would reinforce the case for additional tightening, while softer results would support patience.
COCOA
December Cocoa edged lower early Monday, below a two week consolidation range. Ample old crop supplies (as indicated by large exchange stocks) counter concerns that El Nino will hurt upcoming production in West Africa.
COFFEE
December Coffee gapped lower early Monday and fell to its lowest level since October 15. The Brazilian real collapsed overnight after the Brazilian President Lula da Silva was reelected after being declared a winner over Flavio Bolsonaro. The weaker currency could encourage Brazilian exporters to step up their sales. The real had gained after Bolsonaro won a preliminary election. Bolsonaro is contesting the results which may add to the currency’s volatility, as it could increase the risk of political instability.
COTTON
December Cotton broke below the recent consolidation range early Tuesday. The collapse in the Brazilian real in the wake of Lula da Silva’s reelection does boost the incentive for Brazilian exporter to sell. Favorable weather in the US this week could add to harvest pressure.
SUGAR
March Sugar gapped lower overnight after the Brazilian real collapsed in the wake of Brazilian President Lula da Silva’s reelection over the conservative candidate Flavio Bolsonaro, as the lower currency value increases the incentive for Brazilian exporters to sell. The UNICA report on Friday showed Brazil Center-South sugar production recovering in August, but cumulative production for the marketing year starting in April still down from a year ago and below the five-year average.
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