Written Commentary
CLOSING COMMENTS
Macroeconomics:
The busiest week of earning season comes to a close. This week, the Dow dropped 212 pts (-0.5%), the S&P dropped 105 pts (-1.8%), Crude is a couple dollars lower from last Friday, and gold is flat to slightly higher. The poor jobs report did not seem to phase traders as it’s shortcomings improve the probability of a Fed rate cut next week. Manufacturing contraction is a concern, but is only one of many major indicators of the economy’s health
Ag Fundamentals:
The Commitment of Traders report shows the producer sold corn in the last week while managed money covered corn shorts. Similar story for Canola. Managed money increased their short position by 12,652 contracts as Brazilian forecasts have improved and the export book remains below the 5 year average. Rains expected over the next 5 days should allow for better logistics on our river system to keep us competitive. Next week will be a very important week with election night on Tuesday, the Fed decision on Thursday and the USDA WASDE report on Friday. Buckle up!
Weather:
The Central US is expected to see above normal rainfall over the next 30 days. This should help refill the streams and rivers that have suffered record breaking dry stretches for the last 2 months. The moil moisture map should look less intimidating and the river levels on the lower Mississippi should raise enough to load full draft barges if the rain persists.
The COT Disaggregated Futures and Options Report Showed managed money covering shorts in both corn and canola. The rest of the row crops either increased shorts or dropped length.
The 16-Day Forecast and Experimental Gauge for the Mississippi River Gauge at Memphis is showing some positive news for barge freight. Barge capacity is currently suppressed due to low water and there seems to be a window of opportunity to load full barges November 10th-16th (in green below).
The Fed Watch Rate Move Probability has changed in the last week. A week ago this metric was showing a chance the Fed would announce unchanged rates. It is now showing a 100% probability of a move and the most likely being a 25 basis point cut. We will know on Thursday next week.
The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) report is commonly below 50.0 units when the economy is struggling or in a rescission. This index is based on surveys taken from purchasing managers who hold perhaps the most current and relevant insight into a companies view of the economy. The surveys are conducted between 400 different companies, across 20 industries and 50 states. Above 50.0 indicates industry expansion, below indicates contraction. We have been below 50.0 for a longer amount of time than the last two financial shocks. (April 2024 we peaked above 50.0 for one month.)
Calendar Spreads
Spread | Last | Chg | Full | % of FC |
CZ24/CH25 | -14 3/4 | +1/2 | -30 3/4 | 48% |
SX24/SF25 | -11 1/4 | +3/4 | -26 3/4 | 42% |
SX24/SN25 | -55 1/2 | +3/4 | -106 1/4 | 52% |
MWZ24/MWH25 | -23 1/2 | +1/2 | -30 1/2 | 77% |
WZ24/WH25 | -19 3/4 | 0 | -24 | 82% |
KWZ24/KWH25 | -13 1/2 | +1/4 | -24 | 56% |
Cost of Carry
Daily Trading Limits: Corn $0.30 (expanded $0.45); Soybeans $0.85 (expanded $1.30); Minneapolis Wheat $0.60 (expanded $0.90); KC Wheat $0.40 (expanded $0.60); Chicago Wheat $0.40 (expanded $0.60)
>>Interested in more commentary by Joe Mauck? Go HERE
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