Written Commentary
SOYBEANS
The bean market made a gap-higher opening Sunday eveing in bullish fashion following major news from Treasury Secretary Bessent, indicating a framework deal has been struck with China ahead of Trump’s meeting with Xi on Thursday of this week. Bessent went on to say that he expects China to resume “substantial” purchases of US beans, and that the 100% tariff set for November 1st is off the table. Furthermore, the Phase 1 compliance inquiry announced late last week is likely to be shelved.
SOYBEAN MEAL
Meal prices have extended their rebound to start the week, and they have closed higher for nine straight sessions. The current rally is a dramatic turnaround after months of weak price action, culminating in the contract lows set on October 1st. Bearish attitudes have shifted after meal supplies began to tighten in mid-October, as US farmers stored as much of the crop as possible, prompting soy processors to bid up for the bean supplies they needed. Furthermore, December soymeal gapped higher Sunday night after Secretary Bessent announced “framework” for a trade deal has been reached ahead of Trump’s planned visit with Xi later this week.
CORN
The market moved higher overnight on the potential breakthrough with China after the US Treasury Secretary said a framework deal has been reached ahead of Thursday’s in-person meeting between Trump and Xi in South Korea. The market did not gap up like beans, but December prices are testing their highest level since July 4th, and the bulls have the clear edge. China’s feedgrain imports have been minimal this year and its economy has struggled.
WHEAT
Both December Chicago and Kansas City gapped up overnight on the announced framework deal with China, shifting the technical outlook higher following steadily lower prices since February of this year. Wheat showed initial technical signs of downtrend exhaustion last week, and the overnight gap is likely to trigger much more aggressive short-covering by the managed money crowd, which has been holding a major short position for many months.
CATTLE
Live cattle and feeder cattle prices ended limit down on Friday, marking a significant blow to the bull trend. December live cattle closed below the 50-day moving average for the 1st time since early April. The US government’s plan to lower beef prices and rebuild the herd, along with the Mexican Ag Minister’s visit this week to try to reopen the border, are the major bearish fundamental factors pushing the market lower. Mexican media reports that the Texas Department of Agriculture has urged the US government to resume, in a controlled manner, imports of cattle from Mexico.
HOGS
December hog prices finished last week mainly steady. News that the US and China have made progress on a framework deal ahead of the Trump/Xi meeting on Thursday is a positive for US pork demand, and prices are likely to start higher this morning. The recent downtrend has shown signs of weakening, and the managed money long liquidation seems to have run its course.
MILK CLASS III
December Class III milk finished with a sizable weekly gain after reaching a 2 1/2-week high on Friday.
The USDA reported that milk production in the East and West regions is steadily increasing, with southern states in those regions now seeing colder temperatures, which have improved cow comfort.
ENERGIES
December Crude Oil gave back some of Friday’s gains overnight but held in the upper end of last week’s range. News that US and Chinese officials sketched out a trade deal framework ahead of a planned meeting between President Trump and Chinese President Xi Jinping this week may have eased concerns about global economic growth, which is supportive to demand. Treasury Secretary Bessent spoke optimistically over the weekend about the agreement, but Chinese officials did not confirm.
January Natural Gas traded in a wide range outside range overnight. A cooler trend in the eastern half of the US has improved expectations for heating demand. This comes on top of a drop in US production this month and a recovery in LNG exports. This was up from 101 rigs a year ago and above the five-year average of 109. IEA Executive Director Fatih Birol said that a surge in supply of LNG coming to market this year and next is poised to change the rules of the market and warned that it is turning from a sellers’ market to buyers markets, which is pushing LNG prices down.
DOLLAR INDEX
The USD index fell to start a week packed with global trade negotiations and central bank meetings. President Trump and Xi will meet in South Korea on Thursday to decide on the framework of a trade deal that was created over the weekend. The Federal Reserve will also meet this week; markets have fully priced in a rate cut from the central bank.
COCOA
December Cocoa gapped lower overnight and fell back to the 9-day moving average, giving up a good portion of its gains from last week. The market also fell to the 50% retracement of the rally off the October low. Ivory Coast port arrivals continue to lag behind last year and average levels, despite the good weather reported this year the increase in farmgate prices. Arrivals totaled 82,000 metric tons for the week ending October 26, down from 84,000 the previous week and 92,000 for the same week last year.
COFFEE
December Coffee extended its selloff from last week’s contract highs overnight and fell to its lowest level since October 17. The bears may have been encouraged after Brazil’s President said he had a positive meeting with President Trump on Sunday (on the sidelines of the ASEAN conference in Malaysia) and that their respective teams will start “immediately” to discuss the 50% tariffs on Brazilian imports (including coffee) and other matters. Brazil’s Foreign Minister mentioned that they had requested that tariffs be suspended during the negotiation process, but there has been no indication that the United States has agreed to the request.
COTTON
December Cotton gapped higher overnight in a sharp rally that took it to its highest level since October 6. The market was buoyed by optimism that trade deals with Vietnam and China would open the door for US cotton exports. The Trump Administration said yesterday that the US and Vietnam would finalize a trade agreement in the coming weeks that will maintain 20% tariffs on most Vietnamese goods but lift duties on certain products. The list of such products are to be decided at a later stage. Vietnam has been the largest buyer of US cotton in recent years, and they have started out relatively strong this year.
SUGAR
March Sugar traded to new contract lows overnight, and the nearby contract fell below its four-year-plus low from June. The market continues to be dragged lower by strong production. Last week, Datagro forecast a global sugar surplus of 1.98 million tons for the 2025/26 marketing year (October/September) up from a deficit of 5 million in 2024/25. India and Thailand have experienced ample rains this year, and Brazil’s output improved as they moved through the season. Long-term demand expectations are weighed down by the success of new GLP-1 weight-loss drugs.
PRECIOUS METALS
Gold prices are lower, with December futures falling nearly 2% as hopes of easing US-China trade tensions lifted risk sentiment ahead of several central bank meetings this week. Treasury Secretary Scott Bessent said there was a “very successful framework” for President Trump and Xi to discuss Thursday, while a Chinese official touted a consensus on several issues.
Silver prices are lower, following moves in gold as a risk-on sentiment dented safe-haven demand.
Copper prices are higher as US-China trade deal optimism lifted prices of the red metal. Benchmark copper on the LME was up 0.6% at $11,026, while US futures were up 0.6% to 5.1560. Also supportive of copper prices was new data that showed China’s industrial profits grew at their fastest pace in nearly two years in September.
EQUITIES
Nasdaq futures led gains among all the indexes ahead of a long-anticipated meeting between President Trump and Chinese President Xi, and as the Federal Reserve is set to cut interest rates at the conclusion of its two-day policy meeting on Wednesday. Treasury Secretary Scott Bessent said there was a “very successful framework” for President Trump and Xi to discuss Thursday, while a Chinese official touted a consensus on several issues. Bessent also said that the trade talks have eliminated the possibility of the US imposing 100% tariffs on China starting November 1, while he also expects China to delay the implementation of its rare earth and magnets licensing.
INTEREST RATES
Yields rose across the curve ahead of the Fed’s meeting this week as trade tensions with China cooled ahead of a meeting between President Trump and Xi, helping to spark a global risk-on sentiment. Markets are hopeful a trade breakthrough will happen after productive weekend discussions between US and Chinese negotiators.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
