Written Commentary
SOYBEANS
A negative start for beans this morning as traders look for new Chinese demand after there were no confirmed purchases late last week, keeping the near-term edge with the bears. There is some talk that China is even washing out of some cargoes purchased from Argentina back during its “tax holiday”. China’s port stocks are very high, and they may be trying to make room for additional US purchases. However, with no significant weather issues in South America, there is little need for China to rush as prices slip lower.
SOYBEAN MEAL
Soymeal is seeing a minor rally at the start of this holiday-shortened trading week, retracing some of last week’s pullback. China made a small two cargo US bean purchase on Friday, but the soy complex needs to see larger purchases to rally back towards last week’s highs. This is especially true since there is no major weather problem in South America currently.
CORN
The corn pullback is ongoing with March prices hitting their lowest level in a month overnight, and ahead of First Notice Day for the December contracts later this week. Rallies may be tough to extend this week as seasonal weakness is common during Thanksgiving week. Also, December longs must exit by Wednesday’s close to avoid delivery risk. Lastly, current forecasts show no major weather issues in South America.
WHEAT
Chicago wheat pressed down through support overnight, and there is little reason to expect a bullish turnaround without the support of corn and/or beans. The US set a Thursday deadline for Ukraine to decide on the Black Sea peace proposal, which could be extended. If a deal is struck, it may be assumed that Russian and Ukrainian logistics issues will be resolved, thereby improving export potential and further increasing global competition.
CATTLE
There will likely be no shortage of volatility to start the week following the Cattle on Feed report on Friday and the major news that Tyson is reorganizing its beef division as well as closing its beef processing plant in Lexington, Nebraska, which employs over 3,000 workers and processes up to 5,000 head per day. Furthermore, Tyson says it will end a shift at its Amarillo, Texas, beef facility as part of restructuring its meat operations. The futures markets discounted the tariff removal on foreign beef imports, and bounced back Friday from a near limit-down opening. As a result, traders will be anxious to see if prices react similarly to this morning’s bearish headlines.
HOGS
Another poor close to the week on Friday for hogs with February’s settlement hitting a 7-month low. Cash hogs were down on the national grid last week, but pork cutout jumped higher on Friday. Hog open interest was little changed on Friday, and COT data from the week of October 7 showed Managed Money holding a significant 141,240 net long position, much of which has likely been liquidated since.
MILK CLASS III
December Class III milk finished with a sizable weekly loss after reaching a 2-week high on Tuesday and a new contract low on Friday.
ENERGIES
January Crude Oil is near unchanged this morning after bouncing off Friday’s low, as the market weighs the prospects of peace in Ukraine. President Trump has given Ukraine until this Thursday to accept the framework that was introduced last week, but Secretary of State Rubio has suggested there could be some flexibility if progress is made. Talks continued today (Monday) and after US and Ukraine issued said in a joint statement on Sunday that they had drafted a “refined peace framework” after a first day of talks.
January Natural Gas was lower overnight to its lowest level since last Tuesday as the weather forecast for the US has moderated a bit from the worst fears last week. The 6-10 day forecast shows much below normal temps are expected for the northern Plains and northern Rockies, with below normal temps expected over much of the central lower 48 states out through December 7.
DOLLAR INDEX
The USD index is lower, still feeling pressure from recent comments from NY Fed President John Williams, who on Friday said there was room to lower interest rates as the faltering labor market provides more downside risks than inflation.
COCOA
March Cocoa extended last week’s selloff overnight to trade to its lowest level since October 2024. The market is technically oversold, but there is no indication of a bottom.
COFFEE
March Coffee collapsed on Friday on the news that President Trump had removed the 40% tariff on Brazilian coffee imports. The market fell to its lowest level since September 25 but made a substantial recovery by the end of the day and was slightly higher overnight, though still inside Friday’s range-down action.
COTTON
March Cotton was higher overnight after falling to a new contract low on Friday. Last week’s export sales report showed a decent sales number of 198,985 bales for the week ending October 2. This was the second week in a row they were around 200,000 bales.
SUGAR
March Sugar was higher overnight, and it could be in position to test the recent high at 15.05.
PRECIOUS METALS
Gold prices slipped as markets evaluate the prospects of a rate cut from the Fed after recent comments from NY Fed President John Williams lifted bets on a December cut.
Silver futures fell 0.2% to $49.80.
Copper prices on the LME were little changed at $10,775 earlier in the morning. Markets are largely awaiting industrial profit figures from China on Thursday, following strong readings in August and September.
EQUITIES
The indexes are higher as markets look to recover from last week’s volatility, as odds of a December cut from the Fed have been upped significantly following comments from NY Fed President John Williams. Williams said that the risks to the labor market are greater than risks from inflation. Focus this week will center around PPI and retail sales figures, both due on Tuesday, in what is a shortened week of trading due to the Thanksgiving holiday.
INTEREST RATES
The curve flattened, with yields higher at the front and lower at the long end as hedging ahead of today’s $69 billion two-year note auction and Wednesday’s $70 billion five-year note auction takes place. Thanksgiving is likely to bring a lack of volume to markets this week, further explaining the higher front-end rates amid increased expectations of a Fed rate cut in December.
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.
