Written Commentary
SOYBEANS
A slightly lower start for beans this week as traders will be looking for additional China demand following the purchase of 312,000 tonnes announced on Friday. China bought US beans last week on minor pullbacks, and if that continues this week, the recent 6-session rally can continue.
SOYBEAN MEAL
Soymeal prices are pulling back to start the week, with March hitting a 3-week low this morning. China’s demand for US beans improved last week, and, along with the possibility of bitter cold and snow in the northern half of the Midwest, which could slow crush operations, meal prices ended the week with a slight gain. Soy processor production and transportation disruptions are likely in the short term, but a strong meal export book may provide an underpin of support during breaks this week.
CORN
A slightly lower start for the corn this morning after prices hit moving average resistance at Friday’s high. Open interest continues to plummet, down more than 150,000 contracts since Monday a week ago. The strong export sales for the week of October 16, above the highest estimate, gave the market an upside boost on Friday, along with the morning flash sale to Unknown.
WHEAT
March Chicago wheat ended last week at the same price it started the week, and remains the weak link in the grain complex. Friday’s trading volume was extremely low as speculators found that other markets offer better directional potential.
CATTLE
Sharply higher trade in the cattle complex for the 2nd consecutive day, despite light holiday trading volume. Open interest was down another 1,160 contracts in live cattle and 800 in feeders on the rally Friday. Nonetheless, the live cattle weekly continuation chart formed a reversal higher, suggesting the upside correction may continue, keeping the edge with the bulls in the near term.
HOGS
February hogs were slightly lower on Friday in low-volume trade, but last week’s action was overall positive, having taken out the previous week’s highs. Open interest on Friday did not change significantly.
MILK CLASS III
January Class III milk finished last week’s holiday-shortened trading with a modest gain after reaching a new contract low on Wednesday.
ENERGIES
January Crude Oil was higher early Monday but found resistance at the 50-day moving average (59.97). The market found support from indications that the progress is slow for the peace talks in the Ukraine/Russia war.
Product prices did find support early Monday on reports of more drone strikes on the Russian port of Novorossiysk over the weekend as well as on a less optimistic view towards the peace talks in the Russia/Ukraine war.
January Natural Gas was higher at one point early Monday and was for the most part confined to the upper end of Friday’s range. A winter storm moved across the northern US over the weekend pretty much as advertised, but it did remind traders that we are in a key demand period for the year, which is a change of pace from the warm trend earlier this season.
DOLLAR INDEX
The USD index is lower as markets continue to increase bets of a rate cut out of the Fed next week. Markets are now implying over an 87% chance of a December cut, up from around 30% odds by mid-November, as recent comments from several notable Fed officials has been dovish.
COCOA
March Cocoa was near unchanged early Monday, trading in the upper end of Friday’s breakout range. Ivory Coast port arrivals totaled 100,000 metric tons for the week ending November 30, down from 102,000 the previous week but up from 92,000 for the same week last year and above the five-year average of 87,000.
COFFEE
March Coffee was lower early Monday but found initial support at the 50-day moving average. Weather conditions remain favorable in Brazilian coffee areas, but Vietnam, Indonesia and other parts of Southeast Asia continue to face bouts of flooding that threaten crops and slow harvest pace for robusta beans.
COTTON
March Cotton was lower early Monday but found support at the 9-day moving average. Friday’s export sales update was supportive to cotton but traders are looking ahead to another update this morning as the USDA works to catch up after the government shutdown put them six weeks behind schedule.
SUGAR
March Sugar was sharply lower early Monday but found initial support at the 9-day moving average, as the trade was awaiting the UNICA report on Brazilian center south production for the first half of November, which was to be released during the session. Trade expectations call for a strong harvest/crushing pace for the period.
PRECIOUS METALS
Gold prices climbed to their highest level in six weeks as expectations that the Fed will lower interest rates next week and a weaker dollar provided the non-yielding metal with a tail-wind. Markets are pricing over an 87% chance that the Fed will lower rates.
Silver futures are up over 1.0% to $57.00. Silver is benefiting from the same factors as gold as well as expectations of improving industrial demand for next year.
Copper prices are higher as focus regarding output curbs in China helped lift LME prices to all-time highs earlier in the session.
EQUITIES
The indexes are lower as tech leads the downside, with the December Nasdaq contract down nearly 1%, while the S&P and Dow also lagged. All “magnificent seven” stocks are down in premarket trading. Focus today will rest on ISM manufacturing PMI data out today for November.
INTEREST RATES
Yields are higher across the curve, following moves in Japanese bond yields as signs of a rate hike from the BoJ have lifted yields. Investors in Japan hold over $1 trillion worth of US bonds due to ultra-low rates over the past 20 years. A sustained rise in JGB yields could see selling of US Treasuries into JGBs.
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.
