Written Commentary
SOYBEANS
A global selloff in stocks and commodities overnight has added pressure to the soybean complex, and the bear camp has the edge. CFTC data showed Managed Money increased their net shorts by 15,000 contracts as of Tuesday last week to 179,000 short. A bumper US crop is on the way; however, a lower trending US dollar could shift bean exports back to the US over time, mitigating some of the bearishness. Over the next five days, precipitation will center on Minnesota, Wisconsin, and Michigan. Western Nebraska will see a few showers, and the southeast US will have the remnants of Hurricane Debby, which made landfall in Florida early this morning. Flooding rains are expected across Georgia and South Carolina. The 6 to 10-day forecast calls for below-normal temperatures across the Midwest.
SOYBEAN MEAL
This week, US and global recession fears have come to the forefront, and most commodity markets are under severe pressure. The soy complex has been spared any heavy selling, but volatility looks to remain high this week. Soymeal prices ended last week with a strong rally Friday on a sharp break in the US Dollar, and the currency has weakened further today to a five-month low. US meal exports have been a bright spot this summer, and the lower US Dollar may keep the export trend strong longer than seasonally normal. Hurricane Debby moved into northern Florida today, and the remnants are expected to head north into eastern Georgia and the eastern Carolinas, where crops may have to endure flooding rains. Cushing plants in the Carolinas may also be affected by the flooding.
CORN
Corn prices are under pressure as a global stock and commodity selloff accelerated overnight, and crude oil prices hit their lowest levels since early February. CFTC data showed Managed Money traders decreased their net short position by 23,000 contracts to 295,000 short as of last Tuesday. Brazil’s Safrinha harvest is moving along quickly; now 87% is harvested compared to 65% last year. The Ukraine Agrarian Council says their corn harvest will likely be down 6 million tonnes from the 29.6 million tonne output last year.
WHEAT
Price action is weak this morning, reacting to the extremely negative sentiment in the US stock market and a host of commodities. CFTC data showed Managed Money Chicago Wheat net shorts were nearly unchanged as of Tuesday last week, at 78,000 contracts short. Russian wheat prices rose last week as the Volga Valley saw excessive rains. The French SRW harvest is 67% done compared to 41% last week, and there are reports of poor quality. Argentine wheat crops have been suffering from dryness, but some rains are forecasted for the next few days on the outer edges of the main Ag areas.
CATTLE
Cattle prices were lower Friday after poor employment numbers brought US recession fears to the forefront. The global stock and commodity selloff reached extreme levels overnight, which is likely to put significant further pressure on cattle this morning at the opening. Cash trade Friday was mostly $2 down from the previous week, and packers will likely lower their bids this week due to the pessimistic economic outlook.
HOGS
Hog prices were able to ignore the significant weakness in the stock market Friday but may not be so lucky today as the Dow Jones is down well over 1,000 points this morning. The CME cash hog Index was up again Friday for the 14th consecutive day. CFTC data indicated that Managed Money traders switched from their previous net short position of 4430 contracts to a net long position of 6144 contracts on Tuesday of last week.
MILK – CLASS III
September Class III Milk maintained upside momentum and reached a 20-month high early Wednesday but turned and finished last week with a heavy loss. The USDA reported that milk volumes are seasonally trending lower across most regions of the United States as high temperatures and humidity are pressing them lower. Farm-level milk continues to decline as summer temperatures climb, and spot milk in the Midwest is scarce and becoming more difficult to find. Class I demand is ticking up as regions prepare for school to start in the coming weeks, while Class II and Class III demands are steady.
METALS
December gold futures are sharply lower but held above the 2400 support level. It was just last week that futures advanced to near record highs due to increased geopolitical tensions in the Middle East.
September silver futures are sharply lower and fell under the 26.60 level in light of increasing evidence of a recession in the US. Prospects of a weaker U.S. economy and lower industrial demand for silver substantially outweighed the flight to quality influence.
September copper futures declined below the psychological $4.00 per pound level today in light of increasing evidence of an economic slowdown and prospects of reduced industrial demand for copper.
ENERGIES
September Crude Oil extended last week’s selloff overnight and fell to its lowest level since February 5 off heavy selling in equity markets in Asia and Europe. The followed a selloff in US stock markets on Friday in the wake of the disappointing jobs report that sparked fears of a US recession. Concerns about weak demand from China have weighed on crude prices recently, and the steep selloff in Asian equities overnight adds fuel to those concerns.
September Natural Gas traded to new contract lows overnight, under pressure from the steep selloff in equity markets. Hurricane Debby is expect to hit landfall in Florida today and move in the northeasterly direction into Georgia and the Carolinas and bring flooding to those areas. It also looks like LNG terminals will be missed, but the potential for power outages could lower overall gas consumption. European gas prices were under pressure this morning from stronger Norwegian supply.
STOCK INDEX FUTURES
Stock index futures are sharply lower today following Friday’s sell-off due to increasing worries over a potential U.S. economic slowdown and recession. On Friday it was reported that nonfarm payrolls in July increased only 114,000 when up 180,000 were expected, and the unemployment rate increased to 4.3%, which compares to the anticipated 4.1%.
DOLLAR INDEX
The U.S. dollar index fell to its lowest level since mid-January extending last week’s decline. There are mounting concerns about an economic slowdown in the U.S., which could prompt the Federal Reserve to pivot more quickly to an accommodative monetary stance.
SOFTS
December Cocoa was moderately lower overnight but fell to its lowest level since July 2. The market is holding up fairly well against heavy selling in the equity sector off worries that the US is slipping into recession. Cocoa sold off sharply last week as the trade has become more optimistic about the 2024/25 west African main crop.
September Coffee was lower overnight and came close to testing last Thursday’s four-week low. Active harvest in Brazil appears to be putting pressure on the market. Safras & Mercado said last week that the Brazilian harvest was 87% complete. The Brazilian real sold off sharply on Friday and traded to its lowest level since March 2021.
December Cotton traded to new contract lows overnight, as the steep selloff in Asian and European equity markets added to demand concerns. This followed a steep selloff in equities on Friday in the wake of a lower than expected US jobs report. The dollar falling to its lowest level since late 2021 could make US cotton more competitive on the global market, but that is small consolation when all the talk seems to be about a potential US recession.
October sugar extended last week’s selloff overnight and traded to its lowest level since March 2023, pressured by the steep selloff in global equity markets and in crude oil, which fell to its lowest level since February. Lower crude oil prices pressure ethanol, which lowers the incentive for cane crushers to divert production away from sugar.
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