Were You Ready for Today's TACO Tuesday?

• Monday afternoon's headline told us the US president had said he was postponing his latest threat toward the annihilation of Iran, as has come to be expected. 

• Also as expected, this caused Watson (algorithms) to sell the Energies sector and initially buy metals, all as if by design. 

• However, the Grains sector was able to build on Monday's strong rally, for the most part, through the early morning hours. 

Morning Summary: Truth be told – and truth is so hard to come by these days – we didn’t have to wait until Tuesday for our Chicken TACOs to create early Turnaround activity. The headline broke Monday afternoon, “(The US president) says he’s postponing ‘scheduled attack of Iran tomorrow (Tuesday)’ at Midde East leaders’ request” (from CNBC.com). Does anyone believe, for even a split-second, that this was “at Middle East leaders’ request”? Anyone? Bueller? I didn’t think so. The reality is the US president’s inner circle were able to liquidate some of their long positions in the Energies sector during Monday’s rally, knowing full well what was coming next. We saw the odd activity in energy markets throughout yesterday’s trade. And sure enough, when the overnight session opened later in the evening, WTI crude oil (CLN26) dropped as much as $2.26 (2.2%) while Brent crude (QAN26) lost $3.20 (2.9%) and diesel fuel (HOM26) fell 11.0 cents (2.7%). As I talked about in a piece for Barchart a month or so ago, this is all becoming so predictable it is almost boring. Gold (GCM26) initially rallied, adding as much as $28.20 before falling back overnight. Similarly, silver (SIN26) was down $1.29 (1.7%) to start the day. US stock index futures (ESM26) (NQM26) (YMM26) were lower across the board as well.

Corn: The corn market started the overnight session under light pressure, but as the hours lengthened we saw renewed buying interest once again. July (ZCN26) gained as much as 4.75 cents on trade volume of 47,500 contracts, solid overnight activity, and was sitting 1.75 cents higher at this writing. Recall July closed 21.25 cents higher Monday, one cent off its session high, followed by the National Corn Index coming gaining nearly 21.75 cents from last Friday. That tells us there was indeed support from the commercial side to open the week as well. However, the CME website throws us a bit of a curveball Tuesday morning with total open interest in the corn market decreasing by 12,280 contracts during Monday’s rally. July lost 365 contracts, September decreased by 5,730 contracts, and December was off by 8,130 contracts. I’m not sure what to make of this, other than a round of noncommercial short-covering and or lifting of new-crop short hedges. As for new-crop, September (ZCU26) was up 1.5 cents at this writing with December (ZCZ26) sitting 0.75 cent higher to start the day. Dec26 poked its head back above $5.00 overnight, hitting a high of $5.0075 before backing off slightly. Fundamentally, the new-crop market remains neutral. 

Soybeans: The oilseed sub-sector was mostly in the green again early Tuesday morning, with the outlier soybean oil this time around the clock. Here we see the July issue (ZLN26) down 0.17 cent after slipping as much as 0.45 overnight. I’m not reading much into the move at this time, other than a lack of buy orders overnight. The spot-month diesel fuel contract was still down 6.4 cents at this writing. As for soybeans, July (ZSN26) posted a 9.25-cent trading range, from down 1.5 cents to up 7.75 cents on light trade volume of 16,500 contracts. Recall July closed 36.0 cents higher Monday, followed by the National Soybean Index showing a similar daily gain last night. Was I surprised by this? Maybe a bit, as it showed the commercial side wasn’t afraid of the rally in futures. Does this mean there might be some truth to the latest bluster about Chinese purchases of US soybeans? Experience has taught me to be skeptical of anything the White House says, particularly when it comes to trade relations with China, but we’ll see. New-crop November (ZSX26) was up 0.75 cent on overnight trade volume of 11,500 contracts after closing 30.25 cents higher to open the week. The Nov-January futures spread continues to cover a neutral-to-bullish level of calculated full commercial carry. 

Wheat: The wheat sub-sector was in the green as well pre-dawn, also able to shrug off possible Turnaround activity from Monday’s strong double-digit rally. At least so far. July SRW (ZWN26) was up 5.5 cents at this writing after rallying as much as 15.0 cents overnight on trade volume of 21,000 contracts. July closed 28.75 cents higher yesterday, with the National SRW Index adding 27.0 cents last night. This tells us basis weakened by 1.75 cents, a solid change, coming in at 57.25 cents under July futures as compared to the previous 5-year low weekly close for this week of 59.5 cents under July. In other words, yes, the basis market remains weak but given the rally in futures it isn’t as weak as I might’ve thought. Over in HRW we see the July issue (KEN26) up 4.5 cents after gaining as much as 16.25 cents overnight, all after closing 15.75 cents higher Monday. The National HRW Index showed a gain of roughly 13.75 cents, putting national average basis at 68.5 cents under July futures as compared to last Friday’s final figure of 66.5 cents under and the previous 5-year low weekly close for this week also at 66.5 cents under July.