Is the Commodity Complex the Definition of Insanity Early Friday Morning?

• A quick look at the commodity complex and we know immediately what overnight headlines screamed. 

• The Energies sector fell hard on the latest claim by the US president that a peace deal with Iran would happen over the “next few days”. 

• Meanwhile,  the Grains sector dropped on spillover selling from Energies combined with possible pressure from extended weather forecasts. 

Morning Summary: It is widely accepted that a fitting definition of insanity is “doing the same thing over and over again and expecting different results”. Speaking of which, a look at the commodity complex early Friday morning shows the Energies sector getting hit hard while US stock index futures are higher. One doesn’t have to be a genius to figure out what happened overnight, particularly after acknowledging the previously mentioned definition of insanity. That’s right, the lead headline reads, “(The US president) CLAIMS (emphasis mine) Iran wars settled ‘subject to finalization’, expects signing in ‘next few days’”. Again, this is another claim by the US president with no clear timeline, the same thing we have seen countless times over the past decade. And as we know, up until now there hasn’t been any truth to the statements. But here we are. WTI crude oil (CLN26) is down $4.00 (4.5%) with distillates (diesel fuel) ((HON26) off 17.25 cents (4.9%). Meanwhile, gold (GCQ26) is up $124 (3.0%) with silver (SIN26) showing a gain of $3.00 (4.7%). Does any of this make sense? No. But it doesn’t have to as long as those in the know continue to profit from the situation. Lastly, it will be interesting to see what the ripple effects are on the Livestock sector to close out the week. 

Corn: The corn market was lower early Friday morning on solid overnight trade volume. July (ZCN26) was sitting 1.5 cents in the red after falling as much as 3.25 cents while registering 46,000 contracts changing hands. Similarly, the September issue (ZCU26) lost as much as 4.0 cents with 35,000 contracts traded and was down 2.0 cents at this writing. My Blink reaction is this was spillover noncommercial selling from the Energies sector, though it is also possible the 2026 Tin Can Harvest (leftover 2025 bushels making their way to town after being held on farm) is putting pressure on the old-crop market. Recall July finished Thursday’s session 7.25 cents in the red with September down 7.75 cents. Later in the evening, the National Corn Index came in near $3.7925, down about 7.5 cents for the day and putting national average basis at 32.5 cents under July and 40.75 cents under September. As for new-crop, the December issue (ZCZ26) was also down 2.0 cents to start the day after dropping as much as 4.0 cents on trade volume of 22,000 contracts. The latest 6-to-10-day weather forecast calls for above normal precipitation nearly from sea to shining sea and border to border. Lastly, Dec26 hit a new contract low of $4.3550 overnight. 

Soybeans: If you guessed the oilseed sub-sector was under pressure due to the sharp break in Energies, you are correct, mostly. The outlier this time around the clock was soybean meal with the July issue up $2.40 (0.8%) to start the day. The market tied closest to diesel fuel – soybean oil – was solidly in the red with both the nearby July issue and more heavily trade December contract down 1.5 cents, 2.0% and 2.1% respectively. What stands out to me with bean oil overnight is the Dec issue took out its previous 4-week low of 68.52, confirming the bearish technical reversal pattern on its weekly chart from last week. In other words, the market is indicating its intermediate-term trend has turned down. Over in soybeans we see the July issue (ZSN26) down 1.0 cent after slipping as much as 5.75 cents on trade volume of about 10,000 contracts. Recall July closed 8.0 cents lower Thursday followed by the National Soybean Index coming in 7.25 cents in the red for the day. This put national average basis at 53.25 cents under July futures heading into Friday’s session. Meanwhile, new-crop November (ZSX26) is off 1.75 cents pre-dawn while registering fewer than 10,000 contracts changing hands as of this writing. 

Wheat: The wheat sub-sector was also in the red early Friday morning with all three markets showing an uptick in trade volume. I’m not reading much into overnight trade in wheat based on the Wilhelmi Element (The only price that matters is the close). My Blink reaction is the three wheat markets were influenced by the rest of the Grains sector as well as Energies, meaning Watson was seemingly selling across the board. By the time the closing bell rings, we’ll see if the commercial side provides support, particularly in the HRW market, similar to what we saw Thursday. Recall July HRW (KEN26) finished yesterday’s session 4.25 cents higher for the day and gained 3.25 cents on September (KEU26). Last night, the National HRW Cash Index came in at $5.7825, up 5.0 cents for the day meaning national average basis firmed by 0.75 cent versus July and 4.0 cents against the September. All our reads on real fundamentals tell us commercial interests were providing support. Will Friday see some pre-harvest weekend hedge pressure? While I’m not expecting it, yet, it’s possible given the time of year. Seasonally, the HRW Index tends to post its early high weekly close this week, so there’s that to contend with.