Why Is This Monday Morning Different in the Commodity Complex?

• It was more of the same as far as market-moving headlines go coming out of the weekend with the US president's War on Iran and Vlad the Invader's War on Ukraine getting top billing. 

• We will see later this morning if Tyson Foods reallocation of cattle processing resources continues to make waves in the cattle markets. 

• Grains were mostly higher overnight, with the outlier being the wheat sub-sector, oddly enough. 

Morning Summary: Pour yourself another a cup of coffee (or tea, or whatever helps you get going in the morning) as we embark on another trading week. After watching markets quietly open Sunday evening and night, I was set to talk about how odd it was for things to be quiet on a Monday morning. But a quick running of the traps this morning and I see the commodity complex got a bit livelier as last night unfolded. Turning to the day’s headlines and we see what we would expect, “Strait of Hormuz shipping grinds to a halt ahead of U.S.-Iran ceasefire (there’s that ridiculous word again) expiry” and “Russia targets Danube port after one of Ukraine’s largest aerial attacks of the war”^[i]. As you likely guessed, both Energies and Grains are higher, mostly, to start the day. One story that didn’t make the front page but will certainly be watched as this week gets under way is the continued fallout from Tyson’s reallocation of cattle processing resources. Both cattle futures markets, live and feeder, were hit by a tsunami of selling late last week, even though the move didn’t change US cattle supply and demand. And for the record, coffee led the commodity complex higher with a gain of 2% overnight. 

Corn: Despite continued rains over the weekend, the corn market woke up at some point during the overnight session and started to rally again. December gained as much as 4.0 cents on trade volume of 25,000 contracts and was sitting near its session high at this writing. (It was at this exact point in writing Morning Commentary that I remembered it was Midwest Crop Tour Week^[ii]. I immediately changed the lead graphic to show the appropriate level of respect for the annual event.) A look back at last Friday and we see the latest Commitments of Traders report (legacy, futures only) showed funds held a net-long futures position of 244,910 contracts, a decrease of 10,160 contracts from the previous week. However, Dec26 posted a strong rally from last Tuesday’s close through Friday’s settlement, gaining 23.75 cents due at least in part by renewed fund buying. The National Corn Index came in near $4.3275 Friday night putting national average basis at 26.25 cents under September and 50.5 cents under December futures, as compared to the previous week’s final figures of 27.0 cents under and 50.0 cents under respectively. Technically, Dec26 has become short-term overbought, a statistic Watson might be watching early this week. 

Soybeans: The soybean market was also in the green pre-dawn Monday. Of the two major US crops heading toward fall harvest, it would be logical to think soybeans would be struggling the most given the weather seen thus far in August. Recall the old saying, “Soybeans are made during the Dog Days of Summer (aka August)”, and this month has seen a consistent pattern of storm systems tracking across the US Plains, Northern in particular, and Midwest. A look at Monday’s forecast shows more of the same, though Illinois and northwest Indiana are expected to see some sun. But given the overnight rally in coffee, combined with the strength seen in deferred soybean futures spreads to close out last week, the issue still looks to be Brazilian weather. At last Friday’s settlement the US harvest driven Nov-January futures spread covered 54% calculated full commercial carry as compared to the previous week’s settlement covering 53%. However, the Brazilian crop led March-May covered 22% versus 27% and the May-July 15% versus 21%. While this could’ve been a one-week blip created by USDA’s August WASDE guesses, we can also see these spreads have been varying degrees of bullish since this past March. 

Wheat: With Russia’s War on Ukraine making headlines again coming out of the weekend, it would be no surprise to see the wheat sub-sector racing higher overnight through early Monday morning. Right. But we are talking about wheat, so it is equally unsurprising to see both winter markets in the red to start the day. The December SRW issue was down 6.5 cents after dropping as much as 7.0 cents on trade volume of about 12,500 contracts. It’s a similar story in HRW where the December is down 5.75 cents after dipping as much as 6.25 cents overnight. Both markets saw solid support from commercial buying late last week, at least presumably based on weekly spread activity and the percent of covered calculated full commercial carry. Should we be expecting to finally see an uptick in demand for US supplies? Or is this just another case of wheat being wheat? Recall the latest weekly marketing year shipment update put the pace projection for export demand at 713 mb, still down 17% from 2025-26’s reported shipments of 860 mb and down 8% from 2024-25’s reported 775 mb. As for weather, a look at this morning’s radar shows my friends in south-central southwest Kansas may be getting some much-needed rain. 

^[i] A third headline I found interesting read, “China’s economy slows across the board in July as retail sales barely grow”. So the Three Amigos (Xi, Vlad the Invader, and the US president) all made the front page this morning. 

^[ii] As usual, I have a fun story attached to the Midwest Crop Tour, this one about who and how a certain individual got a major ag media company disinvited from participating.