Was the Commodity Complex a Case of More of the Same Monday?

• Monday morning's headlines spoke of the US and Iran exchanging strikes for the first time since July while Russia warn's of “massive strikes”.  I guess “Strikes” is the word of the day. 

• Meanwhile, debated continued over Fed Chairman Warsh's comments from Jackson Hole last week, initially taken as hawkish but spun by some as dovish. 

• While Energies rallied overnight, Metals and Grains were mostly lower to start this last day of August. 

Morning Summary: After Sunday afternoon’s headlines broke, those similar to Monday morning’s talking about, “U.S., Iran exchange strikes for first times since July as (the US president) threatens strategic hub”, my Blink reaction was the Energies sector would jump and run. However, while markets were higher at the open, things were relatively quiet. A look at the quote-screen pre-dawn shows WTI crude oil (CLV26) rallied as much as $3.18 (3.8%) while Brent crude added as much as $3.34 (also 3.8%) and were sitting $2.80 and $3.00 higher at this writing. Diesel fuel gained as much as 9.25 cents (2.1%) to start the week. On the other hand, Metals were mostly lower with the exception being Dr. Copper, the economic indicator market. Gold^[i] (GCZ26) was down $36.00 (0.8%) at this writing after falling as much as $84.30 (1.9%) overnight. Some of the pressure is likely to still be tied to Howdy Doody’s (Fed Chairman Warsh) economic comments from Jackson Hole last Friday. Supposedly he was hawkish, talking about the need for rate hikes to fight inflation, though some financial media sites spun it to be dovish over the course of the weekend. It’s worth noting the Fed fund futures forward curve dropped again, now indicating a 25-basis point rate hike in October. 

Corn: Compared to last Monday, the corn market could be considered comatose as we start the last day of the August, the end of the meteorological summer and the end of Q4 of the 2025-26 marketing year. Recall a week ago the December issue (ZCZ26) had gained as much as 13.5 cents on overnight trade volume of 128,000 contracts, number that would grow to what I still consider a daily record of 510,000 contracts traded. This morning we see Dec26 posted a 9.0-cent trading range, from down 3.5 cents to up 5.5 cents on what used to be considered solid trade volume of 58,000 contracts and was sitting 2.0 cents higher at this writing. A look back at last Friday afternoon and the latest Commitments of Traders report showed a noncommercial net-long futures position of 440,915 contracts, an increase of 178,770 contracts and the largest net-long futures position since 441,160 contracts on February 25, 2025. Combine that with momentum statistics indicating the market is sharply overbought both short-term (daily) and intermediate-term (weekly) with volatility high, and the factors look to be in place for possible fund selling. However, the May-July spread closed last Friday at a carry of only 0.5 cent and covered 2% calculated full commercial carry. 

Soybeans: Despite the rally in diesel fuel (distillates) overnight, the oilseed sub-sector was mostly lower pre-dawn Monday. November canola was down $3.10 at this writing after falling as much as $6.10 while December bean oil was off 0.1 cent after slipping as much as 0.4 cent. It was a similar story in soybeans where the November issue (ZSX26) posted a 11.75-cent trading range overnight, from up 6.5 cents to down 5.25 cents on trade volume of 25,000 contracts and was down 3.25 cents at this writing. As usual, I’m not reading much into pre-dawn spread activity, but given January is down 2.75 cents and March is off 1.75 cents, my Blink reaction would be there might’ve been some commercial pressure overnight that capped the initial rally. However, deferred futures spreads remained bullish at last Friday’s close with the Jan-March covering 14% calculated full commercial carry, the March-May 14%, and the May-July 5%. The latest Commitments of Traders report showed a noncommercial net-long futures position of 221,430 contracts, an increase of 30,470 contracts from the previous week. Similar to Dec corn, Nov soybeans are technically overbought both short-term and intermediate-term leaving the market vulnerable to a round of fund long liquidation. 

Wheat: And then there’s the wheat sub-sector. Judging by the solid selloff in both winter markets, I can assume Watson was disappointed Russia’s Vlad the Invader didn’t follow through on his nuclear threat that supposedly led to last week’s spike rallies. However, another of Monday’s headlines read, “Russia preparing ‘massive strikes’ on Ukraine’s energy sites after deadliest attack of the year”. Yes, this likely provided support to the Energies sector, but according to the ag BRACE^[ii] Industry, ANY headline from the Black Sea region should rally wheat markets because, as they like to tell us, the world is going to run out of wheat. Let’s just say, as you well know, I have my doubts. Another look back at last Friday’s Commitments of Traders report and we see Watson added to its net-long futures position in both HRW (22,145 contracts) and HRS (13,895 contracts). However, despite the December issue (ZWZ26) closing 22.0 cents higher from Tuesday-to-Tuesday, funds still held a net-short futures position of 6,780 contracts in SRW, albeit a decrease of 11,990 contracts from the previous week. As we head into the end of Q1 of the 2026-27 marketing year, the Dec-March SRW spread covered a neutral 54% calculated full commercial carry while the same spread in HRW covered 47%. 

^[i] I didn’t know what to tell Kitco News last Friday for its weekly poll. So, I went with “42” from The Hitchhiker’s Guide to the Galaxy”.

^[ii] The BRACE Industry: I haven’t mentioned them for a while, but this stands for Brokers/Reporters/Analysts/Commentators/Analysts who believe and promote whatever they are fed from the government, be it news or numbers.