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What to watch in commodity trading this week | Monday Morning Markets | Ep. 1

 

Summary

The tone was risk adverse to start the week, but by Wednesday the needle has finally fallen into full risk off mode. The VIX Volatility index or “Wall Street’s Fear Factor” is up 12.5% at 37.56 at the time of this writing. Traders are pushing all of their money back to safe haven of the US Dollar. Gold and silver can’t even get in on the safe haven rush with Gold down 1.3% and Silver down 4.5% at the time of this writing. The risk off sentiment comes as the US general election draws closer. Stimulus is also for sure off until after the election. That leaves to many unknowns for Wall Street and the more unknowns they see the more they don’t want to buy higher risk assets.

Wednesday grains are not able to escape the risk off sentiment either. This comes as managed money holds long positions in most of the grains and is wanting to take that profit out of the market. As the momentum built to the downside analytical traders were attracted to the market and pushed the selling even harder. Analysts are mixed on whether grains can return higher or not. John Payne in his afternoon commentary is confident that grains have the demand bull and once the volatility settles down buyers will come back. Jack Fenske on the flipside believes that grains have established their high for a while and will struggle to get back to the recent highs.

For the week ending October 23, US ethanol production increased  29,000 barrels per day (b/d) (3.1%), to a seven-week high of 941,000 b/d. Production is still 6.3% below the same week last year.
US ethanol stocks decreased to a near 4 year low at 19.6 million barrels, which is 7.1% below year-ago volumes. Inventories decreased across all regions except the East Coast (PADD 1) and Rocky Mountains (PADD 4).
The volume of gasoline supplied to the U.S. market, a measure of implied demand, rose 3.1% to 8.55 million b/d (130.99 bg annualized). Gasoline demand was 12.7% less than a year ago.

 

The USDA flash sale terminal lit up on Monday announcing 2 sales; 120,700 MT of soybeans sold to unknown and 135,000 MT of soymeal sold to the Philippines. Tuesday the USDA flash sale terminal was quiet. The third trading session it has set quiet in the month of October. Wednesday the purchases were back with Egypt purchasing 110,000 MT of soybeans, unknown destinations purchased 120,000 MT of soybeans and South Korea purchased 207,000 MT of corn with optional origin.

The livestock complex midweek is not insulated from the risk off sentiment building across the rest of the complex. On Tuesday cattle did try to make a comeback with the feeder cattle leading the way. That helped to give lean hogs a boost, but concerns that China’s hog herd is rebounding quickly extinguished those gains. Bunge in their 3rd quarter financials press conference said they believe China’s hog herd is rebounding, noting how strong their demand for soybean meal is currently.

Cash in the country has been quiet up to Wednesday. Packers haven’t even thrown out a token bid. Cash may develop with the risk off sentiment that is building across much of the market complex.

The Fed Cattle Exchange experienced a technical difficulty on Wednesday and was postponed.

For the week ending October 17, 2020, Imported Beef Passed for Entry in the U.S. totaled 55,022, 148.16% of the previous week and 133.82% of the 4-week average.

Expected Slaughter numbers Wednesday

Cattle

117,000 hd today 121,000 hd wk ago 118,157 hd yr ago

Hogs

489,000 hd today 487,000 hd wk ago 475,755 hd yr ago

 

Midday Carcass Value Wednesday

Beef

Choice dn 0.75 205.95

Select up 1.16 189.83

C/S Spread  16.12

Loads  110

Pork

Carcass dn 0.01 88.82

Bellies up 2.43 146.32

Loads 226

Grain Settlements

  • Corn dn 10 1/4 – 14 1/2
  • Soybeans dn 16 1/2 – 25
  • Chicago Wht dn 7 -9
  • Kansas City Wht -5 3/4 -6 1/4

Livestock Settlements

  • Live Cattle up 0.32 – 1.00
  • Feeder Cattle up 0.87 – 1.60
  • Lean Hogs dn 1.15 -1.85
  • Class III Milk dn 0.10 up 0.57

Pre-Opening Market Broker Commentary

Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. A risk off day is shaping up across the entire market complex.


Jerry Stowell, Country Futures,  looks at what may impact the livestock futures today. Cattle futures will try not to go with the equities which are in risk off mode.


Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Macro markets still have reach over the commodity market.


John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close.  Payne is confident that fundamentals can continue to support the grain market.


Jack Fenske, York Commodities, looks at the closing market numbers. Fenske believes grains may have established their highs for a while.

Sir Isaac Newton may have best explained Monday’s market action when he created his theory of gravity, “What goes up must come down.” After a strong week of rallies capped off a friendly USDA report, follow through support was no where to be found in the soybean complex.

PJ Conradt, Tredas, joins the Fontanelle Final Bell to discuss the technical and fundamental factors that pushed the markets lower. Conradt though is excited to see for the first time in years farmers are getting an opportunity to market their grains into healthy cash market with strong basis.

Catch the full conversation here: