Commodity complex bears were in control of the various market sectors overnight through early Friday morning.
The Livestock sector doesn’t trade overnight, with the spotlight on both cattle markets Friday given expanded daily trade limits.
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The Grains sector was also in the red on the first day of the latest Goldman Roll, moving weather forecasts and new-crop markets to center stage.
Morning Summary: There wasn’t a lot of green in the commodity complex early Friday morning with the Barchart Futures Market Heat Map (slide 2) showing only 2 sectors not donning some shade of red. Financials (US Treasury futures) were showing a fractional gain, to go along with lower US Treasury yields and Livestock don’t trade overnight so the sector still reflected Thursday’s 0.6% rally. Speaking of activity out in the Barn, it will be interesting to see what happens with both cattle markets given today’s expanded limits of $16 in feeders and $12.75 in live. Cash cattle have been volatile so far this week with initial reports of $255 trading, down $2 from last week, before $256 being passed by sellers at midweek. It should be noted the June issue (LEM26) closed Thursday at $249.175 meaning national average basis is roughly $8 over this week. While this sounds strong, it’s near the previous 5-year average for this week. As for feeders, my friend in the industry has been reporting lower cash markets throughout the week, putting the spotlight on this morning’s numbers following yesterday’s limit up close in the futures market. As I discussed with him Thursday, both cattle markets are bearish technically but bullish fundamentally. Will Market Rule #6 (Fundamentals win in the end) come into play to close out the week?
Corn: The corn market was lower pre-dawn Friday, the first day of the latest round of the Goldman Roll. Someone smarter than I will likely know if long-only funds have to be in the nearby futures contract, and if so, this is an awkward time of year for corn (and the oilseed sub-sector) given the first deferred issue is the hybrid – part old-crop, part new-crop – September. July (ZCN26) was down 2.5 cents at this writing after slipping as much as 4.0 cents overnight on light trade volume of 20,000 contracts. Recall July closed 7.0 cents lower Thursday, after losing as much as 10.0 cents, followed by the National Corn Index coming in 6.75 cents lower for the day. This put national average basis at 34.75 cents under July futures as compared to the previous 5-year low weekly close for this week of 39.75 cents under July. As for new-crop, December (ZCZ26) dropped as much as 3.75 cents overnight while registering 16,000 contracts changing hands and was down 2.25 cents at this writing. A look at early morning radar (slide 3) shows a rain system stretching across Iowa, with another following in its tracks. The bottom line is weather, both current and forecast, looks favorable for the weekend.
