Friday: Some Comic Relief After a Wild Week
One of the oldest forms of comedy is to be stupid. (Note I didn't say “play'” stupid.) Friday morning's headlines provide us some comic relief along that line.
It has been a wild week in the Grains sector, and I'm expecting more of the same today.
Based on the wisdom of others, let's wait until the “ball stops rolling” at Fridays' close before making hasty decisions.
Morning Summary: After a week like this one, and ahead of what is expected to be a volatile US 3-day holiday weekend, it’s good pre-dawn headlines can provide some comic relief. On the docket Friday is the August jobs report, a monthly occurrence that usually provides more entertainment than economic information. But not in the eyes of financial media that have to make a big deal of such things. (Does that sound familiar ag media?) The lead headline this morning screams, “The big August jobs report is due out Friday. Here’s what to expect for what has been a jobless summer”. Okay, that’s generally benign, but it sets the stage for the following teaser, “Trading the August jobs report: What could affect the number and how investors may respond”. How can I put this nicely: If one is stupid enough to trade government reports, ANY government report, then they deserve the inevitable crying when all is said and done. The other headline – and I’m laughing as I type this – reads, “(Vice president) Vance says Fed should lower interest rates: ‘Would be nice to have some help’”. Did I mention the word ‘stupid’ earlier? Other than that, words fail me. Let’s see how today plays out.
Corn: The corn market finally took a breather overnight, but I don’t think it will last. While I’m not a betting man, my hunch is we’ll get a Frantic Friday before the closing bell peals this afternoon. As of this writing, Dec26 (ZCZ26) was sitting unchanged after posting a moderately wide 8.0-cent trading range, evenly split between up 4.0 cents and down 4.0 cents on trade volume approaching 40,000 contracts. Fundamentally, there hasn’t been much change this week as the Dec-March futures spread covered 49% calculated full commercial carry at Thursday’s close, as compared to last Friday’s settlement covering 47%. Further out, the May-July futures spread has seen its carry firm slightly this week, sitting at 2.75 cents and covering 13% versus last Friday’s finish of 0.5 cent carry and 2%. On the technical side, it will be interesting to see what happens if Dec26 is near last Friday’s settlement of $5.3650 late in today’s session. A close below that mark would complete a bearish technical reversal pattern. Does it mean anything? Not really given algorithms don’t pay attention to such things. That being said, Dec26’s weekly stochastics (momentum statistics) could establish a bearish crossover above the overbought level of 80%, something algorithms do watch.
Soybeans: The oilseed sub-sector was lower across the board pre-dawn Friday. What does this tell us about how today’s session will play out? Well, that and a crisp $10 might get you a cup of coffee from your local barista. Diesel fuel (distillates) was down 4.75 cents at this writing after sliding as much as 6.25 cents overnight. December soybean oil was sitting 0.3 cent in the red on what looks to be light commercial selling. We’ll see if that holds through the close, not just for the day but leading to the morning intermission. The wildcard in oilseeds this week has been canola as it channeled natural gas, aka the Widow Maker, most days. Early Friday morning finds the November issue (RSX26) down a docile $1.50 after falling as much as $10.20 overnight. Speaking of November, the soybean issue (ZSX26) is fractionally lower after posting an 11.25-cent trading range overnight, from up 4.5 cents to down 6.75 cents on trade volume of 25,000 contracts. Thursday saw the Nov-January futures spread close covering 52% calculated full commercial carry as compared to last Friday’s settlement of 50%. Meanwhile the numbers for the March-May spread were 16% and 13%. The bottom line is the commercial side is still registering concern over Brazil’s 2027 crop.
Wheat: What a week it has been for the wheat sub-sector. From a technical point of view, all three December contracts are in position to complete bearish reversals on their respective weekly charts. We should get excited about this right? Maybe not. I’ll remind you of a piece of wisdom from the late Gary Wilhelmi, a longtime CBOT floor reporter, “The only price that matters is the close”. This is particularly true when we are talking about a Friday, and one leading into a 3-day holiday weekend. The other quote I like to use is from baseball legend Bob Ueker, “The best way to catch a knuckleball is to wait until it stops rolling and then pick it up”. If ever there was a set of markets befitting a comparison to a knuckleball, it is the wheat sub-sector. Are the markets fundamentally bullish? No. The Dec-March SRW futures spread closed Thursday covering 63% calculated full commercial carry while the same spread in HRW covered 49%. But what about new-crop? Let me try to be nice again: If one is betting on next summer’s crop based on this fall’s weather, then be ready to learn why one of wheat’s nicknames is “poverty grass”.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.