• After leading the way higher Thursday, the Energies sector was under pressure overnight through early Friday morning, led by natural gas. 

• The US dollar index also reversed course from Thursday's session, giving back about half its daily gain. 

• The Grains sector was in the red after March corn failed to take out its next round number coming out of the midweek holiday. 

Morning Summary: If you think about it, the past two weeks have actually consisted of four 2-day weeks given both Wednesdays were market holidays. It’s actually a more interesting way of doing things, and something exchanges should look at making permanent. While it means there are two Mondays each week, it also means there are two potential Turnaround days, one on Tuesday and the other being Friday. Such is the case this morning with a look at the Barchart Futures Market Heat Map showing us yesterday’s strongest commodity complex sector, Energies, was the weakest pre-dawn with a cumulative loss of 1.4%. It’s interesting to note our old friend natural gas (NGG25) was the laggard during Thursday’s rally and now we can see why as the spot-month contract lost as much as 15.5 cents (4.2%) overnight and was sitting 14.5 cents (4.0%) lower at this writing. We see something similar with the US dollar index ($DXY) early Friday morning. After rallying as much as 1.04 Thursday, before closing 0.90 higher for the day, the green back dropped as much as 0.45 overnight. The Livestock sector will step into the spotlight at the open given both cattle markets jumped over the moon Thursday with February live (LEG25) up $2.00 (1.0%) and March feeders (GFH25) adding $3.225 (1.2%). 

Corn: The corn market was in the red to start the day, again on low overnight trade volume. March (ZCH25) posted a 2-cent trading range and was down 1.5 cents while registering fewer than 15,000 contracts changing hands at this writing. As I mentioned in Thursday’s Afternoon Commentary, what stood out to me was March hit a high of $4.5975 during yesterday’s session, one tick away from its next round number. Given it could not break through $4.60, the stage was set for a possible revisit of the previous round number of $4.50. Later in the evening, the National Corn Index came in near $4.3150, putting national average basis at 28 cents under March futures as compared to Tuesday’s calculation of 26.75 cents under March. This was a significant change, telling us merchandisers aren’t willing to follow the fund-led rally. It will be interesting to see what happens over the next couple weeks if some of the remaining 2024 production hits the market to start the new year. After that we have the Chaos of expected broken trade agreements by way of increased tariffs and reheated trade wars at the end of the month. All this while Watson likely added to its net-long futures position the week ending Tuesday, December 31.  

Soybeans: The soybean market did what the soybean market likes to do overnight: Post an early rally before giving its gain back after Eastern Hemisphere buyers call it a day. The March issue (ZSH25) initially gained as much as 3.5 cents, not a huge move but enough to hint at some possible export sales being made, then fell as much as 6.25 cents through early Friday morning. As of this writing, March was down 5.5 cents on moderate trade volume of nearly 25,000 contracts. A look back at Thursday’s settlement shows the March-May futures spread finished at a carry of 13.0 cents, the spread’s strongest carry since its close on November 27. This follows the continued weakening of national average basis, bringing to mind Grains’ Golden Rule, “First basis, then futures spreads, then futures”[i]. Recall last Friday’s basis figure came in at 58.25 cents under March futures, with my Thursday evening calculation at 58.75 cents under March. While this does not seem to be a significant change, keep in mind the previous 5-year low weekly close for this week is 54.5 cents under while the March futures contract at Thursday’s close of $10.12 was in the lower 31% of its 5-year price distribution range[ii].

Wheat: The wheat sub-sector did not see Turnaround Friday activity overnight, but as a friend of mine likes to say, “There is a lot of week left today”. As usual, we can’t read much into wheat’s overnight session as it tells us next to nothing about how the three markets might head into the morning’s intermission, let alone today’s close. What we know about the three markets is they are fundamentally neutral, generally speaking, though there are a couple outliers. First, spring wheat national average basis continues to firm with my Thursday evening calculation coming in at 16.5 cents under the March Minneapolis (HRS) futures contract (MWH25) as compared to last Friday’s 20.5 cents under and the previous 5-year high weekly close for this week of 12.0 cents under March. That’s an impressive move, indicating demand remains strong for US spring wheat supplies. On the other end of the spectrum we have new-crop Kansas City (HRW) with the July-September futures spread covering 76% calculated full commercial carry at Thursday’s close. Recall the bearish threshold is 67% cfcc, with the spread beyond that mark since November. In Chicago (SRW), the daily moving average of the March-May spread for this Variable Storage Rate tracking period is near 50%. 

[i] I quote this often. My friend Tregg Cronin used to do presentations on this Rule.

[ii] Based on weekly closes only.