Tuesday marks the beginning of the 2-day US Federal Open Market Committee meeting, with the Fed fund futures forward curve continuing to show no change in the Fed fund rate is expected.
The commodity complex in general was lower to start the day while the US dollar index firmed overnight.
China's New Year holiday also gets under way Tuesday, bringing a seasonal slowdown in commercial activity in the oilseed sub-sector.
Morning Summary: As the news cycle goes, headlines are rolling into the January US Federal Open Market Committee meeting that begins today. There is a great deal of noise surrounding this meeting, but if we block that out and focus on what the market is showing us, no change in the Fed fund rate is expected until the May meeting. But, as markets do, this can and most likely will change. Meanwhile, the US dollar index ($DXY) strengthened overnight, gaining as much as 0.68 and sitting within sight of its high at this writing. Tracking the headlines, it’s almost humorous to watch as first one talks about dollar’s weakness tied to tariff bluster with the next telling us the talk is providing strength. As I visited about with Jesse Allen on the Agriculture of America talk show Monday, this is by design. We’ll see how long it takes Watson to figure it out. In other news, China’s New Year Holiday gets under way today. This often means a slowdown in export sales and shipments activity, though business is still business and markets never sleep. A look at the Tuesday morning Barchart Futures Market Heat Map shows nearly every sector of the commodity complex in the red to start the day.
Corn: The corn market spent much of the overnight session below unchanged, though as of this writing contracts had moved back into the green by fractions. Trade volume was not heavy, with March (ZCH25) registering 15,200 contracts changing hands while May showed 5,500 contracts and July 5,100 contracts. It’s interesting to note all three held above their nearest round numbers through pre-dawn hours: March with an overnight low of $4.81, May hitting $4.91, and July posting a low of $4.9250. Besides corn’s characteristic Round Number Reliance, what stands out to me with those numbers is the continued small carry in the May-July futures spread. Monday saw the spread settle at 1.5 cents after finishing last Friday at 1.0 cent carry. This continues to tell us the commercial side holds a longer-term bullish view of real supply and demand. On the other hand, national average basis remains weak meaning immediate-term demand has not been keeping up with supplies. Monday’s calculation came in at 32.5 cents under March futures as compared to last Friday’s figure of 32.75 cents under and the previous 10-year low for this week of 33.75 cents under March. Still, basis did firm by roughly 0.25 cent last night in response to March futures closing 4.5 cents lower.
Soybeans: The soybean market was also quietly in the red pre-dawn with March (ZSH25) down 2.5 cents on trade volume of only 13,000 contracts as of this writing. During the overnight session March posted a trading range of 6.25 cents, from up 2.25 cents to down 4.0 cents, a reflection of the world’s largest buyer heading into holiday. There have been years when the US has seen a flurry of sales ahead of China’s weeklong break, but not this time. With the early stage of Brazil’s 2025 harvest already begun, Chinese buyers have the luxury of only covering what they need short-term from its secondary supplier. Or possibly to put in reserves, as has been pointed out by numerous talking heads recently. The latest weekly export sales and shipments update, for the week ending Thursday, January 16, showed China had 2.449 mmt of US soybeans on the books, down approximately 44% from the same week the previous marketing year. Meanwhile, US shipments of 17.689 mmt to China were up 8% from the same time last year. Monday evening’s national average basis calculation came in at 61.75 cents under March futures as compared to last Friday’s 62.25 cents under and the previous 5-year low for this week of 53.75 cents under March.
Wheat: The wheat sub-sector followed corn with all three markets inching into the green early Tuesday morning. March Chicago (SRW) (ZWH25) was up 2.0 cents at this writing, on trade volume of 9,500 contracts, posting an overnight trading range of 4.25 cents along the way. This range included a 2.0 cents selloff putting March near its overnight session high pre-dawn. Fundamentally, not much has changed with both the old-crop March-May and new-crop July-September futures spreads creeping closer to the bearish threshold of 67% calculated full commercial carry. While traders still aren’t overly interested in the new-crop market, each day that passes brings the 2025 crop closer to breaking out of its winter dormancy. The same is true in Kansas City (HRW) where the July-September spread closed Monday covering a bearish 77%. The spread closed at a carry of 12.5 cents as it continued to hold above its low daily closes of 13.25 cents. Technically, this will be an interesting way to watch for changes in fundamental outlook. March Minneapolis (HRS) (MWH25) was up 2.5 cents to start the day, also within 0.5 cent of its overnight high. Trade volume was lighter than what we’ve seen of late as March registered “only” 570 contracts changing hands.
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.