• Early Tuesday morning headlines were of Brazil's President Lula being placed in intensive care after brain surgery. 

• Meanwhile, the coffee market, with Brazil being the world's largest producer, soared to a new all-time high, presumably on continued weather problems. 

• The Grains sector was quiet to start the day, with the key feature still the noncommercial net-short futures positions in soybeans and the wheat sub-sector.

Morning Summary: So far, this hasn’t been a normal week within the holiday season when markets grow as quiet as children who are nestled all snug in their beds while visions of sugar plums dance in their heads. Instead, we had the overthrow of the Russia-backed dictator Assad in Syria over the weekend leaving a power vacuum global leaders, and markets, were still trying to sort out Tuesday morning. More butterflies were fluttering, this time in Brazil as news broke that President Lula was in intensive care after brain surgery[i]. Given Brazil’s role in the geopolitical bloc BRICS (with Brazil being the B), the door is open to any and all types of influence from the other key members – China and Russia. Meanwhile, we see weather continues to be an issue in Brazil with the coffee market hitting a new all-time high overnight through early Tuesday morning. The soon to expire spot-month December futures contract (KCZ24) posted a high of $3.4735 (per pound), up 15.05 cents from Monday’s close with the first-deferred March issue gaining as much as 16.0 cents. Was this move all weather, or did it also have to do with the news of President Lula? We know coffee’s forward curve has been in backwardation (inverted) for months, with this new development adding another layer of Chaos. 

Corn: The corn market was quietly lower early Tuesday morning with the March issue (ZCH25) posting a 1.0 cent trading range overnight on trade volume of 14,000 contracts. (I immediately thought of Bob Uecker’s line from the movie Major League when giving the game summary after his team managed only one run on one hit. I can’t repeat it here, but feel free to find it online.) What do we know about the corn market heading into today’s session? First and foremost, fundamentals have grown more bullish over time and will continue to do so for the foreseeable future, regardless of the misinformation thrown at the market. That’s all I have to say about that. National average basis was calculated at 25.25 cents under March futures Monday evening as compared to last Friday’s 24.5 cents under. This is an interesting development, but not overly surprising given Monday’s futures spreads showed signs of light commercial selling. The previous 5-year average weekly close for this week is 16.5 cents under March futures with the previous 5-year low weekly close at 32.0 cents under March. As for Brazil, the May-July spread closed Monday covering a bullish 13% calculated full commercial carry. 

Soybeans: Did the overnight events in Brazil change the dynamics of the US soybean market? Looking at the quote screen Tuesday morning and my Blink reaction is no, but we’ll see how the day plays out. January (ZSF25) posted a 4.25-cent trading range overnight on trade volume of less than 12,000 contracts. While we see January gaining 0.5 cent on March, volume is too light to get a good read on if Eastern Hemisphere buyers were showing renewed interest. Recall from the latest weekly export sales and shipments update, for the week ending Thursday, November 28 (roughly the end of Q1 US 2024-2025 marketing year), China had 3.742 million metric tons (mmt) of US soybeans on the books as compared to 5.222 mmt the same week the previous marketing year. On the other hand, China’s alias (for the most part) unknown destinations had 6.226 mmt versus 4.94 mmt the same week the previous marketing year. With the National Soybean Index still near the lower-third of its historic price distribution range (based on weekly closes only through 2018), theoretically US cash soybeans should be attractive to global buyers. On the noncommercial side, futures contracts are near even with last Tuesday’s close heading into today’s session.

Wheat: The wheat sub-sector was quietly lower to start the day. And when I say “quietly”, it could be viewed as an understatement given March Chicago (SRW) was showing overnight trade volume of less than 5,000 contracts, March Kansas City (HRW) fewer than 800 contracts, and March Minneapolis not quite 300 contracts as of this writing. These are levels that make us ask if the markets were even open, and if they were, why? The bigger picture for the wheat sub-sector has grown more interesting of late with commercial buying seen in all three markets. We are starting to see National Cash Indexes ($CSWI) ($CRWI) ($CRSI) gain on the futures markets, not overly surprising given how low cash indexes dropped, possibly drawing the interest of global buyers, at least short-term. Technically, the winter markets have recently completed bullish reversal patterns on weekly charts indicating a round of noncommercial short-covering is likely, at the least. Recall from last Friday’s Commitments of Traders report (legacy, futures only) Watson held sizeable net-short futures positions in all three markets, including a record large short futures position in Minneapolis. This is an almost ideal combination for a round of short-covering heading into the winter, even if fundamentals don’t change all that much. 

[i] Do you recall the movie “Dave” from 1993? This situation has that scenario written all over it particularly when we consider Brazil’s alliance with Russian, India, China, South Africa (Iran, Egypt, Ethiopia, and United Arab Emirates). There are some powerful global players in that group.