The US Plains and Midwest saw rains over the past week, more specifically the recent 3-day holiday weekend.
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Both Corn and Soybeans were on the defensive from Sunday evening's opening bell through Monday's pre-dawn hours.
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Morning Summary: Early Monday morning again shows us the Grains sector is made up of markets that are weather derivatives at heart. As I talked about in my latest Weekly Column (The Right vs. Wrong Truism), it was going to be interesting to see how Watson responded to a number of rainy days over the recently passed US 3-day holiday weekend. I’ll talk about the markets individually in a moment, but a quick summary can be found with the pre-dawn Barchart Futures Market Heat Map. Here we see most sectors in the commodities complex are not green, with the Grains sector showing the largest cumulative loss of nearly 2.0%. In other news, we knew the US president was going to say something over the weekend, to keep his name in the news, and sure enough, Monday’s headlines read, “(The US president) says tariff deadline delayed until August 1 (from July 9)” and “(The US president) threatens extra 10% tariffs on nations that side with BRICS (the political alliance)”. Should Watson care about this nonsense anymore? Should we? That’s a bigger discussion for another day. For now, the US dollar index ($DXY) was showing a modest gain of 0.20.
Corn: As expected, the corn market was under pressure coming out of the holiday weekend. The September issue (ZCU25) lost as much as 14.0 cents overnight through Monday’s pre-dawn hours and was sitting 12.75 cents lower as of this writing. December (ZCZ25) dropped as much as 14.5 cents on trade volume of nearly 40,000 contracts – the first big overnight volume number we’ve seen in a while – and was down 13.25 cents to start the day. Again, if we accept the fact King Corn is the leader of the Grains weather derivative markets, the move is easy to understand. A look at rain accumulation this past week shows most of the US Plains and Midwest received something, fitting well with the 8-to-10-day forecast released June 22. For the record, the latest extended outlook, for the week of July 14 to 20, shows below average precipitation for the 3-I States and Upper Midwest while temperatures are expected to be above average. Time will tell if this is the next round of weather Watson will get worked up over. Monday’s forecast calls for a rainy day across key US growing areas, another reason King Corn could be feeling down, with nothing to do but frown. We’ll see how the rest of the day plays out.
Soybeans: It’s difficult to come up with a bullish factor for the US soybean market to start the week. Not only does weather look to have been beneficial for the 2025 crop this past weekend, but today’s forecast calls for more of the same. Additionally, the latest announcements have the market confused: On one hand the tariff deadline has been delayed – again – while new tariffs are threatened against countries who don’t think the US is the greatest thing in the world, a group that coincidentally includes the world’s largest soybean buyer and producer (China and Brazil, in case you were wondering). From my point of view, Monday morning’s selloff has more to do with weather than the other nonsense that has frankly become repetitive and tiresome. The November issue (ZSX25) dropped as much as 25.5 cents overnight on trade volume of roughly 38,000 contracts and was sitting 20.0 cents lower at this writing. While this doesn’t change anything on Nov25’s weekly chart, it will be interesting to see how futures spreads move this week. A look at the Nov-January daily close only chart shows the previous low (strong carry) at 15.5 cents from July 1. The spread was sitting at 15.75 cents as of this writing.
Wheat: The wheat sub-sector was also in the red to start the day. Why? The most logical answer I have is the same one I talked about last week, the last number of weeks (months?): Both winter markets remain fundamentally bearish. If we go back to last Thursday’s close we see the in-delivery HRW July-September spread covered 84% calculated full commercial carry. Meanwhile, the September-December was covering 75% while the Dec-March covered 66%. The previous Friday saw those spreads covering 83%, 70%, and 62% respectively. In other words, we have what looks to be a clear Down Escalator Simulator taking place where deferred spreads follow the path laid out by nearby spreads as the latter moves into delivery and expire, like escalator steps disappearing into the floor. A look at the quote screen pre-dawn Monday shows September HRW (KEU25) down 11.75 cents after sliding as much as 13.5 cents overnight with December also down 11.75 cents after losing as much as 13.25 cents. It’s a similar story in SRW where the September issue (ZWU25) is sitting 12.25 cents lower at this writing after falling as much as 15.25 cents overnight. December was down 11.75 cents to start the day, with the September-December futures spread covering 65% at last Thursday’s close.
