Written Commentary
MORNING COMMENTS
Macroeconomics:
China’s recent stimulus might not be stimulating enough, an idea that sent Chinese equity markets on a roller coaster ride to begin their week. The National Development and Reform Commission (NDRC) held a press conference and disappointed investors with no future details on the stimulus package announces before the holiday. A new record 3.5 Trillion yuan ($500 billion) of equities changed hands as china reopened after their return from holiday. The CSI 300 Index which tracks the biggest companies in Shanghai and Shenzhen closed almost 6% higher. On the other hand, Hong Kong’s market fell as a record $80 billion changed hands and Hang Seng Index dropped 9.4% in it’s worst day since 2008. The Hang Seng index is still up almost 22% in the last 30 days.
Ag Fundamentals:
.The soybean complex followed the energy market down today. Crude oil over $4 off it’s highs from the overnight trade. I supposed the threat of Israel hitting Iranian oil facilities is not as tangible as the shortcomings of the Chinese stimulus. Soybean futures are attempting to establish support on the 50-day moving average. December soy meal values were also seen bouncing off the 50-day MA. Now that many within the agriculture market are convinced Brazil will receive enough rain to save their delayed planting season, it will take a substantial supply shock or abrupt demand rug pull in order for values to continue their rebound higher. Corn exports and usage may help put a dent in the large crop farmers are shelling today. US corn yields may drop slightly due to a dry August/September. Wheat held support from news of Russia desperate for rain. Below I have added a map of the updated Normalized Difference Vegetation Index (NDVI) levels in Russia’s major wheat growing areas. It’s at near record lows for this time of year and plant health is below the past two growing seasons at this time.
Weather:
Nothing on the radar for US growing regions for the next 7-10 days. Note: The economic impact of Helene and Milton may reach over $200 billion. Estimates for Helene are as high as $34 billion and Milton estimates range from $50 to $175 billion.
Russia’s Wheat Growing Area’s NDVI Levels (2024 in red) is reaching the bottom of the last 20 year range for this time of year.
Calendar Spreads
Spread | Last | Chg | Full | % of FC |
CZ24/CH25 | -17 1/2 | – 3/4 | -30 3/4 | 57% |
SX24/SF25 | -18 1/4 | +1/4 | -26 3/4 | 68% |
SX24/SN25 | -59 | 0 | -106 1/2 | 55% |
MWZ24/MWH25 | -21 1/4 | 0 | -31 | 69% |
WZ24/WH25 | -23 1/2 | +1/2 | -24 1/4 | 97% |
KWZ24/KWH25 | -16 1/2 | +1/4 | -24 1/2 | 67% |
Cost of Carry
As the impressive corn crop is harvested in the US and storage starts to get tight, I expect corn carries to remain strong into winter. Higher corn usage/exports and slightly lower corn yields may keep corn spreads flat, but farmers still need to shell another 70% of the corn in the US that the farmer has yet to sell.
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