What's Driving the Markets This Monday Morning?

Weekly Market Highlights

1. This week began with news that US Federal Reserve Chairman Jerome Powell faces accusations from the US president, who is dissatisfied with the pace of interest rate reductions.

2. The US dollar index experienced downward pressure overnight, while metals surged once again.

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3. The grain markets are anticipating the USDA’s January WASDE report at noon (ET). Based on National Cash Index data from December, the underlying fundamentals are already apparent.

Morning Overview

Although I had hoped to focus on a different topic this week, the first thing I encountered early Monday on CNBC’s Squawk Box Europe was a segment featuring Fed Chair Powell discussing the criminal allegations brought against him by the US administration. These charges appear to stem from the president’s frustration with current interest rate levels.

The independence of the Federal Reserve, which is tasked with managing US monetary policy, is once again under scrutiny. As of this writing, the US dollar index has dropped by as much as 0.41, hovering near its session low amid speculation that the president’s wishes may ultimately prevail. Whether or not political rivals are targeted, the president will eventually appoint the next Fed Chair—potentially someone more inclined to lower rates regardless of economic indicators. Notably, US stock index futures opened the day lower. Meanwhile, copper futures (HGH26) climbed 2.1%, gold (GCG26) advanced 2.3%, and silver (SIH26) soared to a record $84.69, up $5.35 (6.7%) overnight.

Grain Market Focus

Corn: The current climate in the US is such that discussing the USDA’s January WASDE report seems preferable to covering the main headlines. Is the WASDE indispensable? Not really. Are the figures accurate? Unlikely. Will today’s data shift grain market trends? Probably not, though algorithmic trading could react to unexpected numbers or stories. Early Monday, corn prices edged higher ahead of the USDA’s midday release. If recent government reports in the cattle market are any indication—where numbers have seemingly been adjusted to align with the president’s desire for lower prices—it wouldn’t be surprising if the USDA’s latest figures aim to boost corn prices. While the exact numbers remain unknown, National Corn Index data from December showed ample supplies relative to demand. The outlook remains optimistic, with the May-July futures spread reflecting 30% of the calculated full commercial carry.

Soybeans: Soybean futures also saw modest gains early Monday. The March contract traded within a 4.5-cent range, from 1.0 cent lower to 3.5 cents higher, on a volume of 10,000 contracts, sitting just below its overnight peak. The world’s largest buyer may have been active in the market, which is typical for this time of year as Brazil’s next crop approaches. The market has stabilized for now, setting the stage for increased volatility following the USDA’s WASDE release. As with corn, the actual numbers are unknown, but December’s National Soybean Index stood at $9.69—above the previous five-year December low of $9.50, yet below the ten-year average of $10.59. The March-May futures spread covered a neutral 49% of full commercial carry, up from 29% at the end of November, while the December 2024 spread covered 42%. Overall, US fundamentals were neutral but slightly more burdensome than the prior year.

Wheat: Wheat markets were also in positive territory before dawn on Monday. Of particular note was the increased overnight trading volume in the HRW market. The March contract rose 7.25 cents to its session high, with nearly 5,000 contracts traded. This uptick coincides with last Friday’s CFTC Commitments of Traders report, which showed funds holding a net-long position of 1,630 contracts as of January 6—a reversal of 3,430 contracts from the previous week. This marks the first net-long position in HRW since October 22, 2024, when funds held 4,120 contracts. Despite this, the March contract closed January 6 at $5.2150, down 0.5 cent for the week, suggesting commercial sellers were active while funds were buying. As of Monday morning, the March contract was up nearly 17 cents from last Tuesday’s close, indicating funds have continued to build their positions. Fundamentally, all three National Cash Indexes for wheat ($CSWI, $CRWI, $CRSI) ended 2025 below their previous five-year December lows, signaling that supplies outpaced demand across the sector.

Further Reading

Disclosure

As of the publication date, Darin Newsom did not hold any positions, directly or indirectly, in the securities mentioned.