Commodities Wrap 12 August: Corn Jumps 4.5 Percent While Oil Slips and Volatility Sinks Near 5 Percent

By The Edge Research Team

The grains took the session on Wednesday, breaking a two-day run in which energy had led, with corn jumping 4.45 percent to 481.00 cents a bushel and wheat 3.32 percent to 669.75 cents, per CNBC. Crude went the other way and gave back a little of Tuesday’s advance, with West Texas Intermediate settling down 0.26 percent at 82.98 dollars a barrel and Brent down 0.16 percent at 88.77 dollars, leaving the Brent-WTI spread at 5.79 dollars, our calculation, about eight cents wider than Tuesday’s settled spread of 5.71. The clearest signal of the day sat outside the commodity complex entirely, in a volatility index that fell almost 5 percent.

Commodity prices below are settlement prices. Currencies, Treasury yields, the volatility index and Bitcoin trade continuously and have no daily settlement, so those readings are an intraday snapshot taken at 21:35 Kuwait time and are labelled as such.

In energy, the softness was confined to crude. Natural gas rose 1.37 percent to 2.805 dollars per million British thermal units and heating oil added 0.99 percent to 4.2945 dollars a gallon, extending the strength in distillates that has run alongside record refining margins, while RBOB gasoline gained 0.41 percent to 3.1494 dollars. That both refined products rose while the crude they are made from eased is the more interesting split, and it points at product markets rather than at the barrel.

Metals were broadly firmer and silver led. Silver settled up 1.04 percent at 65.61 dollars an ounce and platinum up 0.83 percent at 1,769.50 dollars, ahead of gold, which added 0.60 percent to 4,467.80 dollars an ounce, and palladium, up 0.37 percent at 1,375.00 dollars. Because silver outpaced gold, the gold-to-silver ratio narrowed to about 68.1 from about 68.4 on Tuesday’s settled levels, our calculation. Copper was the exception, easing 0.33 percent to 6.612 dollars a pound.

Agriculture carried the day’s largest moves, and the grains did the work. Corn rose 4.45 percent and wheat 3.32 percent, with soybeans up 1.24 percent at 1,183.25 cents a bushel. In the softs the direction was mixed: cocoa recovered 1.15 percent to 5,719.00 dollars a tonne, having sunk almost 5 percent on Tuesday, and coffee rose 0.49 percent to 317.25 cents a pound, while sugar fell 1.79 percent to 16.43 cents and cotton eased 0.18 percent to 84.24 cents.

Away from commodities, and on the intraday readings rather than settlements, the dollar firmed and volatility collapsed. The dollar index rose 0.16 percent to 99.985, with the euro down 0.15 percent at 1.1523 dollars and sterling down 0.08 percent at 1.3493. Treasury yields barely moved at the long end, the 30-year up 1.4 basis points to 5.249 percent and the 10-year up 0.2 to 4.686 percent, while the two-year fell 1.9 basis points to 4.199 percent. The CBOE volatility index dropped 4.84 percent to 14.54, its lowest reading in this run, and Bitcoin was effectively unchanged, up 0.07 percent at 63,399.35 dollars.

Table – Energy, 12 August, ranked by change:

Table – Metals, 12 August, ranked by change:

Table – Agriculture, 12 August, ranked by change:

Table – Rates, currencies, volatility and crypto, intraday 12 August, ranked by percent change:

Why it matters: Two moves in this session are large and they point in opposite directions about risk. Corn rising 4.45 percent and wheat 3.32 percent in a single day is a supply-side move in markets that had been quiet, and grain prices feed into food inflation with a lag measured in months rather than days. Against that, the volatility index fell 4.84 percent to 14.54, its lowest in this run, and the two-year Treasury yield fell 1.9 basis points. Those are not the readings of a market that has just repriced a risk. The most likely reading, and it is ours rather than anyone else’s, is that the grain move is specific to the grain complex rather than the leading edge of anything wider. The energy split supports that: crude eased while heating oil and gasoline both rose, which is a product-market story about refining rather than a statement about the barrel.

Outlook: The immediate test is whether the grains hold the move on Thursday or give it back, since one-day jumps of this size in corn and wheat frequently retrace when they are driven by positioning rather than by a change in the supply picture. In energy, the marker is whether the distillate strength persists, because heating oil rising while crude falls cannot continue indefinitely without either crude following or margins compressing. For metals, the gold-to-silver ratio at about 68.1 is the line to watch, having narrowed for a second session. Volatility at 14.54 leaves little room to fall further, and a reading that low tends to be a poor predictor of the following week.

Sources: CNBC.

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