Good morning,
DXM9 96.435 -0.163 GCM9 1288.0 -7.2 ESM9 2911.50 -1.00 CLK9 63.26 -0.63
It’s a relatively quiet start to the week, as the nation recovers from a massive set of storms that swept across the country, carrying rain, snow and tornadoes. A headline hitting the tape now is that China will consider a US request to shift the tariffs imposed on farm goods be shifted to other goods. The oil and gold markets are lower this morning, and equities are slightly higher. Goldman just beat estimates on its Q1 earnings, which may provide some support there.
The grain markets are mixed this morning, with corn and soybeans higher and the wheat markets lower. The rain/snow storm brings corn planting delays to the conversation. Soybeans are receiving some support from the China news. Wheat is lower, responding to Friday’s purchase tender from Egypt, which saw cargoes move from Romania and the Ukraine. Friday afternoon, the CFTC released its latest report on positioning in the market (data compiled as of Tuesday). In corn, the report showed funds carrying a record spec short position (-294.4k). A decent sized short position exists in soybeans and wheat as well, leaving the market vulnerable to short covering pops. These position could be even larger, as futures open interest actually increased over the remainder of last week. This afternoon, the grain markets will get the latest crop conditions and progress report from the USDA. Wheat conditions have been very good so far this season. It is expected corn plantings will remain behind historical averages.
The lean hogs are live cattle markets were higher on Friday, continuing to trade up. The hogs market is still receiving support from increased demand created from the Asian Swine Flu, and the cattle market is aided by the storms that just moved across the Midwest. The COT report showed the spec long in hogs to be at a record, and cattle in near its all-time high. These markets could be vulnerable to a profit taking sell-off.
The cotton market put in a strong performance on Friday, after China announced it would issue 800k tons of extra cotton import quotas. The weekend storms also have the markets worried about planting disruptions. Funds extended their length in cotton last week. Orange juice was lower for the 9th consecutive day, trading at its lowest price since October of 2015. The data shows funds added to short positions last week in OJ. Short covering over the week was reflected in the announced positions in cocoa and cocoa. Funds added to the size short in sugar.
The gold and copper markets are lower this morning. Copper correcting from a strong rally last week on improving demand hopes as the Chinese economy shows signs of recovering. Gold continues to correct lower, after putting in some work last week above the key psychological $1300 barrier.
On the US weather front, more rain will move across the Midwest and Great Plains midweek, keeping the obstacles in place for fieldwork. A warm up in temperatures is coming, only to have another rain event next week. Some cooler temperatures at month’s end will slow the evaporation process, and may even keep soil temperatures at levels too cold to plant.
It will be a holiday shortened week for trading in the US, with all markets closed on Friday, in observance of Good Friday. The markets may experience some illiquidity at times this week, as trading desks may not be fully staffed.
Have a good day,
Mike
Mike Clifford
312 604 6404