Good morning,
DXZ0 93.275 -0.154 GCZ0 1907.0 -4.7 ESZ0 3433.50 +10.75 CLZ0 40.84 -0.22
Equity markets continue the back and forth price action, awaiting word on any additional stimulus packages to be voted into place. Gold prices also hover around $1900, awaiting any fresh news. Copper prices have been firm on continued optimism, and yesterday were boosted by Chinese GDP data, that was below estimates, but showed promise for the economy.
The OPEC+ Joint Ministerial meeting was held yesterday, attempting to reassure markets of its stance to provide stability for the oil markets. It acknowledged production levels continue to be closely monitored, in the face of reduced demand concerns resurfacing as the pandemic appears to have its second wave rapidly spreading around the globe. A stimulus package would be another shot in the arm for the demand side of the equation, which can counter more economic lockdowns being implemented globally. The positively interpreted Chinese GDP number also provided some support to oil prices. Another word of caution to the oil bulls is that money mangers’ positions have moved to the longest level in the past 3 weeks.
The grain markets remain red hot in the commodity space. The combination of continued Chinese buying and weather issues in production areas keeps prices grinding higher. The USDA reported another large sale of corn to unknown destinations (presumed China) and Mexico. Continued expected buying of soybeans and talk of US wheat purchases also propels prices. Regarding the weather, very dry conditions in numerous growing areas is driving up wheat prices. Russia, the largest global producer, is in the midst of the driest season observed over the past 4 decades. While many analysts have been gradually lowering production estimates for Russia. While a decent sized crop is still in the cards, the Russian Ag Ministry has been talking about putting export quotas in place, to insure sufficient domestic supplies. In a normal growing season, this likely wouldn’t be discussed. The US Plains is also facing a very dry planting season, with the weekly Drought Monitor registering 40% readings. This leaves the winter wheat a bit vulnerable, as is won’t be as well established ahead of dormancy. Weather is also impacting soybeans. La Nina has impacted both Brazil and Argentina. Brazil observed a late start to its rainy season, which delays planting. This matters as a later plant date translates to a later harvest date, giving the US additional time in the export game for China. This also impacts Brazil’s corn, which gets planted after beans are harvested, suggesting a shorter growing season there. The declining South American currencies are also supporting prices. IN particular Argentina, where the government disarray has the local currency in a meltdown. Farmers are more inclined to hold grains, and not bring product to the market, as it is viewed as more valuable than the currency at the moment. In Brazil, farmers had already made some hefty forward sales, and are now inclined to hold what remains. The fund community is on the this game, and is carrying decent sized long positions in the grains.
Looking at the softs, cocoa futures are attempting to recover from trading down to a 2 month low last week. Poor demand prospects, driven by the pandemic took prices down. Favorable weather for growing in Ghana and the Ivory Coast also weighed on prices. Prices are recovering after being down as much as 3% last week. Political tension in the Ivory Coast is also creating some additional volatility in the market. Coffee prices, having had a constructive bounce off the lows a couple of weeks ago, have resumed the downward trek. Good weather for crop development has again brought back expectations of a large harvest. This at a time as pandemic led demand concerns are hitting producers. Coffee futures have taken out the old lows, and are luring sell signals into this market. Sugar prices continue to climb up, trading at its highest prices since the end of February. Unlike the other softs, the weather for Brazil and India has not been beneficial to the crops, creating concerns of a supply shortfall. Brazil is the leading sugar exporter in the world. In addition, as energy prices continue to hang around the upper end of recent trading ranges, cane producers have additional incentive to produce ethanol instead of sugar. Cotton is also in the midst of a strong rally. Prices are trading at the highest levels in 9 months, as Hurricane Delta is thought to have had a big impact on US cotton yields. The size of this year’s cotton crop has been going through downward expectations to crop size all season, and this is causing more downward revisions. The funds are carrying decent sized spec long positions in sugar, cotton and cocoa. The most recent COT report also showed a decent sized spec long in coffee, but that has likely been reduced in this recent downtrade.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX0 981.50 932.00 911.00
CZ0 365.25 351.75 359.25
WZ0 555.50 537.75 545.00
KWZ0 485.00 471.50 484.75
MWZ0 534.75 533.75 546.00
SMZ0 326.9 311.4 308.2
BOZ0 32.87 31.14 30.41
CLX0 40.93 40.60 40.61
GCZ0 1935.7 1887.2 1770.8
LHZ0 60.800 56.405 57.840
LCZ0 110.980 108.765 108.470
KCZ0 117.35 111.35 113.75
CCZ0 2517 2398 2426
CTZ0 65.64 63.49 62.78
SBH1 13.42 13.02 12.93
JOF1 118.30 122.75 118.75
HGZ0 300.35 288.65 268.60
HOX0 119.09 122.18 130.31
XBX0 117.51 114.29 112.09
NGX0 2.759 2.566 2.466
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404