Good morning,
DXZ0 92.830 -0.255 GCZ0 1978.0 +11.8 ESZ0 3413.50 +18.50 CLV0 39.12 +0.84
Equities keep grinding up into this afternoon’s Federal Reserve announcement. Gold is also firm, within it’s recent trading range and oil is pressing towards the upper end of its recent range. The dollar is coming off again today, also ahead of the Fed. There is not expected to be any changes to the current accommodative monetary policy. The market will be looking for any clues during Chairman Powell’s press conference about the economy getting through the pandemic. There is also some thought that the Fed’s “dot plot” for 2023 could be revealed. The dollar pressure comes from the continued soft policy, which also aids the price of gold. Oil prices have caught a bid following yesterday afternoon’s API data, projecting crude stocks to have declined by 9.52m barrels last week. The EIA will release its production and inventory data from last week later this morning. The oil market is also waiting for tomorrow’s OPEC+ Joint Ministerial Meeting, where future production levels are expected to be discussed, as producers grow more concerned about a potential decline in demand.
The grain markets caught their breath yesterday, following Friday’s WASDE report and Monday afternoon’s crop conditions report that was basically as expected. Harvest is underway in corn, and just beginning for soybeans. While analysts have been revising lower their yield projections, based upon the Derecho damage and the weather in August, the early reports on crops being harvested has been promising. The weather looks favorable for good harvest progress as well. Wheat prices are lower this morning, as the combination of good weather for the planting of winter wheat and today’s Egyptian wheat tender, where the Black Sea should once again dominate the trade, pressures US prices.
The lean hogs market has been dominated by the African Swine Fever hanging over the hog industry globally. China has been hit hard by this, with over 50% of its herd lost last year, and now with more cases popping up in Germany and no vaccine available, concerns mount again. In response, China is focusing on large commercial farms to repopulate the herd. An interesting development is taking place in China, which could have a big impact on corn and soybean demand. China is well known for having large food waste. Much of this food waste would slide down the chain to hog feed. The ASF concerns have put a stop to this, along with China being more observant about food waste. This should increase demand for corn and beans to be used for feed. As China attempts to rebuild the herd, it creates even more demand. Not to mention the recent spike in domestic corn prices has left China’s corn reserves bare, as they attempt to control the escalating prices. This suggests China could remain very active in buying US corn and beans, even without being concerned about any Phase 1 commitments.
The recent dollar weakness was good for cocoa and sugar yesterday, helping to push prices higher. Both of these products have had concerns about weather having an impact on the next growing season and the amount of available supplies, especially if/as the global economy comes out of the pandemic. As mentioned yesterday, coffee prices have been under pressure all week, being driven down by long liquidation following Friday’s COT report from the CFTC showing spec long positions at a 4 year high. Brazil’s weather has been favorable for the coffee plants as well. Cotton was up sharply on Monday, and had a slight correction yesterday. The surge higher comes from a lower production estimate from the USDA, coupled with concerns about crop damage from Hurricane Sally.
For the most part, today’s trade should be fairly contained ahead of the Fed announcement this afternoon. Anything which alters the market’s current view of monetary policy can have a direct effect on the dollar, which will carry residual impacts into many markets.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX0 914.00 888.25 902.00
CZ0 342.50 340.50 361.00
WZ0 532.50 525.25 543.00
KWZ0 455.75 464.75 482.00
MWZ0 527.50 532.75 549.75
SMZ0 301.3 298.2 303.8
BOZ0 31.35 29.72 30.49
CLV0 41.30 38.05 42.32
GCZ0 1939.0 1846.6 1723.6
LHZ0 54.340 53.850 58.335
LCZ0 110.170 106.860 109.475
KCZ0 117.05 111.15 116.90
CCZ0 2406 2355 2421
CTZ0 63.68 61.28 63.01
SBH1 12.94 12.45 12.98
JOX0 121.35 122.45 116.50
HGZ0 295.00 273.55 265.90
HOV0 123.49 117.84 138.14
XBV0 117.04 107.97 118.65
NGV0 2.253 2.171 2.187
Thanks,
Mike
Michael Clifford
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404