Good morning,
DXZ0 92.735 -0.229 GCZ0 1914.2 +9.6 ESZ0 3461.50 +12.25 CLZ0 40.83 +0.19
Today is options expiration for many products at the CBOT. Check the open interest in strikes close to the current price of the underlying, in any products you trade here. A large, unbalance call or put position, just out of the money, can have a magnet effect on prices, as short option positions could potentially get squeezed.
The corn and soybean markets continue to grind higher, and funds keep piling on. Yesterday’s bullish input was the weekly export sales report. Prices remain very close to the highs for the move. This afternoon, the CFTC will release the COT report, showing how much speculative length exists in these products. The wheat market also holds a spec long position. Rains moving the across the parched production areas in Russia and the US Plains gave hope to some reprieve for the expected stress from the very dry conditions this season in both areas. While the amount of moisture expected isn’t enough to completely cure things, any little bit helps. Funds took advantage of this news to book some profits on existing long positions. Wheat prices traded at a 6 year high earlier this week.
Oil had some interesting news yesterday. Russian President Putin came out yesterday, following the recent OPEC+ discussions on production and oil price balance, and said Russia doesn’t rule out delaying the scheduled production hikes by the OPEC+ alliance. Concerns about the pandemic lingering on is behind his comment. He did say he doesn’t feel there is any need for a change now, but the entire situation needs to be closely paid attention to. Most promising for oil markets is that Russia and Saudi Arabia, appear to be in unison with the need to work together to keep order to prices of oil. Last January, the 2 countries got involved in a rather ugly production/price war, which began the sharp drop to oil prices, later exacerbated (and then some) by no demand hailing from the pandemic.
In the softs, sugar prices are on track to have their 6th consecutive monthly gain. This would be the longest rally in 11 years. Some adverse weather is moving into Brazil, which is thought to pose problems for the crops there. Thus, the notion of less supply than had been previously expected, allowed the funds, which are already carrying a strong long position, to take prices higher. Cocoa prices continue to push higher as well. Yesterday afternoon’s release of cocoa stocks held at warehouses showed another decline, and have been dropping all week. These are the deliverable supplies, used to delivery in futures contracts. The same report in coffee showed an increase in available supply, as it has been on the rise all week. The rise in coffee stocks can be attributed, almost exclusively, to Brazil.
An interesting story in the cocoa market. London cocoa has become very cheap, compared to New York cooca. In an uncharacteristic move, some cocoa stored in warehouses in London are being shipped to the US, to be used against delivery of New York futures contracts. These cocoa beans originally were sourced from Cameroon to Europe. Many European processors can’t use the beans from Cameroon, as they produce a reddish powder. The traders involved with these transactions are benefitting from the large price gap between the 2 markets. They also stand to make an additional sum of money ($80 of premium), when these beans are used for delivery. Only a small amount of activity like this is taking place right now, but if more of the trade attempts to capture this significant price disparity, then the wide spread between the 2 markets should converge.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX0 993.25 938.25 912.50
CZ0 370.50 354.00 359.25
WZ0 563.00 540.75 546.00
KWZ0 493.25 474.25 485.75
MWZ0 539.00 534.75 546.00
SMZ0 332.2 314.0 309.1
BOZ0 33.02 31.29 30.38
CLZ0 41.12 40.95 40.62
GCZ0 1932.0 1891.8 1775.6
LHZ0 61.665 56.900 57.820
LCZ0 110.545 108.765 108.215
KCZ0 116.80 111.45 113.40
CCZ0 2514 2399 2425
CTZ0 66.15 63.87 62.77
SBH1 13.50 13.10 12.93
JOF1 117.80 122.30 118.70
HGZ0 301.95 290.70 269.10
HOX0 118.32 122.19 129.10
XBX0 117.54 114.75 111.39
NGX0 2.778 2.584 2.474
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404