Commodity Corner: Morning Comments

Good morning,


DXM9  97.01  -0.141                      GCM9  1277.8  +1.9                         ESM9  2900.75  -9.25                      CLM9  65.32  +1.25


A strong trade higher in the oil markets welcomes traders back from the holiday weekend.  An announcement from the US that an end to Iran oil waivers will be enforced after the May 2 expiration shoots WTI oil almost to $66 and Brent crude above $74.  The expiring waivers allowed countries to buy Iranian oil without facing US sanctions.  An official announcement is thought to be coming later today.  The countries involved include China, Greece, India, Italy, Japan,. South Korea, Taiwan and Turkey.   Iran, in response, said it will close the Strait of Hormuz if it can’t use it.  There will be some increased tension and volatility around the oil markets with these recent developments.


Even though the markets were closed on Friday, the CFTC still released the updated COT report.  The data was compiled as of last Tuesday.  The report showed funds, as had been guessed here based upon the ongoing increases in futures open interest, increased the spec short position in corn to a new record of over 323k.  Funds also increased short positions in soybeans, wheat (both Chicago and Kansas City), coffee and cocoa.  Funds also increased spec long positions in lean hogs, live cattle and cotton.  The actual levels and weekly changes can be found in the attached document, titled “current data”.  The grain markets are lower this morning, being led down by the wheat contracts.  Wheat is feeling pressure from Russian export prices being at the lowest levels since September.  With Russia the top global exporter, this again brings into question the US’s ability to compete on the global stage.  Favorable weather for planting brings pressure to the corn market.  An updated look at crop conditions and progress will be released this afternoon.


Gold was lower last Thursday, as a strengthening dollar and prospects of a US/China trade deal reduced the safe haven status of gold.  Gold has firmed up some in the overnight trade, driven by heightened geo-political tensions, both from the bombing in Sri Lanka and the oil story.  Copper was lower on profit taking last Thursday, and on thoughts that expected demand may not be as great as what the market has priced in.   Copper is following through to the downside today, as the lower equity markets keeps the demand question in place. 


Sugar traded higher on Thursday, in part led by rising cane ethanol prices in Brazil keeping the market thinking that mills will favor fuel production over sweetener.   Coffee had another down week last week, as excessive supplies continues to pressure prices.  Coffee is higher today, possible on short covering as Friday’s COT report showed funds increasing the size of the spec short position, to a 9 month high.   


The lean hogs and live cattle markets had an increase in spec long positioning reported.  Swine Fever worries continue to sweep through Asia and Africa, enabling the thoughts of increased US pork demand from China and an overall shortage of hogs.  The cattle market continues to deal with less supply from the flooding that took place in March.


Have a good day,


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