Good morning,
DXM9 97.785 +0.059 GCM9 1290.0 -4.8 ESM9 2939.25 -2.25 CLM9 62.99 -0.31
It’s a busy week for markets, with it being month end, the Federal Reserve meeting and a slew of key economic data, ending with Non-Farm Payrolls Friday. Japan is celebrating Golden Week this week, so volumes are lighter in the Asian trade.
While the large correction to prices in the oil market was the attention grabber on Friday, fund positioning could steal the spotlight today. Friday afternoon, the CFTC released the most recent COT reports, showing record speculative short positions for corn and soybeans. Grains rallied on Friday, as short covering drove prices higher. This is confirmed with a look at open interest, which declined by 97.6k for corn (declined over 40k Thursday) and a 58.5k decline in soybeans. The bid on Friday was generated from Goldman putting out commodity forecasts for the remainder of the year on Thursday night, calling for grain prices to rise. Also, the rain/snow storm that swept across the middle of the country this weekend certainly kept farmers from getting planting done this weekend. This afternoon, the USDA gives an updated look at crop conditions and progress. The winter wheat conditions are expected to remain good. More clarity on this may come throughout the week via Twitter, as the wheat council quality tour kicks off. The crop progress report will be important, as it is believed farmers had things in overdrive last week, trying to take advantage of the planting window afforded them. It will be key to see far planting progress got, as the forecast for the beginning of this week is for more rain and cooler temperatures, so there should be delays created here. Wheat prices are lower today, being led down by a report out of Russia showing old crop prices at the lowest level in 9 months, as export sales have been slowing. Also, as already mentioned, expectations for some good reports from the winter wheat fields keeps pressure on prices.
Moving Average Technical Levels for Grains:
CN9: 376.75 (50 day); 385.75 (100 day); 388.75 (200 day)
SN9: 912.875 (50 day); 926.0 (100 day); 918.0 (200 day)
WN9: 466.25 (50 day); 498.25 (100 day); 526.5 (200 day)
KWN9: 445.75 (50 day); 484.875 (100 day); 523.75 (200 day)
The oil market, which was the main story last week, as prices shot to new highs for the move on the US ending waivers on sanctions to countries doing business with Iran, is continuing to leak lower this morning. After the initial drop of over $1 from the European trade last Friday morning, oil prices took another big leg down mid-session on Friday, as it was reported that President Trump had reached out to the oil cartel to get oil prices lower. WTI prices traded at a 3 week low. There could be some long liquidation taking place in the oil markets, following the recent large rally. The COT report showed there were over 11k longs added to positioning (314,387) in WTI, and over 16k longs added to Brent Crude (396,266). Given all the comments that came out on Friday, booking a profit on recent gains probably didn’t seem like a horrible idea.
The meat markets were lower on Friday, continuing the corrective down trade following large rallies in both live cattle and lean hogs. Friday afternoon’s COT report showed small increases to long positioning in both, which are sitting at record levels. Futures open interest declined in cattle by 11k on Thursday and another 8k in Friday’s trade. Confirming the liquidating trade. An anticipated increase in feed demand, putting a bid into grain prices, could put some pressure on the meat markets.
Frozen orange juice continues to trade lower today (now trading at a 6 year low), following the down day Friday which took prices to the lowest levels since September 2015. Inventory expectations are high, with Florida expected to see a rebound in fruit production. Frozen stockpiles at warehouses are at the highest level since last June. Demand concerns remain as well, with consumers not drinking as much orange juice, do to its high sugar content. The lumber market traded higher Friday, ending up on the week, which ends the longest slump in prices since August.
Gold prices are lower this morning, following being +1% last week, as the dollar inches higher. The increased gold prices on Friday came from concerns about future economic growth in the US, as the reported +3.2% q/q GDP number showed a larger build in inventories, questioning how strong future GDP readings may be. Copper trade higher on Friday, as it was reported that stockpiles held by COMEX had declined for the 51st consecutive week. This is the longest string of declines since 1992. China reporting lower inventories also put a bid into prices.
The US weather forecast has rain and cooler temperatures moving across the corn belt and central Plains into the coming weekend. As already mentioned, this could bring a delay to plantings of corn, spring wheat and soybeans. Above normal rainfall is expected. Looking at the extended outlook, later next week potentially brings a longer dry period.
Have a good day,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1201A
Chicago, IL 60604
Trean Group, LLC
312-604-6404
312-896-2012 (fax)