Good morning,
DXM0 99.815 -0.940 GCM0 1708.8 +14.9 ESM0 2728.50 +84.00 CLK0 26.52 +0.44
Equities continue to surge higher, as the market attempts to get a jump on the virus curve flattening out. It doesn’t feel like we are there yet, at least in the US, but money has been itching to dive in, so here we go. It is a struggle to call this a “risk on” movement, with gold having made a new high overnight (1742.6), and holding above $1700 at this writing (6:30 AM CDT). Oil prices are firmer today, shaking off the quick over $3 washout Sunday night on continued concerns about the Saudis and Russians playing nicely, and with the move back of the OPEC+ meeting to Thursday. The market is hoping that some resolution can be found to the current price war both sides are engaged in. Even if Russia and Saudi Arabia can’t come to an agreement on more production cuts, it is still thought that Russia may curb some production, as storage is reaching capacity. The OPEC+ meeting, which is for member nations and other oil producing countries (although the US and Canada weren’t invited to join) is scheduled to begin in Vienna at 4 PM on Thursday afternoon (9 AM CDT). Headlines on this meeting will certainly create some volatile price action for the oil and energy markets over the next couple of days.
The grain markets are attempting to return to a bit of normalcy, along with other markets. The COVID-19 has certainly had a big impact on the markets. Corn has traded at the lowest prices since 2016, as the oil price implosion, coupled with horrible gasoline demand has driven ethanol prices down. Couple this with expectations for approximately 96 to 97 million acres of corn to be planted this year, and you get a very large overhang of corn. Soybeans have been in a back and forth trade, as hopes for increased demand from China, coupled with some shipping logistics issues in South America creates perceived opportunity for the US. However, the Brazilian real continues to make new lows, along with many 2nd and 3rd tier economies, which allows the Brazilian producer to aggressively price newly harvested crops. The USDA releases the latest look at supply and demand in the WASDE report this Thursday. Small increases to inventories, both domestically and globally are expected for corn, while domestic stocks in soybeans are expected to see a small increase, while globally there should be a decline. Part of the global decline can be attributed to the expectation that there will be a lowering of production projections in soybeans and corn for South America, due to some hotter and drier weather. Estimates for all of this data can be found in the current data attachment. Wheat is not expected to have any significant changes in the WASDE report, but wheat has been the grain to trade of late. While lower today, US wheat prices have been strong of late, buoyed by several inputs. Demand for staples, amidst the global pandemic, has ramped up demand for bread and flour. Other wheat producing countries have been cutting back on available supplies for export, to make sure all domestic needs are protected. Russia and the Ukraine are experiencing some abnormally dry weather, which potentially may cut into the expected size of the wheat crops there. While the US hopes to be in position to capture more business from these inputs, yesterday’s export inspections data didn’t suggest it. Another possibly bullish development for wheat prices could be a cold front moving into the Plains next week. As winter wheat crops have emerged from dormancy, and yesterday afternoon’s Good to Excellent condition report came in at 62% vs 60%, there is a risk of stress or damage to these crops, with the colder temperatures and no protective cover.
Looking at some other commodity markets, the meat market has been under pressure of late. One of the concerns for the meats is the slowing chain speeds and disruptions to harvesting due to employees observing shelter in place, and not working. There are also concerns about longer term demand for meat, as huge demand was witnessed as people prepared for the pandemic, and now will need to work off inventories. In a change of pace, lumber posted a seldom seen of late up day yesterday, locking limit bid. However, most expect the price action to resume the downward slope, as the effects of the virus hits every sector of the economy, including housing. Lumber futures were down 32% in March. The cotton market continues to move higher, driven by the renewed optimism for increased demand as markets work through and attempt to recover from the impacts of the pandemic. Yesterday, cotton closed higher for the 3rd straight session, posting the largest 3 day rally since the spring of 2017. Cotton is in the midst of recovering from the beating it took in March on demand concerns from economic weakness, where prices declined by 17%. Sugar prices are recovering, following the improving prospects for the oil market. Coffee prices are also recovering today, as available supply concerns resurface from port logistics and the same weather pattern impacting the soybean market. If the Brazilian real can recover against, the dollar, that should be supportive for sugar and coffee prices as well.
Also worth being aware of is Fed Chairman Powell will be giving an address on the economy this Thursday morning at 9 AM CDT. Given all of the global efforts in terms on monetary and fiscal policies, and as the economic data begins to come out, showing the effects much worse than what analysts are forecasting, Chairman Powell’s view will be much anticipated.
Technical Moving Averages:
Product 50 day 100 day 200 day
SK0 883.25 910.75 922.75
CK0 368.50 379.00 396.25
WK0 543.00 544.00 528.50
KWK0 468.00 467.50 460.75
MWK0 531.75 537.75 549.50
SMK0 304.4 305.4 309.6
BOK0 28.77 30.92 30.55
CLK0 40.12 49.06 51.73
GCM0 1605.0 1560.7 1530.4
LHM0 74.465 81.025 84.995
LCM0 101.060 109.615 110.165
KCK0 110.65 117.05 112.50
CCK0 2593 2598 2511
CTK0 62.04 65.38 64.68
SBK0 13.03 13.26 13.01
JOK0 102.90 102.90 106.60
HGK0 244.95 260.60 263.05
HOK0 138.15 164.69 175.21
XBK0 125.76 155.06 164.82
NGK0 1.834 2.015 2.167
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404