Good morning,

 

DXM0  98.975  +0.069                 GCM0  1690.9  -14.7                                         ESM0  3027.50  +33.00                  CLN0  33.90  -0.45

 

Equities continue the grind higher, in spite of continued concerns about US/China relations as the US talks tough on additional tariffs and sanctions towards China from the situation in Hong Kong.  Optimism surrounding a quicker than expected recovery from the pandemic, as economies gradually re-open, continues to fan the equity flame. 

 

Oil prices traded at an 11 week high yesterday, as the continued production restraints implemented by OPEC, coupled with rising demand as the global population comes out of quarantine, delivers a more balanced supply / demand outlook.   Oil prices did come off the highs yesterday, as US/China tensions continue to escalate.   In the recent IEA supply and demand balance forecast, it suggests that demand will exceed supply, beginning in Q3 of this year, which will eat away at the large inventories created from the pandemic. 

 

Gold prices remain under pressure today, as it continues to lose some of its safe haven appeal.  Prices have moved below the $1700 level in the overnight trade.  While a long liquidation trade could certainly provide some legs for a down trade, one should tread cautiously.  The US/China relations could magnify at any moment, and the equity rally, primarily driven by hope, can certainly hit winds that can change the course quickly.  The industrial metals, such as copper, are under pressure this morning, as the China story looks to be an obstacle to the positive economic rebound experienced thus far. 

 

Grain prices are firm this morning, as another Chinese purchase of soybeans was reported yesterday.  This and the strengthening Brazilian real improve US prices to be competitive with Brazil for China.  If prices can remain comparable, and if China is still looking to make good on its Phase 1 commitments, then beans should maintain a bid.  Corn prices carrying a modest bid today, led by an expected increase in ethanol demand.  Wheat prices are supported by another downgrade to the size of the Russian wheat crop, due to the weather conditions.  As mentioned yesterday, funds are carrying a large spec short position in corn, and also a decent sized one in the wheat complex.  As month end approaches, a round of profit taking wouldn’t be that unusual.  Yesterday afternoon, the USDA released the weekly crop conditions and progress reports.  For conditions, winter wheat improved 2% (54%), while the first flash for corn was a very respectable 70%.  Regarding progress, corn planted came in at 88%, ahead of the averages but slightly less than the market expected.  Soybeans planted are also ahead of the yearly averages.  Spring wheat planted was behind the averages by about 9% (still 81%), but nothing to get too uptight about yet.

 

The strengthening Brazilian real is also a factor in some of the soft markets.  Coffee prices have traded higher over the past couple of sessions, as the stronger domestic currency disincentivizes local producers from exporting as aggressively.  Also boosting coffee were concern about a coming cold front, and some potential frost damage to the crops.  Sugar prices are trading down, following yesterday’s move.  It was reported in the last session that Brazilian millers in the center-south region produced 2.50m tons of sugar, compared to 1.61m last year.  More evidence that the huge demand hit to the oil and gas sector from the pandemic clearly swayed the production decisions for cane. 

 

Live cattle and hog futures both closed higher yesterday.  Friday’s cattle on feed data came in as expected, and last week’s cattle slaughter numbers were stronger than expected, but behind last year’s numbers.  Clearly related to the meat packing plant closures from the pandemic.  Hog prices benefited from China’s April pork import data, which showed an increase of 170% from a year ago.  The weekly slaughter numbers for hogs were higher than the prior week, but fell short of the estimates.        

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      852.25                   887.00                   916.25

CN0                      330.00                   359.75                   379.75

WN0                    530.75                   540.25                   528.50

KWN0                  476.75                   479.75                   464.50

MWN0                523.25                   537.75                   545.25

SMN0                  297.4                     301.7                     307.3

BON0                   26.54                     29.11                     30.34

CLN0                    27.39                     39.28                     46.82

GCM0                  1680.4                   1639.1                   1576.5

LHM0                  57.855                   69.900                   79.475

LCM0                   89.280                   99.955                   106.455

KCN0                   113.00                   113.20                   113.60

CCN0                   2337                       2530                       2491

CTN0                   54.88                     61.78                     63.61

SBN0                   10.49                     12.26                     12.56

JON0                    113.95                   108.15                   108.80

HGN0                  230.20                   247.65                   257.55

HON0                  98.32                     132.41                   159.00

XBN0                   81.79                     122.26                   147.77

NGN0                  2.017                     2.063                     2.212

 

Thanks,

Mike           

 

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1065                                                              

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