Good morning,
DXM0 97.690 -0.130 GCQ0 1747.8 -2.5 ESM0 3068.00 +14.00 CLN0 36.20 +0.76
Risk on continues to drive the equity market higher, in spite of the unrest that remains across the US. Economic optimism trumps (apologies for the play on words) the civil tensions, as local commerce attempts to re-open. Positive momentum also came from yesterday’s purchasing managers’ index, which met expectations at 39.8, but was up from last month, allowing for some interpretation that the economy is coming out of the economic abyss.
Oil prices have moved above the $36 barrier in the overnight trade. The news that OPEC+ has agreed to move up its next meeting to June 4 (Thursday) and talk that most if not all members are in agreement that the additional production cuts for May and June should be extended. The agreement had stated that the production cuts would be pared back, beginning July 1, and now that is allegedly being pulled back. A successful restart to the economy is also supporting oil and gas prices, as the workforce attempts to return, leading to more consumption.
Gold prices have been oscillating around unchanged this morning, with unchanged being $1750. Given all the potential hazards for markets out there, from US civil turmoil, to US/China relations, to a possible breakdown in the oil agreements amongst cartel members and numerous other scenarios, gold will remain a safe haven asset, and continue to maintain underlying support. $1800 remains an upside objective for gold. Some analysts are calling for $1850.
Yesterday afternoon, the USDA released the weekly crop conditions and progress report. Regarding conditions, corn had an uptick from last week, soybeans came in respectably with the first flash of the season and spring wheat was strong, ahead of last season. Winter wheat had another downtick last week, and remains a fair amount the level from a year ago. As for progress, corn and soybean planting was strong, and remains ahead of the 5 year averages. But the story here is North Dakota, which is substantially behind the averages. This is an issue as the window for corn planting comes to a close, and could result in acres being lost. Soybeans could face a similar fate, although the planting window looks good for beans there. Wheat prices are lower this morning, as much of this news was already built into prices. Part of the pressure on US wheat today stems from Egypt conducting another purchase tender. 8 companies provided offers, from Russia, the Ukraine and France. US prices are $21/mt higher than Russia, and not competitive enough to even be able to participate in making an offer. While the extended forecast for the grains looks favorable, there is talk of the potential for some hot and dry conditions to occur in July and August, and the peak of development cycle for corn and beans. There are some rain events also projected in the forecast, but the potential is there for possible some stress to the crops from the summer heat. Not today’s trade, but worth storing in the back of your mind.
Cotton prices moved to an 11 week high, on talk of a squeeze on the July futures contract. Chinese purchases are thought to greatly reduce available supply ahead of harvest beginning on Aug. 1. With continued talk of China looking to scoop up essential commodities, out of fear the global pandemic will disrupt the supply chain, short futures holders are afraid of being squeezed. The oil market in April shows just how painful, and costly, a delivery squeeze can be. In addition, cotton prices are getting a bid as cotton areas in west Texas have only received about 25% of anticipated moisture over the past month, causing stress to the crops. Coffee prices bounced yesterday, after being hit hard last week on increased supply expectations from the USDA and reduced demand caused by the pandemic. Prices are higher again today, as technically coffee was very oversold. In addition, the Brazilian real continues to recover, disincentivizing local producers from aggressively selling. Sugar prices continue to grind back up from the lows, as the ongoing bounce to the energy sector and some weather issues brings into question available supply.
Technical Moving Averages:
Product 50 day 100 day 200 day
SN0 852.75 881.75 914.50
CN0 328.00 356.50 378.00
WN0 531.00 538.25 528.75
KWN0 478.00 478.50 464.75
MWN0 523.00 535.75 544.50
SMN0 296.1 300.6 306.7
BON0 26.70 28.79 30.27
CLN0 27.94 38.24 46.45
GCQ0 1704.9 1650.8 1585.4
LHQ0 60.110 70.520 79.270
LCQ0 93.550 100.285 105.785
KCN0 112.30 112.00 113.45
CCN0 2348 2526 2495
CTN0 54.95 61.26 63.54
SBN0 10.50 12.15 12.52
JON0 116.05 109.00 109.05
HGN0 231.45 246.05 257.10
HON0 97.88 128.47 157.41
XBN0 84.20 118.90 146.56
NGN0 2.008 2.045 2.202
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604