Good morning,
DXU0 92.965 -0.275 GCZ0 1955.0 +8.0 ESU0 3420.00 +27.50 CLV0 42.65 +0.31
The new week kicks off with equities continuing to grind to new highs, oil futures slightly higher, gold futures with a bid and most of the other commodities firm as well. The dollar index is lower today, providing support to products denominated in dollars. It is not a very busy week on the economic calendar. The Republican Convention takes place this week. The Federal Reserve holds in Monetary Policy Symposium at Jackson Hole, with Chairman Powell to speak on Thursday. Any shifts away from current market thinking, regarding policy can have a big impact on the dollar, which can carry over to many commodities.
The 2 tropical storms/hurricanes, Laura and Marco, making a track towards the gulf, are creating some concerns for many commodities produced in the area, such as oil and cotton. This is keeping a bid in oil prices, and has cotton surging higher. Cotton is also being driven by an expected increase in demand coming out of China, especially as the country continues to show signs of recovery from the pandemic.
The grain markets are firm today, following last week’s Pro Farmer Crop Tour, which resulted in yield projections better than feared, on the heels of the Derecho a couple of weeks ago. Equally, if not more concerning for the grains is the very dry conditions that have been in place for the past month. The extended forecast contains very little precipitation, and many analysts are lower yield estimates as a result. So, the very large expected crop many not be as big, but it will still be abundant. Then factor in China, where the domestic situation for grain and soybeans is keeping them aggressive buyers in the export market, and ending stocks numbers are being whittled away. Again, the overall amount of available grain will be plenty, but probably not as big as what was thought in July. While the US weather is having an impact on the current corn and soybean crops, similar hot and dry conditions are impacting the wheat crops in Argentina. This is providing support for US and European wheat prices, where some additional business could be captured from the shortfall in Argentina.
Another point to be aware of in the grains, is the massive short covering/establishing long positions in the grain markets. The weekly COT report from the CFTC, released Friday afternoon, showed funds covered in over 60k in shorts in corn. Keep in mind, this data was compiled as of last Tuesday, so likely even more was covered in as the market continued to rally as the PFT was taking place. Soybeans specs switched from a small short towards a healthy long, with over 75k bought, putting the spec long position close to 70k. The wheat markets (Chicago & Kansas City) both observed some short covering as well, but the specs remained short the wheat, just over 25k in each. Russian crop estimates have been getting bumped up of late, and with Russia’s dominance in the export arena. Other commodities with noticeable positioning. Sugar, which has been in the midst of a strong bull run on increased demand and potential future supply shortfalls, saw longs increase by almost 20k, putting the spec long position at over 125k. Coffee also saw spec longs continuing to add to positions, now being over 15k. Live cattle saw funds buy over 10k, putting the long position at almost 40k. As for cotton, mentioned above having s good bid here with the hurricanes moving in, showed longs over 30k.
Some other quick commodity tidbits. Cocoa prices fell to a 3 week low last Friday, as production in Ghana and the Ivory Coast, in spite of the drier conditions, is still expected to be good. The demand side for cocoa remains in serious doubt, as consumption is expected to stay subdued, due to the residual economic effects of the pandemic. Many feel this reduced demand for chocolate could stay in place for a couple of years. Lumber prices were very well bid last week, locking limit up on numerous days, following very good readings on the housing data out of the US. Copper prices are firm this morning, following the strength in equities. Copper is also getting a bid as the concerns about dwindling available supply continues to grow, as holdings in exchange warehouses continues to erode. China being in recovery mode makes this concern all the greater.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX0 888.00 872.25 901.25
CZ0 337.25 338.00 364.00
WZ0 517.75 526.25 542.75
KWZ0 450.50 470.75 482.00
MWZ0 526.75 535.00 552.00
SMZ0 296.2 296.4 304.1
BOZ0 29.94 28.83 30.41
CLV0 40.96 36.67 43.41
GCZ0 1885.0 1807.4 1687.2
LHV0 50.575 52.050 61.450
LCV0 104.570 101.215 106.685
KCZ0 108.45 110.00 116.40
CCZ0 2297 2309 2416
CTZ0 62.07 59.61 63.23
SBV0 12.22 11.52 12.50
JOX0 124.10 121.85 116.25
HGU0 282.50 260.50 262.10
HOV0 125.29 117.10 143.65
XBV0 115.15 101.55 121.76
NGU0 1.931 2.027 2.114
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404