Good morning,
DXM9 97.045 -0.080 GCM9 1287.4 0.0 ESM9 2831.50 -55.50 CLM9 62.88 +1.22
Global equities come back under pressure from the open overnight, as the Asian markets respond to no deal being finalized last Friday and the US increases the tariffs on $200B worth of goods to China to 25% from 10%. China responds, announcing it will raise tariffs on US goods from June 1. This gave equities a fresh leg down. Oil futures are higher, as Saudi Arabia reported 2 of its tankers, headed for the Persian Gulf, were attacked. The grain markets, which made new lows Friday following the bearish WASDE report, only to bounce a bit into the close, have resumed the downward trek from the trade status. While the market clearly has a “risk off” tone, gold is trading lower as well today.
Outside of the lack of a trade deal on Friday, the grain markets had the biggest news, as the USDA released the most recent WASDE report, which included projections for the 2019-20 crop season. As expected, strong production and inventory numbers were seen, and the markets traded to new lows on the data (soybeans are at the lowest prices seen in a decade). The projection for corn inventories puts it at a 30 year high. The lack of a trade deal being completed and a beneficial planting window opening up didn’t provide any help to prices. Friday afternoon’s COT data from the CFTC showed some modest short covering in corn, but funds added to shorts in soybeans and meal. Overall, a very large speculative short position remains across the complex. While positioning of this magnitude has tended to create nervousness in the trade, and bring in short covering, the present landscape really provides very little to be concerned about. Funds added to shorts in corn and wheat, following Friday’s data. This afternoon, updated reports on crop conditions and progress. Winter wheat conditions are expected to remain good, while planting progress should remain behind the averages, as last week’s rains didn’t provide much opportunity for planting.
The oil market has bounced over $1.50 from the overnight lows, as geopolitical tensions renews supply concerns. In addition to the 2 tankers from Saudi Arabia being attacked, one from the U.A.E. and one form Norway were attacked as well. In addition to these attacks, stemming from the tensions with Iran, lower available supply was also pondered as it was announced Russia reduced its output for the first 12 days of May. The tensions saw Brent crude trade up to $72/barrel, before rotating back off the level some.
The other soft commodities are lower this morning, with cotton continuing to be the leader on this move down. Last week, cotton had its biggest weekly loss since 2017, as the WASDE report showed large expectations for this season’s production and inventories. Couple this with the potential for lost business with China due to the trade dispute, and the supply / demand imbalance weighs heavily on prices. The COT data showed large short positions across most of the softs. The live cattle and lean hogs markets continue to have good size spec long positions in their markets, although live cattle continues to see unwinding, as prices have moved down and the size of the long is reduced from the highs. Lean hogs saw a slight decline in length as well. The trade dispute could have a direct impact on the amount of pigs sold to China.
The gold market was lower this morning, as the market attempts to determine just how much of a safe haven bid is required. Given the lack of trade progress, the tensions in the Middle East and global equities under pressure, it is a bit surprising gold isn’t higher. The overall strength of the dollar is probably keeping as lid on gold prices. Gold did firm back up to unchanged levels, as the Chinese tariffs were announced, and stocks got pummeled further. Copper is lower, as no trade progress is seen as a negative for global economic growth. Copper also took a fresh leg down, on the China tariffs announcement.
As mentioned, apart from a couple of passing showers, drier air sweeps across the Corn Belt, Plains and Mississippi Delta regions, to provide a window for planting. The extended forecast has predominantly drier conditions remaining for the next 10 days or so. The first week will see a pick up in temperatures, only to cool off in the second week.
Technical Moving Averages:
Product 50 day 100 day 200 day
SN9 893.75 914.875 915.0
CN9 372.0 382.25 387.5
WN9 455.5 488.25 520.75
KWN9 431.5 471.875 515.75
MWN9 540.25 557.75 584.625
CLM9 61.43 57.24 60.72
GCM9 1295.4 1302.4 1268.2
LHM9 89.855 84.135 82.015
LCM9 119.020 118.200 116.190
KCN9 95.58 101.51 109.06
CCN9 2296 2316 2278
CTN9 76.57 75.97 79.16
SBN9 12.58 12.74 12.64
JON9 113.81 118.93 134.25
HGN9 289.55 282.45 280.35
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)