Good morning,
DXM9 96.670 +0.025 GCQ9 1336.7 +5.5 ESM9 2879.00 -8.00 CLN9 51.79 -1.48
Trying to decide where to begin, having been away from the markets the past 2 days. I guess I’ll just dive in and randomly toss some comments around about the markets. So, I’ll apologize in advance if this bounces around (more than normal).
The grain markets continue to digest yesterday’s June WASDE report from the USDA. The biggest point was the aggressive reduction in the expected yield for corn, moving it down to 166.0 from 176.0. Planted acres for corn was only lowered by 3 million, to 89.8 m acres. Interestingly, in Monday’s crop progress report, it showed corn as 83% planted. If you take that off the initial 92.8 m acres expected for corn, that gives you around 77 m acres of corn, much less than the 89.8 projected yesterday. Now, if the remaining expected amount get planted this late, that could explain part of the drastic reduction in expected yields. World corn carryout is the lowest since 2012. Soybeans saw an increase in planted acres just under 1 m. No change to yields here. Wheat rallied as well, being pulled up from the strength in corn. Total wheat production was raised, but domestic ending stocks for 2019-20 was lowered. World ending stocks were raised, with production in Russia and Ukraine raised by 1 mmt each. A word of caution on global wheat production came out of Australia, where Abares reported wheat production there could be down 11% to 21.2 mmt, as the hot dry weather is having a big impact on the crops. Funds were very active following the data, buying up to 50k of corn and almost 10k of wheat. It was thought funds sold 5k of soybeans. As the market continues to work through the numbers, the focus remains on the weather, and how much more corn/beans get planted. Focus also shifts to the plantings and quarterly stocks reports on June 28.
Oil, which has had a decent recovery over the past few sessions, from the lows made last week, reversed course overnight. The catalyst for the downturn is the same culprit, a strong inventory number reported from API. It was reported crude stocks rose 4.85 m barrels last week, where the median estimate was for a 1 m bbl reduction. With the DOE and EIA bringing its numbers today, the market once again is on the defensive. If the pattern of late holds true to form, and the data come in strong and prices work lower, the old low for CLN9 is 50.66.
Gold has resumed it’s march towards the highs, as trade uncertainties keep the safe haven status of gold the people’s choice. There is really not much more to say on gold at the moment, it’s prices should move opposite to how the trade is going. Copper continues to move in conjunction with equity prices, displaying optimisms or pessimism on the economy accordingly.
Cotton prices traded lower yesterday following WASDE. The domestic balance sheet was left unchanged, but global inventories were raised. Cotton prices are doing better this morning. Cocoa had its 7th consecutive higher session yesterday. The story there is the negotiations between the producers and the buyers on the establishment of a minimum price for sales. Orange juice prices rallied yesterday, as the amount of production out of Florida was reduced in yesterday’s report.
On the economic front, May CPI is released in the US toady. CPI data is expected to remain contained in today’s report. Following last Friday’s soft non farm payrolls data, the market has ramped up expectations for the Federal Reserve to lower short term interest rates. The market has essentially priced a cut to come at the July meeting, but a few are making the case for a cut to come at next week’s meeting. Data softer than expected in today’s CPI and Friday’s retail sales can help press that point.
Technical Moving Averages:
Product 50 day 100 day 200 day
SN9 866.0 897.75 906.75
CN9 381.75 384.5 388.0
WN9 465.75 479.5 510.0
KWN9 429.25 454.75 498.5
MWN9 534.75 551.75 574.5
CLN9 61.11 59.16 60.13
GCQ9 1298.6 1310.2 1281.6
LHQ9 93.840 88.475 84.795
LCQ9 111.160 113.325 113.190
KCN9 94.40 99.05 106.90
CCN9 2378 2320 2296
CTN9 72.86 74.22 77.21
SBN9 12.29 12.59 12.65
JON9 105.05 113.65 127.85
HGN9 280.10 282.75 279.20
Have a good day,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404