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Wkly Futures Mkt Summary Apr 1.24


The path of least resistance was higher in treasuries late last week as the trade once again managed to shape a neutral inflation reading into a supportive result. In other words, the headline personal consumption expenditure matched expectations and matched the prior month while the core PCE came in at 2% versus 2.1% expectations and 2.1% previously. Apparently, the lower-than-expected initial claims reading was offset by a higher-than-expected ongoing claims reading while the upward revision in US GDP was simply discounted altogether! In retrospect, the treasury trade has settled into a bullish bias with the trade shaping scheduled data to their advantage! Clearly, there were some disappointments in March US inflation related reports, but trade perceptions are fixated on a June cut.


While treasury and equity markets saw last Friday’s US scheduled data as benign, the currency markets saw the data as supportive to the dollar. However, economic competition against the dollar is slim and the trade deep down knows the US Fed will not cut rates until they are very convinced that inflation has been slayed. From a simple macroeconomic differential edge, the US dollar should continue to rise as US GDP was revised upward from 3.2% to 3.4%, while German retail sales collapsed, and UK GDP fell by 0.3%. Apparently, the dollar trade is not buying into the gold market theme of a June US rate cut or embracing the idea that global players are dumping dollars for gold.

The chart action in the euro favors the bear camp with the currency seemingly poised to return to the early February lows. While the US dollar is not showing definitive strength, the pound appears to be out-of-favor and undermined by internal issues. Clearly the Canadian dollar is the most likely to stand up to residual strength in the dollar with solid consolidation low support.  


The equity markets survived the last of three monthly key US inflation reports without disrupting the bullish environment. In fact, like the treasury markets, the equity markets continue to discount signs of inflation and embrace any sign of slightly softer inflation. Along those lines, the CME Fed Watch tool yesterday afternoon suggested a 55% chance of a June rate cut which improved to 61% after Friday’s scheduled report sweep. In retrospect, the equity markets seem to lose some upside momentum early last week, but the fear of missing out continues to result in higher lows and higher highs. Global equity markets were mostly higher at the start of this week except for the markets in Spain which traded 0.33% lower. Clearly, the bull camp retains control with constant hope of a June rate cut seemingly smoothing over potential threats to equity markets. In addition to favorable Chinese manufacturing data, investors are also hopeful of “Goldilocks” US PMI numbers and hopeful of US jobs data which shows modest growth.


The views that gold prices are being pulled higher by Bitcoin were dealt a blow early this week with gold at times trading nearly $40 an ounce higher and bitcoin at times trading $2,000 lower. Another potential myth regarding the record run in gold is talk that global central bankers are dumping the dollar in favor of long gold positions. While we suspect central bankers have investment plans in motion to buy gold, the dollar has not suffered from a massive rotation. On the other hand, hedge fund managers continue to build up their long positions. In fact, adjusted for the gains since the current COT positioning report was released in June gold has gained more than $80 an ounce thereby likely putting the spec and fund long at the highest level since April of 2022! Not to be left out, silver has also managed a range up extension but remains well below its March highs and adjusted for the gains since the last positioning report was measured silver likely has the largest net spec and fund long since April 2022.


Apparently, the copper trade has been able to discount last Friday’s 1.8% week over week jump in Shanghai copper warehouse stocks, which is surprising considering the rapid “trend” of building stocks at the exchange. However, copper should be cheered by a favorable Chinese Caixin Manufacturing PMI reading for March, but the gains were fractional. Perhaps the trade is cheered by signs of reduced refined copper production plans from several Japanese companies for the first half of 2024.


With a new high for the move and the highest trade since mid-October the bull camp in crude oil starts the week with the edge. The bull camp is cheered by a favorable Chinese manufacturing PMI reading, a 19% week over week drop in global floating crude supply, and by chatter that Saudi Arabia will raise prices to Asian customers because of solid demand signals! However, Bloomberg has coverage indicating that US suppliers are beginning to gain market share from OPEC plus members which from a longer-term perspective erodes the power of Middle East producers. In a slight WTI positive, India has apparently halted crude purchases from Venezuela because the upcoming expiration of a waiver of US sanctions.

Clearly, the gasoline market is in less favor than crude oil in the early action this week and we suspect that is largely the result of the massive jump in the US refinery operating rate over the past two months, which is likely to result in a near-term buildup in gasoline inventories.  With natural gas managing to consolidate and then bounce from the latest contract low at the end of last week, the short-term oversold condition is partially leveled which could allow for renewed selling and further contract lows this week.

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Thursday’s USDA quarterly stocks and intended acreage report did not offer much for the bull camp as acres were nearly right on the estimates and quarterly stocks were above guesses. Total US crop acres were down 6.4 million from last season as the lower prices has the farmer hesitant to plant marginal acres. On-farm stocks were up 24% from last year, while off-farm stocks were down 3%. Combined bean and corn acreage was 1.7 million acres below the total of 2023.


Last Thursday’s bullish acreage number surprised the trade and corn stocks were slightly below estimates as well. However, more reports of avian flu in dairy cattle is a negative to start the week. Combined corn/bean acreage was down 1.7 million from last season. This could be the low-end of the corn acreage estimates for the year as an early planting start could increase corn acres in the end of June final report. The surprise low acreage number raises the importance of weather this season as a small drop in yield could have an outsized effect on price action.


Thursday’s USDA report for wheat featured slightly larger than expected acreage and larger than expected stocks, offering little for the bull camp. The lone bright spot was a larger than expected decline in SRW acres. Spillover support from corn lifted the market as well as growing dryness in Russia/Ukraine wheat areas, which will see only very light showers over the next 10 days, Russian attacks on Ukraine port infrastructure continue. Over the weekend, the Russian government granted phytosanitary certificates to several RIF ships, and they were allowed to leave port with their grain cargoes.


The USDA Hogs and Pigs report (released after the close on Thursday) was not a big shocker, but it did show inventory and pig crop numbers coming in at the bearish end of expectations. The report showed the March 1 US hog inventory at 100.6% of last year versus an average trade expectation of 100.1% and a range of expectations from 98.8% to 100.9%. Kept for breeding came in at 97.9% of last year versus 97.1% expected (range 95.2%-99%), and market hogs at 100.8% versus 100.4% expected. The weight categories of under 50 pounds, 50-119 pounds, and 120-179 pounds all came in above expectations. Only the heaviest category (180 and over) was lower. This may support the nearby contract against the deferreds early this week.


Last week’s break in April cattle below may have been too far, too fast, and we may see some consolidation between 180 and 185 this week. Reports are that traders viewed last week’s cash cattle trade as stronger than expected considering the break in the futures. As of Friday afternoon, the five-area weighted average price was $188.02, down from $189.44 the previous week. The weekly export sales report on Thursday showed US beef sales for the week ending March 21 at 12,645 tonnes, up from 10,979 the previous week and above the four-week average of 12,217. The largest buyer was South Korea at 3,437 tonnes, followed by Japan at 3,371, and China at 1,992.


After being seen as an irrational price level at the start of the month, the cocoa market finished March by climbing above 10,000 twice last week. In both cases, cocoa prices finished the session with a daily loss, and that could make it more difficult for the market to have a sizable upside move from current price levels early in April. May cocoa was unable to hold onto early strength and could not sustain midsession and late rebounds as it finished Thursday’s trading session with a moderate loss. For the holiday-shortened week, however, May cocoa finished with a gain of 827 points (up 8.8%) which was an eleventh positive weekly result over the past 12 weeks.


Coffee prices continue to face bearish supply developments, but the market has rebounded from a near-term pullback three times since the start of this year. If improving global risk sentiment can strengthen the near-term demand outlook, coffee prices can regain upside momentum early this week. May coffee came under pressure and stayed on the defensive all day as it finished Thursday’s inside-day trading session with a moderate loss. For the week, May coffee finished with a gain of 4.00 cents (up 2.2%) and a second positive weekly result in a row.


May cotton was higher at the start of this week, extending its gains in the wake of Thursday’s USDA prospective plantings report. The report put US 2024/25 cotton planted area at 10.673 million acres, below the average expectation of 10.906 million and down from a forecast of 11.0 million at the USDA outlook forum in February. This was up from 10.23 million planted in 2023/24 but well below the 13.75 million in 2022/23. The weekly drought monitor showed 6% of US cotton production area under drought as of March 26, down from 7% the previous week and 47% a year ago. However, the drought monitor shows abnormally dry to severe drought conditions persist in some Texas growing areas, indicating they need rain.


Sugar prices continue to see coiling action, but they have lifted well clear of their early March lows. With the market receiving bullish supply news from Brazil, sugar prices should maintain upside momentum this week. May sugar was able to reach a 1-month high before finishing Thursday with a moderate gain. For the week, May sugar finished with a gain of 0.67 cent (up 3.1%) which a third weekly gain over the past four weeks.

Please contact us at 1.877.690.7303 or via email at sales@admis.com for any questions or comments on this report or would like more information about ADMIS research. 

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Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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