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Wkly Futures Mkt Summary Apr 8.24


On the one hand, treasury prices deserved to slide late last week with the US jobs report showing much better than expected results. On the other hand, the magnitude of the declines in treasuries were undersized given the upside surprise in payrolls and the decline in the unexpected dip in the unemployment rate. However, given the four point slide in treasuries from the late March high, some traders think the trade has priced the latest reduction of rate cut hopes.


In retrospect, the action in the dollar last week should be extremely disappointing to the bull camp as declining US rate cut prospects and strong monthly jobs data should have resulted in a larger recovery, with the bounce less than 40% of the initial washout last week. However, the euro zone posted very positive PMI data from earlier in the week and a cushion of the trade is still holding out hope for a US rate cut. While the dollar is not giving off definitive direction in the early trade this week, subtle shifts in global central banker views favor the bull camp with US rate cut timing pushed back again, the number of US rate cuts this year reduced again and some foreign central banks like the ECB and BOE thought to be poised to cut rates in June. As in the euro, we see the path of least resistance pointing down in the Pound partly because of the potential strength in the dollar and partly because of a soft UK pay data report has temporarily increased the hope for UK rate cuts next month.


Despite posting significant volatility in last Friday’s preopening trade and in the face of the US jobs data, the equity markets managed to delink from the constant need for improved chances of lower US interest rates and instead seem to be cheered by signs the US jobs market continues to hold together. In other words, the stellar jobs report lowers the prospect of a soft landing and accentuates the idea the US economy might not need rate cuts. Global equity markets at the start of this week were higher except for the markets in China which traded nearly 1% lower.


While the gold and silver markets exhibited significant two-sided volatility at the end of last week, the bull trend has clearly prevailed and is managing that action despite adversity from the dollar and interest rates. However, a small portion of the upside impetus this is likely the failed Middle East peace talks undertaken by Egypt. It appears that gold and silver ETF holdings have started to climb with the flat price of gold in a potential beginning of the end of the rally. In other words, when the small investors begin to jump into the market bullish sentiment could burn hot, and then burnout.


Even though the copper market is likely drafting some lift from the noted strength in industrial commodities like precious metal markets and energies, the trade is likely drafting ongoing support from the Chinese copper smelting industry move to reduce capacity and from the recent sign of improvement in the Chinese economy. The copper market is likely drafting a small measure of lift from an increase in daily per Chinese capita spending jumping 54% in March from February. However, it should be noted that Shanghai copper warehouse stocks have increased in 14 of the last 15 weeks and are currently at the highest level since April 2020.


Clearly, the massive range up rally in petroleum prices last week was attributable to the increase in tensions in the Middle East as the trade last week saw intelligence chatter suggesting Iran would strike Israel sooner rather than later. However, with the Israeli military pulling back some troops in southern Gaza and hope last week that Egypt could broker a solution, a corrective setback is possible. However, the peace deal has failed and global crude oil in floating storage fell by 17% versus last week’s reading giving the bull camp fresh tight supply hope. The bull camp should also be cheered by news of record US TSA traveler figures and from reports of record jet fuel demand. Crude Oil positioning in the Commitments of Traders for the week ending April 2nd showed Managed Money traders added 12,045 contracts to their already long position and are now net long 229,484. Non-Commercial & non-reportable traders were net long 346,155 contracts after increasing their already long position by 16,198 contracts. In addition to further strength in crude oil, the gasoline market is indirectly supported by an outage at a Russian refinery (from flooding), a very strong US jobs report and by record US TSA checkpoint counts.

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Weather will be the focus to start the week before USDA releases their March supply and demand report on Thursday morning. Significant parts of the Midwest have the ideal set up for planting, wet over the last couple weeks and now a warmer drier 6-15 day period coming up. Initial plant dates for crop insurance in Illinois are approaching. April 15 is the earliest plant date for the southern 1/3rd of the states, April 20 for central Illinois and April 24 for the northern counties. Very heavy rains are expected in the southeast US which could cause some replanting issues in that region. Brazil harvest is near 80% done and hedge pressure has likely already hit its zenith.


Volatility is expected to pick up later this week as USDA and CONAB give their April updates on Thursday morning. Until then, US weather will be the main focus for traders. Flooding concerns will increase in the next week over the Delta and Southeast as heavy rains are expected there, which may washout some of the early planted fields. The Eastern corn belt is expected to see precipitation later this week, while the Western belt and central Plains will see only light showers.


Having stalled at moving average resistance last week, wheat looks poised for further short covering this week on continue dryness in the Southwest Plains and the Black Sea growing area. Central Oklahoma and central Texas are expected to see rains midweek, but Southwest Kansas and the Oklahoma Panhandle will miss out. Weekend conditions featured very high winds across the southern Plains, which didn’t do the crop any favors.


June hogs reached new contract highs last week on expectations for lower supply this summer, but this has taken the market to overbought levels. The USDA pork cutout reached its highest level since September 25 last week, which supports packer margins in the face of higher hog prices. The low price of pork relative to beef and the discovery of bird flu in dairy cattle may have also encouraged retailers to favor pork. If the flu story fails to create much concern by consumers, beef may regain favorability among retailers. The CME Lean Hog Index as of April 3 was 85.88, up from 85.15 the previous session and 84.25 the previous week.


June cattle extended their selloff on Friday despite a lack of news on the Avian flu front. Slaughter and cattle weights were both higher last week, resulting in a surge in beef production. The USDA estimated cattle slaughter totaled 609,000 head for the week, up from 586,000 the previous week and 605,000 a year ago. The estimated average dressed cattle weight last week was 845 pounds, up from 843 the previous week and 820 a year ago. The five-year average weight for that week is 822 pounds. Estimated beef production last week was 513.7 million pounds, up from 494.5 million a year ago.


Cocoa prices extended their winning streak to seven positive weekly results in a row, but last Friday’s close was 529 points below last Tuesday’s record high and 645 points above last Thursday weekly low. With bearish supply developments at the start of the second quarter, cocoa remains vulnerable to a sizable near-term pullback. May cocoa followed through on Thursday’s late rebound with a sizable gain during Friday’s trading session. For the week, May cocoa finished with a gain of 29 points (up 0.3%).


Coffee’s upsurge has been fueled in large part by bullish supply developments, but the market should also benefit from stronger global risk sentiment as well. Last week’s rally may leave the market vulnerable to profit-taking early this week, but coffee should remain well supported on near-term pullbacks. May coffee rebounded from early losses to reach a new 2024 high before finishing Friday’s trading session with a sizable gain. For the week, May coffee finished with a massive gain of 23.65 cents (up 12.5%) which was a third weekly gain in a row and the largest weekly increase since July 2021. Expectations that Central American production will come in below last season’s levels have underpinned coffee prices this week following news that Honduran and Costa Rican exports from October through March were below last season’s pace.


May cotton fell to the 200-day moving average on Friday and bounced off that area at the start of this week’s trading. The market has been under pressure recently from expectations that US exports will meet steep competition from Australia and Brazil as their crops come in, but the steep selloff last week has left the market in oversold condition and receptive to a rally. Export sales last week were flat, and cumulative sales for the 2023/24 marketing year are running behind the average pace. December cotton was also under pressure on Friday after the bounce off a lower-than-expected plantings number the previous week. US soil moisture is much better than a year ago, with only 7% of US cotton production area experiencing drought versus 46% a year ago.


After a positive start to the month and quarter, sugar prices lost strength for much of last week. With Brazil’s Center-South cane harvest underway, sugar needs to find fresh bullish supply news to regain upside momentum. May sugar was unable to hold onto mild early gains as it fell to a 2 1/2 week low before finishing Friday’s trading session with a sizable loss. For the week, May sugar finished with a loss of 0.53 cent (down 2.4%) and a negative weekly reversal from Monday’s 5-week high. Brazil’s Center-South cane harvest may see early delays due to recent rainfall, but the first half March Unica report showed cane crushing well above last year’s levels.

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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