Silver bought, Gold sold ahead of Breakout

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, May 12. Following a couple of weeks of strong energy-led gains, the Bloomberg Commodity Index traded lower by 1.2% in the week to May 12. In response to this speculator’s cut bullish commodity bets by 9% to 567k lots. Most of the selling was seen in natural gas, Brent crude oil, corn and gold while buyers concentrated their efforts in WTI crude oil, soybeans and live cattle.

Energy

The divergence in speculative interest between WTI and Brent crude oil continued in the week to May 12. The 5% rally in CLM0 attracted another 25k lots of fresh longs with the net rising to 325k lots, the highest since September 2018. Brent crude oil (LCON0) meanwhile traded lower by 3% resulting in the net long being cut by 21k lots to 156k lots. The combined net-long reached a three months high at 481k lots with WTI contributing two-third of the nearly 300k lots funds have added during the past six weeks.

As mentioned in my latest ‘COT, the short-lived collapse to a negative WTI price last month probably saved the market. It helped accelerate dramatic cuts in global production, estimated by the IEA to hit 12 million barrels/day this month. With demand beginning to recover and US producers having made substantial cuts, WTI crude oil has so far been the go to contract for bullish speculators. However, driving the price to high before fundamentals can support a sustained recovery carries the risk of US shale oil producers turning the taps back on to soon.

Natural gas’s failure to sustain a rally above $2/therm helped trigger a 19% correction and a 30% reduction in the net long to 112k lots. The price had rallied strongly from the March low on the outlook for lower production from associated oil production. Milder weather combined with continued lockdowns leading to lower demand and reduced export demand for LNG all helped drive the price lower.

Metals

Gold longs were cut to a fresh 11-month low at 161k lots as the price continued to struggle to break it’s $1700/oz shackle. Silver buyers meanwhile returned to increase the net-long by 35% ahead of the Thursday spike back above $16/oz. The white metal has now retraced more than 61.8% of the February to March collapse thereby attracting renewed demand from speculators who in recent weeks had cut net-longs by 85% from the February peak.

HG Copper traders were the least bearish since January after cutting the net-short by 18% to 13k lots, Further upside however remains doubtful with economic data beginning to show the horrendous damage done to the global economy from many weeks of inactivity. Something that was highlighted by the data showing that the change in position was driven by short-covering and not fresh longs.

Agriculture

Another year of plenty supplies across the three major crops are being projected by the U.S. Department of Agriculture in their latest outlook from May 12. Only a deteriorating weather outlook over the coming months or a pickup in U.S. export sales – unlikely given the strong dollar – can prevent stocks building following another bumper harvest in the U.S. and around the world. Overall the grains sector was net-sold with buying of soybeans (+24k) being off-set by wheat (-0.9k) and not least corn where 24k lots of selling lifted the net-short to a one-year high at 214k lots.

All four soft commodities were net bought despite cotton being the only contract being supported by a higher price. Buying of sugar and coffee occurred despite the headwind from a free falling Brazilian real.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock indexes, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials, the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behavior of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Organic Soybean Prices Remain Robust as Trend in Organic Chicken Retail Sales Rise

Organic soybean prices continue to climb despite a temporary drop in organic chicken slaughter. The lack of home ground domestic US soybeans has the US relying on India. Imports have slowed in May according to The Jacobsen, leaving several consumers short.

Organic Corn Prices Remain Soft

Spot organic corn prices remain soft as organic chicken feed demand has temporarily eased. Producers are putting their feed-demand temporarily on hold as slaughterhouses recover from closures due to COVID-19. Slaughterhouses are in the process of disinfecting plants and revamping operations to provide a safer working environment. Organic chicken slaughter tumbled in early April, dropping nearly 30% but has rebounded about 50% of the losses over the past 5-weeks.

Organic Chicken Sales Index Trends Higher

What is surprising is that retail demand has remained steady, as supermarkets continue to run through inventories. Some of the major chicken producers see meat production taking a while to rebound. Plants in Pennsylvania, Colorado, Minnesota, and Wisconsin are operating at 70-90% of capacity, according to reports.

The dip in supply of organic chickens has come just as home stockpiles are dwindling. This should put upward pressure on organic chicken prices. The trend in organic retail sales is expected to climb by 2% year over year for the season-ending September 2020, according to The Jacobsen.

The trend in monthly organic chicken sales is upward sloping rising from left to right which points to continued rising organic chicken sales. The rise in organic chicken prices are unlikely to dent consumption, and slaughter should rebound before demand destruction occurs. Solid demand and tailwinds created by US stimulus are likely to keep upward pressure on organic commodities prices, according to a price forecast from The Jacobsen.

Another Year of Plenty Awaits the Grain Market

What is our trading focus?

  • WHEATJUL20 – CBOT Wheat
  • CORNJUL20 – Corn
  • SOYBEANSJUL20 – Soybeans

Grain prices are generally trading softer following the monthly release yesterday of the World Agriculture Supply and Demand Estimates report (WASDE) from the US Department of Agriculture.

This was the first report to include projections for ending stocks at the end of the new 2020-21 crop year which runs until August next year. Across the board, another year of plenty of supplies is being projected with only a deteriorating weather outlook over the coming months preventing another bumper harvest in the U.S. and around the world.

Key takeaways:

Corn: Supplies will rise to their highest in 33 years due to massive plantings and what is expected to be a record crop in the 2020/21 marketing year.

Soybeans: The USDA raised its fore forecast of 2019-20 soybean ending stocks to 580 million bushels, up from 480 million last month and above the highest expectations. For 2020-21 the ending stocks was projected to fall to 405 million bushels, below the average estimate.

Wheat: While lowering the projected 2020-21 U.S. ending stocks to 909 million bushels from 978 million this year, it was still well above expectations at 819 million. Adding further pressure to U.S. wheat prices was the a jump in global ending stocks to a record 310 million tons. A recovery in Russian and Australian productions thereby making it harder for U.S. farmers to compete for export orders, unless the dollar should weaken over the coming period.

The uptrend in wheat from the 2019 low is once again being challenged with a break below $5.05/bu on the continuation chart signalling an extension to the next key level of support at $4.91/bu, the March 17 low.

Corn meanwhile remains stuck near a 13-year low with support at the psychological important $3/bu level so far holding. The price has struggled amid the outlook for another bumper crop emerging across the U.S. plains together with stiff competition from producers in Argentina and Brazil both reaping the benefit from much weaker currency. Adding to the recent weakness has been the collapsing oil price as it has cut demand from ethanol producers who normally account for one-third of U.S. demand.

Soybeans has been trading sideways for the past two years with the price struggling to move higher from a near 12 year low around $8/bu. Worries about Chinese demand as the Covid-19 blame game heats up and the mentioned competition from exporters in Brazil and Argentina are two of the main obstacles keeping the price down.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Organic Soybean Acres Planted are Likely to Rise

 

Organic soybean planting is likely to rise related to organic corn planting during the coming harvest according to The Jacobsen. This is because the average value per acre for organic corn has declined substantially relative to the value per acre for organic soybeans. The relative value is measured by The Jacobsen Planting Acre Index.

The Jacobsen planting acre index is beginning to consolidate at 4-year lows. The index calculates the theoretical value of an acre of organic corn relative to the theoretical value of an acre of organic soybeans. The assumptions used are based on the Jacobsen calculation of the average yield per bushel in the Midwest for both organic corn and organic soybeans. The index ignores any additional costs for switching and any additional costs of planning organic corn compared to organic soybeans.

After hitting a higher of more than $800 per bushel in August of 2018 (which coincides with the 4-year high of organic corn prices The JacobsenPUATF), the index has declined by more than $500 per bushel and is hovering below $300 for the first time in the past 4-years.

The low level of the index means that the strong demand for soybeans and the lack of supply during the 2019/2020 season, makes organic soybeans a good option in the rotation despite the value being lower than the value of an acre of organic corn in the mid-west.

Prices Remain Stable

Organic corn prices are stable with little to no activity in the spot market hovering around $7/$7.1 picked up at the farm in the mid-west. Some merchandisers are now quoting $7 delivered into their mid-west facilities. This could put additional downward pressure on prices. Organic corn prices in South Central PA remain near $350 per short-ton delivered for new crop, and slightly below for spot. Organic soybean prices are hovering just above $20 per bushel, but there is little product around. Organic soybean meal prices are hovering near the $760 level mid-west, and have similar values in PA.

Organic Soybean Prices Could Top $23 per Bushel as Panic Buying Accelerates

The organic soybean complex is in danger of experiencing upside momentum, which could significantly buoy organic soybean prices. Organic soybean prices are elevated, but activity is light because there is not a lot of product available. Organic soybean imports in March were light as expected. April should be similar, according to The Jacobsen.

A question for traders is how quickly India will be able to rebound from port closures. The “shelter in place” order sent workers from other countries home until it was safe to return and work was available. Indian exporters are saying that flood of Egyptian workers has left the country. Getting the engine that creates the organic soybean export machine up and running could take some time. For the 2019/2020 season, Jacobsen expects imports to use to hover above 70%. This means that 70% of the organic soybeans consumed in the US are imported.

For US consumers, unfortunately, there are no sellers according to merchandisers. This includes both organic soybean and organic soybean meal. This could create panic buying sending prices temporarily higher. The Q3 is likely a target period after the pipeline from India goes dry for most of the Q2.

Organic soybean imports were robust in February the last official month reported by the US Customs Department. There was small growth for the month, year over year. The Jacobsen forecast that March organic soybean imports were no-existent. Less than 1,000 metric tons likely arrived.

The Jacobsen sees organic soybean and organic soybean meal imports remaining well below the historical norm for the Q2, and then potentially rebounding significantly in the Q3 due to pent up demand. this could push organic soybean prices mid-west up to $23 per bushel. It could also push organic soybean meal prices above $850 per short-ton. The Jacobsen full forecast along with our organic soybean balance sheet can be found in The Jacobsen organic market intelligence report.

Surprising Soybean Oil Export Numbers

Soybean oil exports have been much stronger than expected during the 2019/20 marketing year. Many analysts (including The Jacobsen), believed that rising biofuel output would drive domestic basis levels higher, which would limit U.S. soybean oil exports. As a result, predictions of marketing-year exports were generally below the 1.94 billion pounds shipped last year. However, with about half of the marketing year gone, forecasts have risen above that level, but they may continue to grow in the coming months.

 

Export commitments for U.S. soybean oil totaled 776,200 tonnes (1.71 billion pounds), which is 45 percent above the same week last year and the highest level since at least 2016/17 when the United States exported 2.55 billion pounds of soybean oil. Whether exports in 2019/20 remain above 2016/17 for the rest of the marketing year and exceed the 2.55 billion pounds shipped will depend on developments in the energy industry and how quickly the U.S. economy recovers from the coronavirus pandemic. That said, it seems unlikely that U.S. shipments will rise above the 2016/17 total this year.

The pandemic is the most obvious reason soybean oil exports are unlikely to exceed the 2016/17 total. With the world economy grinding to a halt, demand for vegetable oil, in the short term, will be substantially lower than it was just a month ago. However, even if the drop in economic activity is not as dire as many analysts expect, soybean oil exports are likely to remain below 2016/17.

The best-case scenario for soybean oil exports would be a recovery in world demand while usage in biofuel remains weak. With tensions between Saudi Arabia and Russia continuing for at least the short term, it seems likely consumption of soybean oil for biofuel production will remain below expectations. That should keep U.S. interior basis levels relatively low and, in theory, should make soybean oil more competitive. However, the critical price that will drive U.S. exports will not be the basis. The spread between soybean oil and palm oil will be the crucial indicator to watch to understand the strength of U.S. soybean oil exports over the next six months.

The spread, which bottomed just below parity earlier in the year, widened to three cents in March. Given the relative fundamental situations, The Jacobsen expects the relative value will continue to expand and could reach five or six cents during the second half of the marketing year. When the spread was close to parity, many end-users substituted soybean oil for palm oil, which raised U.S. exports. With the spread moving in the opposite direction, The Jacobsen expects soybean oil export sales to slow as the relative value of soybean oil moves higher.

On Thursday, The United States Department of Agriculture (USDA) reported export sales of soybean oil for 2019/20 delivery during the week ending March 12 totaled 18,900 tonnes, which was in line with market expectations that ranged from 5,000 to 35,000 tonnes. Sales for 2020/21 delivery totaled 2,000 tonnes. The total was 2,400 tonnes above the five-year average for the week but was 34 percent below the four-week moving average. Weekly shipments of 39,100 tonnes were in line with the five-year average for the week and the four-week moving average but rose 25,200 tonnes from the prior week. The Jacobsen expects the trend of sales falling below the four-week moving average and shipments moving above the four-week moving average to continue as the spread moves higher. This has nearly impacted organic soybean prices.

The Jacobsen recently raised its export forecast to two billion pounds, which is in line with USDA’s March forecast. While commitments already represent more than 85 percent of that total, The Jacobsen does not expect to raise its forecast and may even cut its projection if the impact of the pandemic on world vegetable oil demand slows consumption more than expected.

Organic Retail Demand is Expected to Rise

Organic retail demand is predicted to rise during the balance of the 2019/2020 season according to the Jacobsen insight. A strong tailwind lead by increased demand for food purchased at supermarkets and big-box stores will buoy demand. The rapid shift in US short term interest rates, in conjunction with the fiscal policy, will help further catapult purchases of organic goods when pent up demand is unleashed and the coronavirus fades. This should help buoy organic grain prices including organic corn prices and organic soybean prices.

Social distancing is poised to buoy demand for retail organic food. Supermarkets in impacted coronavirus areas are having a tough time holding on to consumer staples like water, and meat, that can be frozen. While there might be a pause in demand as this scenario fades, strong monetary and fiscal policy will buoy demand. The last time US interest rates were dropped to zero, they stayed there for 7-years.

Fiscal and Monetary Policy Boost

The White House announced several fiscal stimulus policies as well as formulated a policy on social distancing. They are requesting social distancing for the next 15-days. This will likely buoy demand for organic proteins including eggs, dairy, and chicken. While there will likely be a dip initially when things “go back to normal”, the stimulus in the economy should allow for an upgrade cycle for those who might consider organic as a choice over conventional. The fiscal policy in conjunction with the powerful monetary policy should help accelerate growth in the Q4 of 2020 into the Q1 of 2021.

Continued Decline in Crude Does Not Necessarily Imply Continued Pressure on Soybean Oil Prices

If crude oil prices resume the move lower, it could pressure soybean oil prices, but at some point, the impact of the marginal move lower in crude may be minimal for soybean oil. The main reason for the ultimate disconnect will be strong export demand, as, despite the expected slowdown in the world economy, world vegetable oil fundamentals remain bullish. However, there are other reasons the two prices may become less correlated than they have been recently.

The second reason that soybean oil prices could ultimately disconnect from crude oil is that the decline in soybean oil has also made it substantially more competitive with low carbon intensity (CI) score feedstocks. The decline in soybean oil prices has been much more significant than the decrease in the value of the low CI feedstocks due to the value of credits under the Low Carbon Fuel Standard (LCFS) in California. The credits continue to support low CI demand, and The Jacobsen expects low CI prices to remain supported. As a result, the relative prices make soybean oil, a much more competitive feedstock for any producer, not shipping products to the California market. At equal prices, many producers will favor soybean oil over the low CI feedstocks, which should ensure that soybean oil demand remains strong in the eastern half of the country (or at the very least, east of the Mississippi River). It should not impact organic soybean prices.

The second reason is why The Jacobsen believes it may have been premature for the United States Department of Agriculture (USDA) to cut its forecast of 2019/20 U.S. soybean oil usage in biodiesel by 200 million pounds. Ultimately, the reduction may prove prescient, but it will take a couple of months to understand how the impact of the decline in crude oil prices will translate into renewable fuel production. It will also be at least a month before analysts and traders have a better understanding of the length of the decline in crude oil prices.

The final reason soybean oil prices could disconnect from crude oil is fund activity. If funds continue to liquidate long oil share positions, soybean oil prices may move lower, even if crude oil is moving higher. Likewise, if funds start to rebuild long oil share positions, soybean oil prices could move higher while crude is moving lower. If crude oil prices continue to move lower, funds may continue to liquidate. However, if crude moves lower and the demand from biofuel producers remains at the levels The Jacobsen expects, there may be a rush to reverse those positions.

No matter what happens, soybean oil prices are likely to remain volatile for the foreseeable future. End users should take advantage of the decline by extending coverage, while producers should only sell minimal volumes and wait for the rebound in prices The Jacobsen expects to occur in the early summer.

Organic Soybean Prices Could Surge on African Swine Flu Import Ban

The goal is to protect the U.S. pork industry from the introduction of the virus. The question for those in the trade is how this will affect organic soybean prices. Additionally, if this ban comes to pass, how long before the Pork Industry realizes that organic corn could also carry ASF, which could impact organic corn prices.

The U.S. pork industry wants Secretary Perdue to restrict the import of organic soy products for animal-feed under the Animal Health Protection Act from all ASF-positive countries. The Secretary has broad authority under the Animal Health Protection Act to prevent the introduction of foreign animal diseases.

There are several countries that currently are experiencing an ongoing battle with ASF. Of the countries that import organic soybeans to the US in 2019, Ukraine, Russian and Moldova, along with China are currently battling ASF according to the World Animal Health Information Database.

The volumes of imports from impacted countries make up approximately 25% of the total organic soybeans that were imported into the United States in 2019. Separately, Romania tops the list of countries that are impacted by ASF that exported organic soybean meal into the United States in 2019. Approximately 9% of the organic soybean meal that was imported into the US in 2019 came from Romania.

So how will this impact the price of the organic soybean complex? With tight supplies already driving organic soybean prices above $20 per bushel in the mid-west and $780 for organic soybean meal per short ton in South Central PA, the result should be bullish.

Approximately 65K metric tons of organic soybeans and nearly 18K tons of organic soybean meal would possibly be restricted. Organic soybean/meal imports made up slightly more than 70% of the organic soybean/meal used for feed during 2019, and merchandisers are already having a difficult time finding any available organic soybeans in the US. While the restriction would have an immediate impact on sentiment likely pushing organic soybean/meal prices higher.

*Countries in bold are experiencing ASF

Oil Bought, Gold Sold Ahead of Virus Outbreak

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

Last week’s report highlights the changes made by hedge funds across key commodities just before the corona virus became the main news item to impact and rattle global markets. The worrying news from China raised concerns about its potential impact on demand for key commodities from crude oil to copper.

Crude oil as well as products have extended their losses today as the market continues to grapple with the corona virus news and its short to medium term impact on global fuel demand. While China has restricted travel within but also out of the country the market reaction at this stage is mostly a matter of confidence taking a hit.

However a prolonged outbreak combined with a continued spreading will reduce global fuel demand as it alter the way people travel and commute around the world.

Despite multiple risks to supply from key OPEC producers Brent crude oil has slumped to a three-month low today and the reason for this reaction can be traced back to the COT report which highlight just how unprepared speculators and funds were.

The chart below shows the net-long position held by money managers in the five major crude oil and product contracts. The 860k lots net-long in the week to January 21 was just 6% below the December 24 peak but double the October 8 low when Brent traded as low as $58/b.

Brent crude oil was left particularly exposed once the price broke below key support on Wednesday. Two weeks of price weakness had failed to trigger a reduction in the net-long. Last Tuesday it had even risen by 2.8k lots to reach a 15-month high at 429k lots.

In natural gas the slump below $2/therm supported another expansion in the already record short to 292k lots. This in response to weak winter demand and strong production.

Gold and silver both saw light selling last week before running higher on Friday in response to corona virus safe haven demand as stocks dropped. In the week to January 21 gold’s net-long was reduced by 3k lots to 259k lots, some 11% below the record peak last September.

Today in early trading gold extended its Friday rally to hit $1588/oz before drifting lower. The lack of a firm response similar to the one on January 8, when the U.S.-Iran war threat briefly took it above $1600/oz, point towards a market in general risk off mode. Something that in some cases can also negatively impact a safe-haven asset like gold, especially given the current elevated position and worries about demand from China.

The platinum long reached a new record at 53k lots, some 23% above the previous record from August 2016 when the price was trading at $1150/oz. Just before the longest price slump since 2014 the copper long had been kept unchanged at 7.2k lots.

Just like crude oil, copper and iron ore, all pro-cyclical commodities, have taken a beating from a renewed and currently serious risk to global economic growth. While iron ore dropped 6% overnight in Asia HG Copper lost another 1.8% with HGH0 once again testing the November and December lows.

The soybean complex continued to be sold on muted U.S. soybean sales to China. On Friday soybean futures hit a six-week low as China virus developments further dimmed the prospects for sales picking up before a deluge of Brazilian beans hit the market soon.

Both Kansas and Chicago wheat were bought as the price expanded to a 16 month high in response to strong overseas demand and weather worries. Both subsequently suffering a setback due to the general risk off hitting the commodity sector.

Soft commodities were mixed with cocoa and especially sugar seeing continued strong demand. Coffee long liquidation stayed subdued despite seeing the price down 20% from the December peak.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Grain Futures Update – 12/20/2019

With the Phase One Trade Deal signed, Stephen discusses how China will impact the grains through the use of monthly charts.

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The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

Crude Oil Specs Bought the OPEC+ Promise to Cut

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

Hedge funds increased bullish commodity bets by 34% in the week to December 10. Biggest changes where buying of WTI (78k lots), Brent (43k), Copper (31k), Sugar (80k) and Coffee (15) while on the sell side gold (29k), silver (15k) and corn (30k) stood out.

Strong buying of crude oil and products emerged following the OPEC+ meeting in Vienna. The decision to cut production further to reduce the risk of an oversupplied market in early 2020 helped trigger a 25% increase in the combined crude long to 602k lots, the highest since May and the biggest one-week accumulation since December 2016.

The natural gas net-short extended to a fresh seasonal record high of 235k lots, just 4k below the absolute record from August. Above-normal temperatures have driven the price lower and the net-short higher and with that also increased the risk of volatility should frigid winter conditions suddenly make a return. Short sellers in other words need to pay close attention to U.S. winter weather developments.

The gold net-long was reduced by 13% to 197k lots, the lowest since June. Silver meanwhile saw it’s net-long being cut by one-third to 30k lots, a five-month low. Despite having the kitchen sink thrown at it (rising stocks, yields and the trade deal) gold still managed its highest weekly close in six. It supports our view that, trade deal or not, the 2020 outlook still calls for caution and demand for the diversification gold brings. Not least considering the potential inflationary impact of central banks slashing rates while pumping additional liquidity.

Speculators turned the least bearish on HG copper since May after the price broke a trifecta of resistance levels. The remaining short was most likely reduced further ahead of the weekend when the phase one trade deal was announced.

All three major crop futures were sold ahead of last week’s WASDE report and Friday’s trade deal announcement. The combined short in soybeans, corn and wheat reached 216k lots, the biggest seasonal short in two years. Just before the trade deal announcement helped force short-covering across the sector. However some skepticism remain with the market struggling to see how China can buy $50 billion worth of agricultural products. Especially when Trump refers to the volume as being on an annual basis. During the past 24 months China bought $52.4 billion worth of U.S. produced soybeans, crude oil, LNG, pork, cotton, maize, wheat and sorghum.

The emerging consensus for a global deficit next year in both sugar and coffee helped drive another strong week of buying. Six weeks of sugar short-covering was topped last week when speculators bought a record 80k lots to cut the net-short to just 15k lots, a one-year low. Eight weeks of Arabica coffee buying lifted the net long to 29k lots, a three year high. While the fundamental support remains, not least in coffee where Brazil is reported to run out of reserves, the aggressive buying has however increasingly left both contracts exposed to profit taking.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Start trading now

This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Soybeans Higher 3rd Day In A Row, Coffee Prices Hit New Highs

Soybean Futures—Soybean futures in the January contract is trading higher for the 3rd consecutive session up another $0.04 at 8.82 a bushel bouncing off of major support rallying in my opinion on oversold conditions as prices have fallen out of bed over the last couple of weeks. Optimism about a possible Chinese trade agreement has sent prices up in the last several days, however I still remain bearish as prices are still trading under their 20 & 100 day moving average is the trend remains to the downside.

I have been recommending a bearish position from around the 9.23 level over the last several weeks and if you took that trade the stop loss has now been lowered to 9.09 & in tomorrow’s trade will be lowered once again to 9.04 as the chart structure will continue to improve on a daily basis therefor the monetary risk also be reduced.

This is my only grain recommendation as I’m keeping a close eye on a possible bullish position in corn so continue to place the proper stop loss as the grain market is sitting in limbo until some type of agreement with China comes about as we will have more clarity on that situation come December 15th.

TREND: LOWER 

CHART STRUCTURE: EXCELLENT

VOLATILITY: LOW

Coffee Futures—Coffee futures in the March contract continues its bullish momentum to the upside up another 325 points at 124.50 a pound hitting a 12-month high as this is the strongest soft commodity at the current time.

Presently I am not involved, however I’m certainly not recommending any type of bearish position as that would be counter-trend trading and if you are long a futures contract place the stop loss under the 10-day low which stands at 114.15 as an exit strategy, however the chart structure will start to improve on a daily basis therefor the monetary risk will be reduced.

Coffee prices are trading far above their 20 and 100 day moving average as this trend is strong to the upside as fundamentally speaking a supportive factor for arabica coffee Coex Coffee International on Wednesday said that Brazil’s coffee crop will be closer to 54-55 million bags well below the USDA’s forecast of 58 million bags.

There are major concerns in key coffee-growing regions in the country of Brazil which is the largest producer in the world about a lack of rain as I have witnessed this before and it will explode to the upside and if it continues as the volatility will increase substantially as all you have to do is look at the 2014 chart as that was the last drought that this commodity has experienced so stay long.

TREND: HIGHER 

CHART STRUCTURE: IMPROVING

VOLATILITY: INCREASING

This article was written by Michael Seery (CTA—COMMODITY TRADING ADVISOR)  www.seeryfutures.com

Soybeans Higher Break 7 Day Losing Streak

Harvest in the United States has been wrapped up as we will now focus on the 2020 crop as I have been recommending a bearish position from around the 9.23 level and if you took that trade continue to place the stop loss above the 2 week high which now stands at 9.17, however the chart structure will improve on a daily basis therefor the monetary risk will be reduced significantly in the coming days ahead.

Soybean prices are trading far below their 20 and 100 day moving average as this trend is strong to the downside as I still believe as I’ve stated in many previous blogs I think prices will test the contract low which was hit on September 9th at 8.65 in the coming days ahead as a trade agreement with China still has not been written in stone.

At the current time this is my only grain recommendation as soybean meal continues to head lower putting pressure on soybean prices so stay short as picking a bottom is extremely dangerous in my opinion.

TREND: LOWER 

CHART STRUCTURE: IMPROVING

VOLATILITY: LOW

This article was written by Michael Seery (CTA—COMMODITY TRADING ADVISOR)  www.seeryfutures.com

How Low Are Soybean Prices Going?

Soybean Futures

Yesterday’s crop progress report stated that 94% of the crop has been harvested and that should be wrapped up by next week as we will now focus on the 2020 acres number and that should give us an estimate of what next year’s production numbers might be.

I have been recommending a bearish position from around the 9.23 level & if you took that trade continue to place the stop loss above the 2 week high standing at 9.23 as the chart structure will start to improve in next week’s trade therefor lowering the monetary risk. If you have been following my previous blogs you understand that I continue to think that prices will retest the contract low which was hit on September 9th at 8.65 possibly in next weeks trade as technically and fundamentally speaking this market remains weak.

Soybean prices are trading far below their 20 and 100 moving average telling you that the trend is to the downside as this is my only grain recommendation currently so stay short and continue to place the proper stop loss.

TREND: LOWER

CHART STRUCTURE: IMPROVING

VOLATILITY: LOW

This article was written by Michael Seery (CTA—COMMODITY TRADING ADVISOR)  www.seeryfutures.com

Negative Week for Grain Prices Due to Weather and Optimism in Trade

Grains such as soybeans, corn, and wheat are trading with a negative note on Friday as investors are closing positions ahead of the weekend. Agricultural futures are ready to close the week with losses.

Soybean contracts down for the second day

ZS1 Soybean Futures 1-hour chart Sept 6
ZS1 Soybean Futures 1-hour chart Sept 6

Soybean is trading in consolidation mode after the deep decline performed on Thursday. Investors are trading in profit-taking mode ahead of the weekend.

On Thursday, soy was rejected by the 8.80 area, and it fell 1.60% to close at 8.61. On Friday, the grain attempted a recovery, but the dovish pressure was too intense, and it is now trading 0.12% down.

On the week, soybean is ready to close its third negative week in the last four, this time with a drop of 0.80% in the period. The unit has been trading in a range between 8.62 and 8.80 for a month.

Technical indicators are suggesting more room for the downside. However, the mentioned 8.62, and the 8.45 area are containing the unit.

Corn breaks below 3.56 and trades at near 4-month lows

ZC1 Corn Futures 1-hour chart Sept 6
ZC1 Corn Futures 1-hour chart Sept 6

Corn is trading negative on Friday after a brief period of consolidation on Thursday. However, the picture is really dovish and even more now that the pair broke below the 3.56 support and is trading at 3.55, its lowest level since May 13.

Currently, futures of corn are trading at 3.56, 0.63% negative on the day. Technical conditions remain bearish for the unit with the 3.50 and 3.40 areas as next support zones.

On the week, corn resumed its free-fall from 3.76 after the recovery performed the previous week. This time, corn contracts are falling 3.60% on the period. The technical picture is also very dovish.

Wheat stops two days of gains and falls on Friday

ZW1 Wheat 1-hour chart September 6
ZW1 Wheat 1-hour chart September 6

Wheat is trading down on Friday as investors are taking profits ahead of the weekend and after two days of gains. The grain is trading 0.75% down at 4.62, and it is heading to test the 4.60 area.

On the week, futures of wheat are fighting to close the period in positive, but the odds are against it as technical indicators are suggesting more declines before the end of the session. Wheat is trading 0.05% negative on the week.

Coffee on consolidation mode below 100.00

Futures of coffee has been trading in a small range between 95.00 and 98.00 during the whole week. Consequently, the unit is posting a weekly decline, but the drop is not that much. Coffee contracts have declined 1.50% in the week.

Soybeans, Corn Collapsed After a Good AMIS Report

Grains such as soybeans, corn, and wheat are trading down on Thursday as investors are digesting the latest AMIS crop report and optimistic news about new trade talks.

The market sentiment improved considerably on Thursday. Investors welcomed the announcement of a new round of trade talks between the United States and China in October.

However, a new crop report showing that forecast for supply in grains was lifted sharply, “mostly reflecting a massive upward revision for the US,” pushed prices down.

According to the Agricultural Market Information System market monitor for September, “world maize production has been lifted sharply in view of a massive upward revision for the US. Rice production is also seen higher while wheat production is expected to increase to a record. In the case of soybeans, a projected year-on-year decline in output is unlikely to become a concern, as overall supplies remain adequate, especially given the dampening impact of African Swine Fever on feed demand in China.”

AMIS highlighted that money managers liquidated long positions in wheat and corn, “establishing modest short holdings for both.” However, in the case of soybeans, “it added to its net short position m/m.”

Soybeans down on Thursday and lost two days of gains

ZS1 Soybean 1-hour chart September 5
ZS1 Soybean 1-hour chart September

Futures of soybean are trading down on Thursday as investors are digesting the latest AMIS report. Improving supply expectations and long position liquidations are pushing prices lower.

Early in the day, soybeans traded higher to 8.78, intra-day high. But the news and a rejection of that level sent the unit down to 8.65. The contract of soy is now priced at 8.65, which is 1.10% negative on the day.

Technical indicators are suggesting more declines in the short and middle term. The next support is at 8.63, followed by the 8.60 area. Be aware of stop-loss triggering below 8.60.

Corn consolidates losses around 3.59

ZC1 Corn 1-hour chart September 5
ZC1 Corn 1-hour chart September 5

Corn is trading positive on Thursday for the first time in the last five sessions as investors are digesting the AMIS report.

“In the US, the crop is progressing under mixed conditions across much of the corn belt due to the late sowing this season,” the report says. “Final yields will depend on how the weather performs over the next month.”

In this framework, futures of corn attempted to bounce from 3.56 per bushel, but the 3.61 level contained the unit. Corn is now trading 0.10% positive on the day at 3.58, but it is losing steam.

Wheat posts second day of gains, but it stopped its advance

ZW1 Wheat 1-hour chart September 5
ZW1 Wheat 1-hour chart September 5

Wheat is performing its second day of gains on Thursday, but recent crop report news hurt the unit and it pared gains at 4.69.

The unit is now trading at 4.66, 1.03% positive in the day. Oscillators are suggesting a turn in the direction for the unit, but the 4.64 is supporting the contract. Watch out for the 4.60 area, followed by the 4.56 and 4.50 levels for supports.

Grains Mixed on Better Crop Conditions and Hopes for US Grains Demand

Soybeans, corn, and wheat are trading mixed on Wednesday as grain investors are digesting news from the USDA regarding crop ratings and US grain exports.

Soybeans higher amid robust export inspections

ZW1 Wheat futures 1-hour chart September 4
ZW1 Wheat futures 1-hour chart September 4

Soybeans are trading positive for the third day in a row, but the movement remains in a small range between 8.60 and 8.80. Investors welcomed news about an increase in export inspections.

The U.S. Department of Agriculture reported they inspected 1.28 million metric tons of soybeans for overseas delivery between August 23 and 29, which was a 33% increase from the previous seven days and also an increase from the 776.277 metric tonnes reported in the same period of 2018.

Soybean investors are taking the news as a signal that the demand from U.S. supplies has started to grow again.

Besides, the weekly crop report was released and showed that soybeans crop remained unchanged with a 55% rated good/excellent, which is considerably lower than the 66% a year ago. Soybean blooming and pods are also below five-year averages.

In that framework, futures of soybeans attempted a decisive run overnight, but the unit was capped at 8.74. Then, it started to fall to current levels around 8.69. Soy is currently flat on the day.

However, the odds have changed for soybeans as technical indicators are signaling a bullish extension is gaining momentum in the daily chart. The positive sentiment is even more prominent in the 1-hour chart with oscillators and moving average pointing to the upside too.

If the pair holds above the 8.68, it will recover until the 8.74 again. Then, 8.78 is waiting for the unit.

To the downside, below the 8.68, soybean contracts will find buying interest at 8.62 and 8.60.

Corn extends decline for the fourth day

ZC1 Corn futures 1-hour chart September 4
ZC1 Corn futures 1-hour chart September 4

Futures of corn are trading lower again on Wednesday as investors crop conditions have improved in the last week. Corn is now heading to test August 14 low at 3.58.

Corn crops were rated 58% good or excellent, above the 57% condition the previous week. According to the USDA, corn was in dough stage at 81%, well below the 93% in the five-year average.

Earlier in the day, corn was trading slightly positive, but after failing at the 3.63 level, it started to fall and it broke Tuesday’s lows at 360 and extended drops to the current 3.59. Corn is now 0.50% negative in the day, trading at lows of the session.

Technical indicators suggest that the unit is oversold so that a brief bounce could be expected. However, both the 1-hour and the daily chart suggests more dovishness.

If corn consolidates levels below 3.60, next support will be at 3.58, followed by 3.55 and 2.50. Any potential upside will need the unit to break above 3.63.

Wheat pared gains at 4.60, back to test 4.55

ZW1 Wheat futures 1-hour chart September 4
ZW1 Wheat futures 1-hour chart September 4

Futures of wheat are showing some signal of being alive with its first positive session in the last five trading days. On Wednesday, wheat is consolidating losses after the declined performed since August 28 high around 4.78.

The USDA reported that U.S. spring wheat harvest is 55% completed, well above the 78% average by this time in the previous five years.

Early in the day, wheat tested the 4.60 in an attempt to recover more ground from Tuesday minimums at 4.50. However, the unit was rejected by the 4.60 area, and contracts were sent to be traded at 4.55.

The unit is still 0.45% positive in the day, but technical indicators are signaling that the upside recovery is not too active. A retest of the 4.50 area is expected unless the unit breaks above the 4.60 resistance.

Soybeans, Corn down; Wheat at 4-month lows

Corn, soybeans and other soft futures such as wheat are trading down on Monday as investors are digesting the last set of tariffs on Chinese products, improved weather and supply conditions.

Soybeans start trading with a negative gap

ZS1 Soybean 1-hour chart September 3
ZS1 Soybean 1-hour chart September 3
ZC1 Corn 1-hour chart September 3
ZC1 Corn 1-hour chart September 3

Futures of soybeans are trading negative on Tuesday as investors are digesting improved weather forecast and concerns amid the trade war and the new set of tariffs that the United States put on play Sunday.

Soybeans are currently trading 0.60% negative in the session after opening the day with a negative gap at 8.66. Then, the unit fell to be bought as cheap as 8.59, where it found support. It is now at 8.64.

Technical indicators suggest more room for the downside with Momentum, Awesome Oscillator and MACD signaling bearish conditions in the 1-hour chart.

However, in the bigger picture, soybeans are trading in a range between 8.55 and 8.80.

Soybean investors were slightly less dovish last week as the CoT showed that net short positions were declined to 75,551 in the August 27 week from 76,820.

Corn falls for the third session and tests the 3.64 area

ZW1 Wheat 1-hour chart September 3
ZW1 Wheat 1-hour chart September 3

Corn is trading negative for the third session as the unit is testing the 3.64 area as investors are digesting improved weather conditions in the last days.

According to the CoT report, investors increased their net-short positions in corn to 96,370 in the week of August 27, the highest level in three months. Up from 82,266 the previous week.

So, with investors betting on lower prices, Corn futures look ready to break below the 3.64 area. Besides, technical indicators in the 1-hour chart are also signaling for more drops in the next few hours.

Below 3.64, corn will find support at 3.63 and then 3.60. Finally, the grain would open the door for a retest of the 3.58 area, August’s lows.

Wheat extends decline to lowest since May 16

Futures of wheat are trading down for the fourth negative day as investors are digesting reports of abundant global supplies. However, the CoT report showed that net short contracts declined to 37,330 for hard-red winter futures contracts in the week of August 27, down from 40,404 the previous week.

The trend in futures of wheat is clearly bearish with the unit extending declines steadily from the 4.77 area traded on August 29. Earlier in the day, the unit broke below the 4.62 area and after a small pullback, it extended loses to test the 4.56 level.

Currently, Wheat futures are trading at 4.57’6, which is 1.05% negative on the day. In the one-hour chart, technical indicators are mixed with oscillators going north but Momentum and moving averages signaling for more drops. So, a brief period of consolidation is expected around 4,58, but the big picture remains bearish.

Wheat will see next support at 4.53, then, 4.50 and the 4.30 area. To the upside, ZW1! is contained by the 4.60 area and then, 4.62 will act as resistance.

Grains to Close Week, Month With Losses, All About Trade War

Grains are trading mixed on Friday but with a negative note on August as investors are still waiting for trade war developments. As for now, conciliatory words between US and China are giving some hopes.

“The most important thing is to create the necessary conditions for continuing negotiations, said Gao Feng, a spokesman for China’s Commerce Ministry. However, he said that China has an arsenal of measures for retaliation. However, they don’t want to use it.

Despite the conciliatory tone, the market is reluctant to believe in everything China and the United States said, as it seems they want to have a prolonged trade war. Farmers, then, are suffering the consequences.

Soybean ready to close August with gains

ZS1 Futures of Soybean 1-hout chart August 30
ZS1 Futures of Soybean 1-hout chart August 30

Soybeans are trading positive for the third day in a row as investors welcomed conciliatory feeling between the two parts involved in the trade war. On Friday, futures of soybeans jumped to trade as high as 8.78 per bushel, but the level resisted and it sent the unit back to previous levels.

Profit-taking ahead of the end of the week and month is keeping the grain out of higher prices. Currently, soybean is trading 0.60% positive on the day at 8.73.

On the technical analysis front, odds are for a bullish extension in the short and middle terms as studies on both, the 1-hour and daily charts, are pointing to the upside.

On the week, soybean is closing the first positive period in the last three weeks. The oilseed is posting a 2.10% weekly gain, recovering almost all losses experienced in the previous two weeks.

In the monthly chart, soybean is closing August with a 0.63% gain as the unit was on time to reverse losses in the first half of the month, but the benefit is not that big. August would be the third month of gains in the last four. The monthly chart also suggests that the grain is moving in a long term range between 8.44 and 9.30.

Corn down amid profit-taking

ZC1 Futures of Corn 1-hour chart August 30
ZC1 Futures of Corn 1-hour chart August 30

Corn is trading down for the second day as investors are closing positions ahead of the end of the month. Early in the day, the contract attempted to break above the 3.74 level, but it wasn’t successful.

Currently, corn is trading 0.40% negative at 3.69. The unit is now testing the 3.69 area, which is the support that is containing the downside. Below there, the next frontier would be 3.66.

On the week, corn is giving signals of life as the unit is performing its first period of gains after the sell of experienced in the last three weeks. Thought the move is on a consolidation phase rather than a recovery.

The month is also an ugly picture for corn as it is closing its third negative period. The unit has now entered on full steam into the long term range traded between July 2014 and May 2019 between 3.40 and 4.00.

Wheat breaks below 4.62 and trades at lows since May

ZW1 Futures of Wheat 1-hour chart August 30
ZW1 Futures of Wheat 1-hour chart August 30

Futures of wheat are trading negative on Friday with the unit breaking below the 4.62 area and extending drops to 4.59, its lowest level since May 16.

Previously in the day, wheat traded around 4.66, but a break below the 4.64 triggered stop losses that fueled declines to 4.62, where another batch of stop losses was activated. Then, the unit found support just below the 4.60 area.

Currently, the unit is trading at 4.60, 2.50% negative on the day.

On the week, the unit is falling 3.50%, extending losses after the previous week small recovery.

On the month, wheat is falling for the second period, with August performing 5.28% down in the period. Overall, wheat is inside a downtrend with the 4.20 area as the most likely destiny.

Grains roundup for August 30

Coffee is down in the day, week, and month as futures of coffee weren’t able to break above the 98.00 area. The contract is now traded at 95.25, 2.15% down. On the week, coffee is 0.11% down after attempting a recovery that was capped at 98.50. In the bigger picture, coffee is closing August with a 3.25% decline, extending the already sell-off of 10.30% of value performed in July. Technical analysis suggests more declines in all frame times.

ZC1 Futures of Coffee 1-day chart August 30
ZC1 Futures of Coffee 1-day chart August 30

Sugar is having the same story of coffee with declines in the day, week, and month. The trend in the sugar futures is even more visible to the downside with prices at 11-month lows around 11.10. The unit is closing its fifth negative week in a row, and its second month with red numbers in a row. August is 8.20% negative for sugar.

SB1 Futures of Sugar 1-day chart August 30
SB1 Futures of Sugar 1-day chart August 30

Happy weekend and stay safe!