Starting the trading week on a generally positive tone in many physical commodities, particularly grains. However, the markets are very watchful of new developments in Egypt.
Archive | January, 2011
Copper: Support from Weaker Dollar and Higher Equities
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
Surprisingly the copper market is showing some positive action overnight and that is in direct conflict with the action in the precious metals markets early this morning. However, with both Indian and Shanghai copper prices forging gains overnight, that seems to suggest that copper is set to continue last week’s generally positive track in prices. The copper market is helped by a weaker Dollar and slightly higher global equity market action, but it is also possible that a noted decline in exchange copper stocks overnight is lending the market some support. LME Copper Stocks were 394,025 tons down 4,050 tons. LME Copper stocks have increased 13 of the last 20 days. The Commitments of Traders Futures and Options report as of January 25th for Copper showed Non-Commercial traders were net long 23,912 contracts, a decrease of 6,277 contracts. The Commercial traders were net short 27,494 contracts, a decrease of 6,739 contracts. The Non-reportable traders were net long 3,583 contracts, a decrease of 460 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 27,495 contracts. This represents a decrease of 6,737 contracts in the net long position held by these traders.
Update: Unrest in Egypt Impacting Commodities
Protests in Egypt may have a wide impact on the region and Europe and is impacting many commodity markets.
Early Commodity Update – 2011.01.28
The negative psychology towards physical commodities this week appears to have been reversed overnight. US Treasury Secretary said that inflation is one of the lesser concerns that currently faces the current economic situation. China may start stockpiling necessary food-stuffs.
Early Commodity Update – 2011.01.27
The day is starting out mixed for most physical commodity markets.
Hogs: Short-term Cash News Still Very Strong
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
Another jump in pork cut-out values plus continued talk of a jump in pork exports for the next few months helped drive futures to new contract highs yesterday and supported the market again overnight. April hogs closed up the 300 point limit and nearby futures pushed to the highest level since August. August hogs pushed as high as 97.45 which is a new all-time high for any August contract. The market drove sharply higher on active buying from fund traders and trade houses as news of increased demand from South Korea plus a continued strong gain in pork cut-out values helped support the buying. Traders believe South Korea pork imports could jump as much as 30% this year after producers in the country has already culled 24% of their herd due to foot-and-mouth disease. Cash hogs were $1.00 higher at many locations and the forecast for bitter cold weather moving into the Midwest into the middle of next week added to the positive tone. Ideas that production will continue to decline in the weeks ahead helped to support the market as well. The drop in production from the 4th quarter to the first quarter is expected to be 465 million pounds by the USDA. If so, this would be the largest drop on record and may continue to provide support as the market moves from a large supply base to a lower production base. The CME Lean Hog Index as of January 24th came in at 76.72, up 26 cents from the previous session and up from 74.75 the week before. The estimated hog slaughter came in at 423,000 head yesterday. This brings the total for the week so far to 1.268 million head, up from 1.202 million last week at this time and up from 1.192 million a year ago. Pork cutout values, released after the close yesterday, came in at $87.48, up 89 cents from Tuesday and up from $86.01 the previous week. This is the highest pork value since September 30th. Weekly average weights for Iowa-Southern Minnesota as of January 22nd came in at 274.3 pounds, down from 274.8 the previous week and up from 269.9 pounds last year.
TODAY’S GUIDANCE: Rising open interest and news from the COT reports that the fund net long is still not at a burdensome level leaves the market technically bullish, but the market is still holding a hefty premium and short-term indicators are a bit overbought.
TODAY’S MARKET IDEAS: April hog close-in support is at 89.10 with 92.95 as next upside objective.
Cattle: Lower cash might spark more of a set-back; trend still up
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
News of lower cash cattle trade with futures already holding a stiff premium to the cash market helped to limit the advance yesterday and pressured the market some overnight. Traders see tightening supply ahead and a strong uptrend in cash cattle prices ahead but Texas cash cattle traded $1.00 lower yesterday at $105.00. April cattle closed sharply higher on the session yesterday and managed to fill part of the gap left on Monday morning. The market was slightly higher early in the day but the buying intensified into the mid-session to drive futures sharply higher as new highs in hogs and expectations for meat export demand to remain strong helped to support. Higher grain prices helped to support deferred contracts. August cattle recovered half of the losses of the previous five trading sessions. The market recovered after hitting the lowest level since January 10th into the close on Tuesday. Talk that the market was a bit oversold after taking out the previous day’s lows for seven sessions in a row added to the positive tone. The estimated cattle slaughter came in at 126,000 head yesterday. This brings the total for the week so far to 381,000 head, up from 375,000 last week at this time and up from 374,000 a year ago. Boxed beef cutout values were up 53 cents at mid-session yesterday and closed 31 cents higher at $173.59. This was up from $171.91 the prior week. Beef prices are at the highest level since July 10th of 2008. For the USDA Cattle Inventory report on Friday, traders see the US herd falling about 1.5% over the past year and the herd is already the smallest since the 1950′s. Hefty cow slaughter for much of the past year and a lack of “holding back” of any breeding stock for expansion has kept total supply higher than expected for the past year but the supply outlook remains one of tightening total supply ahead.
TODAY’S GUIDANCE: Futures got ahead of the cash market and cash weakness yesterday was a bit of a surprise.
Interest Rates: Looking To the FOMC Statement
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The Treasury market managed a range up move yesterday and prices temporarily moved back within striking distance of the upper end of the 2 month consolidation pattern. In fact, the March bonds yesterday managed to reach the highest price level since January 14th. While some press accounts pegged the rally yesterday on the hope for a spending freeze from the State of the Union address, a large potion of the rally took place in the lead up to and shortly after the Treasury auction. In fact, the March bonds saw a post auction rally of 1 point, but the market was unable to hold those gains overnight.
The scheduled economic data from yesterday was somewhat mixed, with the US Consumer Confidence reading significantly stronger than expected, while the Richmond Fed and Case-Shiller reports depicted weakness in the economy. In the end, the Treasury market seemed to embrace some concern for the economy, but prices might also have been boosted somewhat by a reduction of inflation fears in the face of sharp and ongoing declines in physical commodity prices.
While the market showed little reaction to the state of the union speech, it’s trading higher off the idea that Washington will have to at least slow the expansion of the deficit and that in turn could reduce some future Treasury supply flow. In looking ahead to the action today, the market is presented with a $35 billion 5 Year Note auction, a Mortgage Application Survey, new home sales and the FOMC statement.
The market probably won’t take too much direction from the mortgage application survey early today but the trade will probably take some direction from the New home sales report. However, expectations call for a minor improvement in home sales and if that comes to fruition, that could apply some temporary pressure to Treasury prices. On the other hand, with the trend of recent auctions being generally supportive to Treasury prices, the market might claw out some gains into and perhaps through the mid day auction window.
In looking forward to the FOMC statement, the general expectation is for little change in the wording of the statement, as the recovery still appears to be very fragile. Some analysts think the Fed will continue to discount the threat of inflation and some think that the Fed will still suggest that the economy still needs support. Some analysts even think that the Fed might suggest that the pace of growth is still uneven or perhaps even showing signs of decelerating. For the most part, analysts think that the FOMC statement will be either a non-event, or it will be supportive of Treasury prices.
The biggest problem for the bull camp is that bond and note prices are already sitting more than 2 full points above last week’s lows and that could suggest something of a bullish FOMC statement is factored into prices. Some players suggest that bond and notes would probably encounter very aggressive selling in the event that the Fed gives the slightest hint of a change in policy, as few in the trade think that is in the cards for today.
Soybeans: Argentina Export Block Threat; Nov Up For More Acreage
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The market saw continued weakness overnight and moved close to the level seen ahead of the USDA January 12th reports before catching support and moving higher on the day. Ideas that the Argentina crop has stabilized and might even improve plus talk that short-term demand for vegetable oils could ease during the Lunar New Year were seen as negative force to drive the market lower. Palm oil futures are sluggish this week even with talk that January palm oil production in Malaysia could be down 5-10%. Traders see continued good rains in Argentina through the middle of the week next week before the region might dry down again. Workers at the key export port of Rosario in Argentina indicated that they will block the entrance for loading ships and may also block the entrance for soybeans moving to crushing plants to six big companies. This could stop grain shipments and could slow or halt crushing at key plants located near the export port. The market was down sharply at the mid-session yesterday and lost another 10 cents late in the day as fund trader long liquidation selling was noted late in the day. The sharp sell-off in energy markets and weakness in equity markets soured the tone late in the day. Improving crop conditions in Argentina, a sharp break in crude oil and metal markets and a rally in the US dollar combined to spark fairly aggressive selling from speculators to drive the market sharply lower. The USDA confirmed a sale of 110,000 tonnes of US soybeans to China but indicated later in the morning that the sale was announced in error. The USDA also confirmed a sale of 2.74 million tonnes for China for the 2011/12 season which was thought to be the largest single-day sale on record. This is part of the sales announced from the trade delegation meetings last week. The USDA also confirmed a sale of 114,000 tonnes of US soybeans to Taiwan. Cash basis levels are said to be weak due to a slowdown in meal demand and weaker crush margins. Oil and meal were also under pressure into the mid-session with March meal at the lowest level since January 12th. Traders see increased talk from world politicians that more regulation may be needed to control food inflation as a potential negative force.
TODAY’S GUIDANCE: The threat of more Argentina export blocks and protests could push more exports to the US in the short-term. Oil export sales have already reached 84% of the USDA forecast for the year vs. 35.8% normal and meal sales reached 60.3% vs. 47.3% normal. If the USDA raises their export forecast, the total crush number might be adjusted higher and ending stocks lower. Soybean sales have reached 84.7% of the USDA total vs. 71.8% normal. Higher exports would also tighten ending stocks. We do not see a normal “February” break under the current set-up and on the contrary see the “need” for November soybeans to move higher right now in an attempt to capture more planted acreage this year.
Precious Metals: Mid-East Conflict Weigh on Prices
by Dave Hightower on January 31, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
OUTSIDE MARKET DEVELOPMENTS: While equity markets in Asia were generally mixed during overnight trading, stock indices in Europe are generally weaker this morning. Early indications are for the US stock market to open slightly lower this morning. The Dollar is slightly weaker against most of the major currencies during overnight trading. Protests in Egypt continue for a sixth day, with the Mubarak government still in control for now. Russia has raised reverse requirements for corporate non-resident bank accounts. Japanese Housing Starts during December were up 7.5% year-on-year, higher than expected. Japanese Industrial Production during December was up 3.1%, also higher than forecasts. Euro zone Inflation during January was up 2.4% year-on-year, in line with expectations. Major US economic numbers to be released this morning include December Personal Spending and Income at 7:30 AM, and a private survey of Purchasing Managers in the Chicago area at 8:45 AM. Fed regional President Lockhart will also speak during the session.
GOLD MARKET FUNDAMENTALS: Some technical traders will point out the inability to reverse a recent pattern of lower highs on the charts and in the early trade today, the April gold contract was trading as much as $21 an ounce below the highs from last week. Surprisingly the gold market hasn’t been able to benefit from initial weakness in the US Dollar this morning. However, Indian gold prices showed some initial positive action before the uncertainty in the Middle East seemed to undermine gold and other physical commodity markets. The gold trade might have garnered some support from news overnight of an ongoing expansion of the premium of gold bars over the price of gold in Singapore, as that can indicate interest in plowing capital into portable safe haven instruments. The gold market also saw suggestions from China overnight that the Peoples Bank of China should expand its ownership of gold and other precious metals but seeing that news just ahead of the Chinese New Year and into the Egyptian situation might have dampened its impact somewhat. Comex Gold Stocks were unchanged at 11.591 million ounces. The Commitments of Traders Futures and Options report as of January 25th for Gold showed Non-Commercial traders were net long 175,828 contracts, a decrease of 13,606 contracts. The Commercial traders were net short 216,480 contracts, a decrease of 17,138 contracts. The Non-reportable traders were net long 40,651 contracts, a decrease of 3,534 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 216,479 contracts. This represents a decrease of 17,140 contracts in the net long position held by these traders.
SILVER MARKET FUNDAMENTALS: Like gold, the silver market still seems to be partially undermined as a result of ongoing tensions in Egypt but the market did forge an impressive attempt to rally in the early trade today and that might have put some silver bears off balance. In fact, silver might have been undermined by news that Euro zone inflation readings were a touch hotter than some expected as that in turn raises the fears that interest rates in Europe might be set to rise sooner than was anticipated. In other words, silver seems to be reacting to classic physical commodity market fundamentals, but apparently slightly higher equity market action and a weaker Dollar wasn’t enough this morning to give the silver market a positive start to the new trading week. Some players suggest that silver was benefited from the recent COT positioning reports, which showed a reduction in the Non Commercial and Non reportable combined net long positioning. The Commitments of Traders Futures and Options report as of January 25th for Silver showed Non-Commercial traders were net long 30,697 contracts, a decrease of 1,320 contracts. The Commercial traders were net short 46,557 contracts, a decrease of 1,844 contracts. The Non-reportable traders were net long 15,859 contracts, a decrease of 526 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 46,556 contracts. This represents a decrease of 1,846 contracts in the net long position held by these traders. Comex Silver Stocks were 104.685 million ounces up 1,008 ounces. Stocks have declined 12 of the last 20 days.
PLATINUM: The April platinum market saw a continued pattern of lower highs in the early Monday trade, with platinum and other precious metals markets under pressure despite a slightly lower US Dollar trade. The platinum market might remain off balance with the Chinese New Year looming later this week, as that might temper expectations for improved physical demand directly ahead. Like gold and silver, platinum probably needs a favorable resolution to the Egyptian crisis to shake of a residual bearish tilt in prices. The Commitments of Traders Futures and Options report as of January 25th for Platinum showed Non-Commercial traders were net long 29,559 contracts, a decrease of 1,162 contracts. The Commercial traders were net short 34,159 contracts, a decrease of 601 contracts. The Non-reportable traders were net long 4,600 contracts, an increase of 562 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 34,159 contracts. This represents a decrease of 600 contracts in the net long position held by these traders. Critical support could be seen at last week’s consolidation low level of $1,781.10 in the April platinum contract.
TODAY’S MARKET IDEAS: The bears retain a slight edge as the fear of slowing off the threat of a regional conflict outbreak in the Middle East is being seen as a negative to precious metals prices. The bull camp has to hope for a quick and favorable solution to throw off a weaker price bias.