Written Commentary
Market Outlook for US and South America Regions
Grains
Corn futures had a wild ride since mid-June. Futures rallied after the USDA June acreage report was near 3.53. Improving U.S. Midwest weather sank prices to near recent lows at 3.22. The USDA estimated the U.S. 2019/20 corn carryout to be near 2,248 million bushels. This was due to lower feed/residual use as a result of a higher estimate of June 1 stocks. The USDA estimated the U.S. 2020 corn crop at 15,000 million bushels. The drop was due to a farmer survey that lowered U.S. 2020 acres.
Livestock
Live cattle futures trading slowed to a turtle’s pace in June. August live cattle futures on June 1 settled at $98.97/cwt and on June 30 closed the month at $96.27. Beef packers and processors were able to increase slaughter capacity. With the increasing cattle slaughter there was also additional carcass weights. Steer carcasses for June 2020 averaged about 50 pounds heavier than June 2019. June did not eliminate all the backed up cattle.
Lean hog futures in June continued the trend down that began in January. On May 29 August 2020 lean hogs settled at $56.72 and on June 30 August lean hogs were $49.02/cwt with a new contract low made on June 26 at $47.52/cwt. Even with U.S. hog slaughter down at the beginning of June, close to 20% from the levels of January and February, hog and pork prices were pressured lower.
Financials
In recent weeks stock index futures have overperformed the news as the technical situation continues to improve. Stock index futures are substantially higher since the lows were made on March 23. In fact, NASDAQ futures were able to advance to a record high and are substantially above the psychological 10,000 resistance level.
Currencies
In mid-May the U.S. dollar broke out to the downside from a two-month trading range. Some of the pressure on the U.S. dollar was due to flight to quality long liquidation in light of higher stock index futures. There was some selling when it was reported that the first quarter U.S. gross domestic product was down 5.0% when a decline of 4.8% was anticipated.
The euro currency advanced in June when the European Central Bank at its regularly scheduled policy meeting almost doubled its asset-buying program. The ECB is adding EUR600 billion ($675 billion) to the EUR750 billion that it announced in March.
Energies
U.S. crude oil prices recently advanced to a four-month high. However, there was some profit taking as some investors questioned whether a plan by OPEC to begin phasing out its emergency production cuts may be too soon. There was support for futures on news that EIA data showed a big, 7.5M-bbl weekly drop in US crude-oil inventories. Some of this was due to an increase in air travel, which led to the huge crude oil drawdown.
Metals
Since the lows were made on March 16, gold has advanced $375 to near the 1830 level. The safe haven metal is still near its highest level since 2011, as investors are anticipating ultra-low interest rates may become even lower.
Market Outlook for China and Asia Regions
The key Chinese and Asian event over the last 30 days has been China’s economy returning to normal, with PMIs remaining in the expansion area and as trade data indicates economic growth. Other countries are also showing improvement in the economic situation, although to a lesser extent. Central banks in the region kept their policies mostly on hold while assessing the effectiveness of their previous stimulus measures on their economies.
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.
