cmdty FMS Daily

Jun E-mini S&Ps this morning are up +0.47% at a 3-week high on expectations of strong S&P 500 Q1 corporate earnings results. Netflix is up over 7% in pre-market trading after it reported better-than-expected Q1 earnings and forecast a bigger-than expected increase in subscribers for Q2. European stocks are up +0.63% as automakers gained when China removed a two-decade restriction and will let foreign car makers own more than 50% of local ventures, which should boost foreign automakers profits. Also, exporters gained after EUR/USD fell back from a 2-week high and moved lower, which is positive for earnings for European exporters. Gains were limited in European stocks after the German Apr ZEW survey expectations of economic growth fell -13.3 to a 5-1/3 year low of -8.2. Asian stocks settled mixed: Japan +0.06%, Hong Kong -0.83%, China -1.41%, Taiwan -1.32%, Australia unch, Singapore +0.03%, South Korea -0.17%, India +0.26%. China's Shanghai Composite fell to a 2-1/4 month low after China Mar industrial production rose +6.0% y/y, the slowest pace of increase in 7 months, and as technology stocks tumbled after the U.S. banned ZTE Corp, China's second-largest telecommunications gear-maker, from buying American technology. Chinese bank stocks may get a boost in Wednesday's session as the PBOC, after Chinese markets closed Tuesday, cut some banks' reserve requirement ratio by 100 bp or 1.0%, effective Apr 25.

The dollar index is up +0.04%. EUR/USD is down -0.03%. USD/JPY is down -0.03%.

Jun 10-year T-note prices are down -2 ticks.

The German Apr ZEW survey expectations of economic growth fell -13.3 to a 5-1/3 year low of -8.2, weaker than expectations of -6.1 to -1.0.

China Q1 GDP rose +6.8% y/y, right on expectations.

China Mar industrial production rose +6.0% y/y, weaker than expectations of +6.3% y/y and the slowest pace of increase in 7 months.

China Mar retail sales rose +10.1% y/y, stronger than expectations of +9.7% y/y.



Key news today includes: (1) Mar housing starts (expected +2.4% to 1.266 million, Feb -7.0% m/m to 1.236 million), (2) Mar industrial production (expected +0.4% m/m, Feb +0.9% m/m), (3) San Francisco Fed President John Williams (voter) speaks at a NABE conference in Madrid, Spain, (4) Fed Governor Randal Quarles testifies before the House Financial Services Committee on the conduct of supervision and regulation of depository institution holding companies and other financial firms supervised by the Fed, (5) Philadelphia Fed President Patrick Harker (non-voter) speaks on “The Economics of Equitable Education: How Today’s Loans, Access and Training Affect Tomorrow’s Economy” at an event in Philadelphia, (6) Chicago Fed President Charles Evans (non-voter) discusses current economic conditions and monetary policy at the Chicago Rotary Club, (7) Atlanta Fed President Raphael Bostic (voter) speaks on the economy at a seminar in Atlanta.



June S&P 500 E-minis this morning are up +12.50 points (+0.47%) at a 3-week high. Monday's closes: S&P 500 +0.81%, Dow Jones +0.87%, Nasdaq +0.71%. The S&P 500 on Monday rallied to a 3-week high and closed higher on reduced Middle East tensions after Saturday's U.S. attack on Syria was only a limited one-time strike with no impact on Russian personnel or military assets. Stocks were also boosted by the +0.6% increase in U.S. Mar retail sales, stronger than expectations of +0.4%. Healthcare stocks rallied after CNBC reported that Amazon has shelved a plan to sell and distribute pharmaceutical products after considering it last year.



Grains prices this morning are higher with May corn +1.75 (+0.46%), May soybeans +3.00 (+0.25%), and May wheat +3.25 (+0.70%). Grain prices on Monday closed lower: May corn -3.75 (-0.97%), May soybeans -12.25 (-1.16%), May wheat -10.25 (-2.17%). Bearish factors included (1) the action by Safras to raise its Brazil 2017/18 soybean crop estimate to a record 119.2 MMT from 117.3 MMT last month, (2) reduced Chinese soybean demand after Chinese customs data showed China Mar soybean imports fell -11% y/y to 5.66 MMT, the lowest for the month in 3-years, and (3) forecasts for increased precipitation in the Great Plains, which should improve the condition of the U.S. winter wheat crop.

May soybeans on Friday had posted a 5-week high on bullish factors that included (1) reduced trade tensions between the U.S. and China after Chinese President Xi Jinping said he would open Chinese markets, and (2) positive carry-over from last Tuesday's WASDE report where the USDA unexpectedly cut its U.S. 2017/18 soybean ending stocks estimate to 550 mln bu, less than expectations of an increase to 574 mln bu, and also cut its global 2017/18 soybean ending stocks estimate to 90.8 MMT, less than expectations of 92.9 MMT.

Corn and beans also continue to see support from the Mar 29 USDA Prospective Plantings report, which showed substantially smaller-than-expected 2018 corn and soybean planting (i.e., corn planting at a 3-year low of 88.0 mln acres vs expectations of 89.5 mln acres; soybean planting at 89.0 mln acres vs expectations of 90.9 mln acres).

Monday's USDA Crop Progress report confirmed the poor condition of the U.S. winter wheat crop due to drought. U.S winter wheat in good/excellent condition was at 31% as of Apr 15, up from 30% last week but down sharply from 54% last year. The winter wheat conditions represent the worst spring start since 2002. The NWS reported that the wheat-growing region from Texas to southwest Kansas had the driest Dec-Feb on record. On the negative side, the USDA in last Tuesday's WASDE report raised its U.S. 2017/18 wheat ending stocks estimate to 1.064 bln bu, higher than expectations of 1.039 bln bu, and unexpectedly raised its global 2017/18 wheat ending stocks estimate to a record 271.22 MMT, more than expectations of a cut to 268.4 MMT. Also, Russia recently extended its zero-wheat export tax for an additional 2-years, which should boost Russian wheat exports.



Livestock prices on Monday settle mixed: Jun cattle +0.525 (+0.51%), Jun hogs -0.850 (-1.09%). June cattle prices on Monday climbed to a 2-week high as funds covered short positions on cash market strength after cash cattle prices climbed to a 1-week high. USDA slaughter data shows 8.975 mln head of cattle processed this year through Apr 14, up +2.2% y/y, and U.S. Feb beef production rose +2.6% y/y to 1.98 bln lbs. Jun cattle posted a 1-week low Wednesday on domestic beef demand concerns after wholesale beef prices fell to a 2-month low. Cattle prices plunged to a 1-year low Apr 4 on news of China's implementation of a 25% tariff on U.S. pork exports to China and by Wednesday's news that beef is on the list of products subject to China's proposed 25% tariff on $50 billion of U.S. products. The USDA projects that U.S. 2018 beef production will climb +5.8% y/y to a record 27.752 bln lbs. Foreign demand for U.S. beef is robust with U.S. Jan-Feb beef exports up +12.6% y/y at 469.517 mln lbs and with the USDA projecting that U.S. 2018 beef exports will climb +5.7% y/y to a record 3.025 bln lbs.

The Mar 22 USDA Cold Storage report was supportive as it showed beef in cold storage in Feb fell -8.3% m/m and -8.4% y/y to 460.276 mln lbs. The Mar 23 USDA Cattle on Feed report was negative as it showed cattle on feed as of Mar 1 rose +8.8% y/y to 11.715 million head, above expectations of +8.2% y/y, and cattle placements in feedlots during Feb rose +7.3% y/y to 1.817 million head, higher than expectations of a +4.2% y/y. Also, cattle marketed for slaughter in Feb rose +1.6% y/y to 1.675 mln head, above expectations of +1.2% y/y.

June hog prices on Monday closed lower on concern about bigger pork supplies. USDA slaughter data showed the average hog carcass weight last Friday rose to a 1-month high of 216.8 lbs, which should lead to bigger pork supplies. Also, pork packer profit margins dropped to a 3-1/2 week low, which may curb packer demand for hogs. Domestic demand concerns remain as well after wholesale pork prices fell to a 3-year low last Wednesday. Jun hogs rose to a 3-week high Friday on strength in the cash market after cash hog prices rose to a 2-1/2 week high Friday. Jun hogs slumped to a contract low Apr 4 and nearest-futures (J18) fell to a 1-1/2 year low after China said that it may levy a 25% tariff on U.S. pork exports starting immediately, which is likely to nearly shut down U.S. pork exports to China and cause backed-up pork supplies in the U.S. Even aside from tariffs, U.S. pork production is bearish after rising by +3.6% y/y to 2.06 bln lbs in February. Slaughter rates are also on the rise as USDA slaughter data shows 35.61 mln hogs processed this year through Apr 14, up +2.7% y/y. The Mar 22 USDA Cold Storage report was negative as well as it showed overall pork supplies in Feb rose +5.9% m/m and rose +8.3% y/y to 614.918 mln lbs. Foreign demand for U.S. pork is firm with U.S. Jan-Feb pork exports up +7.6% y/y at 977.496 mln lbs and the USDA projects that U.S. 2018 pork exports will climb +5.2% y/y to a record 5.925 bln lbs. The USDA also projects that U.S. 2017/18 pork production will climb +5.2% y/y to a record 26.926 bln lbs.

The USDA Q1 Hogs & Pigs report (released March 29) was bearish as it showed that the U.S. pig herd as of Mar 1 rose +3.1% y/y to 72.908 mln, which was a record high for a March 1st (data from 1964). Also, sows retained for breeding as of Mar 1 rose +1.7% y/y to 6.2 mln, more than expectations of +1.4%, and hogs marketed for slaughter rose +3.3 y/y to 66.708 million, more than expectations of +2.2% y/y and a record high for a March 1st (data from 1964). In addition, piglets per litter in Q1 rose +1.4% y/y to 10.58, higher than expectations of +1.0% y/y and a record high for a March 1st (data from 1964).



Softs this morning are mixed with May sugar -0.06 (-0.50%), May coffee -0.15 (-0.13%), May cocoa -11 (-0.41%), and May cotton +0.14 (+0.17%). Softs on Monday settled mixed: May sugar -0.10 (-0.83%), May coffee -3.05 (-2.60%), May cocoa +138 (+5.38%), May cotton -0.16 (-0.19%). May sugar on Monday closed lower. May sugar has trended lower over the past 5-weeks down to a 2-1/2 year nearest-futures low last Wednesday as signs of abundant supplies fueled fund selling. Unica reported Brazil's Center-South 2017/18 sugar output in the crop year through Mar rose +1.21% y/y to 36.059 MMT with the percent of sugar used for ethanol down to 53.54% from 53.71% last year. Also, the Brazilian real plunged to a 16-month low against the dollar last Tuesday, which provides incentive for Brazil's sugar producers to boost more-profitable exports with the weak real. Other bearish supply factors included (1) the forecast by the Thailand Office of Cane and Sugar Board for Thailand 2017/18 sugar production to rise to a record 12 MMT, and (2) the forecast by India's SMA that India's 2017/18 sugar production will rise to a record 29.5 MMT and that India may boost its sugar exports to a 4-year high of 2 MMT because of the record output. India also recently scrapped its 20% duty on sugar exports, which should spur an increase in its sugar exports. ISO projects a global 2017/18 sugar surplus of +5.03 MMT following the global 2016/17 deficit of -6.465 MMT. The USDA's Foreign Agricultural Service (FAS) on Nov 17 forecasted (1) a record 2017/18 global sugar surplus of 10.73 MMT, and (2) record global 2017/18 sugar production of 184.95 MMT.

May coffee prices slumped to a 9-3/4 month nearest futures low Monday as the outlook for abundant coffee supplies spurred fund selling of coffee futures. Safras on Thursday projected Brazil 2018/19 coffee production may jump +20% to a record 60.5 mln bags amid beneficial weather. Safras also hiked its Brazil 2017/18 coffee production estimate to 50.6 mln bags from a prior estimate of 50.45 mln bags. Current supplies are robust as ICE-monitored coffee inventories rose to a 2-1/2 month high Thursday of 1.957 mln bags and are just below Jan's 2-1/4 year high of 2.017 mln bags. Meanwhile, Vietnam said it expects its 2018 coffee exports to rise +9% y/y to 1.55 MMT. ICO projects that global 2017/18 coffee production will climb +0.8% y/y to a record 158.93 mln bags. On the supportive side, the USDA projects that global 2017/18 coffee ending stocks will fall -8.6% to a 5-year low of 29.3 mln bags, and U.S. Mar green coffee inventories fell -2.3% y/y to 6.567 mln bags.

May cocoa prices on Monday soared to a 17-month nearest-futures high on optimism about stronger cocoa demand amid tighter supplies. This week's data is expected to show European Q1 cocoa processing rose +3.4% to a 6-year high of 351,292 MT and North American Q1 cocoa processing rose +1.5% y/y to 121,954 MT. Also, Barry Callebaut, the world's top cocoa processor, reported global chocolate sales rose +2.5% y/y from Aug-Jan. Ivory Coast farmers delivered 1.517 MMT of cocoa beans to Ivory Coast ports during Oct 1-Apr 15, down -0.6% y/y. Cocoa prices have rallied sharply this year on dry weather in the Ivory Coast, which has received less than 75% of normal rainfall over the past month, according to Speedwell Weather. Cocoa purchases from the Cocoa Bard of Ghana, the world's second-biggest cocoa producer, have fallen -2.7% y/y to 642,451 MT from Oct 13-Mar 15. ICCO projects that 2017/18 global cocoa production will fall -2.3% y/y to 4.638 MMT and that the global cocoa surplus will fall to +105,000 MT from 2016/17's 6-year high surplus of 300,000 MT.

May cotton on Monday closed lower on forecasts for rains in Texas, which should boost soil moisture levels. Cotton rallied to a 1-month high Friday on bullish factors that included (1) projections from the China Cotton Association for 2018/19 cotton acreage in China, the world's biggest cotton grower, to fall -4% y/y to 2.8 mln hectares, (2) reduced trade tensions between the U.S. and China after Chinese President Xi Jinping promised to open Chinese markets, and (3) last Tuesday's WASDE report where the USDA raised its U.S. 2017/18 cotton export estimate to a 12-year high of 15 mln bales from 14.98 mln bales estimated in Mar. On the negative side, the USDA cut its U.S. 2017/18 cotton ending stocks estimate to 5.3 mln bales, more than expectations of 5.1 mln bales, and raised its global 2017/18 cotton production estimate to a 5-year high of 122.18 mln bales, up from a Mar estimate of 121.9 mln bales. Cotton prices on Apr 4 plunged to a 1-3/4 month low on the Chinese proposal to slap 25% tariffs on U.S. cotton exports. Chinese cotton demand has already weakened with China Jan-Feb cotton imports down -6.9% at 236.4 MT. Cotton still has support from the drought in the Southern Plains. The U.S. Drought Monitor reported that 28% of Texas (the biggest U.S. cotton-producing state) was in a severe-to-extreme drought as of Apr 10, up from 20% three months earlier. Cotton prices were undercut by the Mar 29 USDA Prospective Plantings forecast for 2018 U.S. cotton planted acreage of a 7-year high of 13.5 mln acres, more than expectations of 13.3 mln acres. Also, India, the world's second largest cotton producer, projects its 2017/18 cotton production will climb +9.8% y/y to a 3-year high of 37 mln bales. Cotton demand is a supportive factor as the USDA projects that global 2017/18 cotton use will climb to a 10-year high of 120.39 mln bales.



May crude oil prices this morning are up +9 cents (+0.14%) and May gasoline is up +0.0004 (+0.02%). Monday's closes: May crude -1.17 (-1.74%), May gasoline -0.0255 (-1.23%). May crude oil and gasoline on Monday closed lower on reduced Middle East tensions after the U.S. military strike on Syria was conducted quickly and on a very contained basis. Crude oil prices were also undercut by negative carry-over from last Friday's Baker Hughes report that active U.S. oil rigs rose by +7 rigs to a 3-year high of 815 rigs.



Metals prices this morning are weaker with Jun gold -5.4 (-0.40%), May silver -0.062 (-0.37%), and May copper -0.024 (-0.78%). Monday's closes: Jun gold +2.80 (+0.21%), May silver +0.019 (+0.11%), May copper +0.0245 (+0.80%). Metals on Monday closed higher on a weaker dollar and on fund buying of gold as long gold positions in ETFs rose to a 5-year high last Friday of 2393 MT. Copper prices were boosted by tighter supplies after LME copper inventories fell -5,025 MT to a 3-week low of 352,000 MT.



June 10-year T-notes this morning are down -2 ticks. Monday's closes: TYM8 -0.5, FVM8 -0.5 Jun 10-year T-notes on Monday fell to a 3-week low and closed slightly lower on reduced safe-haven demand for T-notes on relief that the U.S. military strike on Syria is over and that there was no impact on Russian personnel or military assets. T-note prices were also undercut by the stronger-than-expected U.S. Mar retail sales report of +0.6%. T-notes found support on New York Fed President Dudley's comment that the Fed will stick to its "gradual" path of raising interest rates unless inflation moves up by an "appreciable margin."



The dollar index this morning is up +0.04 (+0.04%). EUR/USD is down -0.0004 (-0.03%) and USD/JPY is down -0.03 (-0.03%). Monday's closes: Dollar Index -0.375 (-0.42%), EUR/USD +0.0049 (+0.40%), USD/JPY -0.23 (-0.21%). The dollar index on Monday closed lower on comments from President Trump who tweeted that Russia and China are playing the currency devaluation game while the U.S. raises interest rates and that is "not acceptable." The dollar was also undercut by dovish comments from New York Fed President Dudley who said the Fed will stay on is "gradual" rate hike path unless inflation moves up by an "appreciable margin."