CRB FMS Daily Report
Dec E-mini S&Ps this morning are up +0.06% and European stocks are up +0.15% on the prospects that that the ECB will extend its QE program for 9 months until Sep 2018. According to the report, an unnamed official said the ECB will reduce its bond purchases in half to 30 billion euros a month from the current 60 billion euros starting in Jan, but will extend the program until Sep of 2018. EUR/USD weakened on the report and the 10-year German bund yield dropped to a 2-1/2 week low of 0.415%. Strength in the Chinese economy is also positive for global growth after China Sep imports rose a more-than-expected +18.7% y/y, the largest increase in 6-months. Mining stocks are higher as Dec COMEX copper climbs +0.46% to a new 1-month high on strong Chinese demand after China Sep copper imports rose +10% m/m and +26.5% y/y to 430,000 MT. Energy stocks are higher as well with Nov WTI crude oil up +1.84% at a 1-1/2 week high. Crude prices rallied on strength in Chinese demand after China Sep crude imports rose +13% m/m to 9.04 million bpd, the second-highest on record. Asian stocks settled mostly higher: Japan +0.96%, Hong Kong +0.06%, China +0.13%, Taiwan +0.12%, Australia +0.34%, Singapore +0.49%, South Korea -0.23%, India +0.78%. Japan's Nikkei Stock Index rallied over 21,000 to a 20-3/4 year high and found support on comments from BOJ Governor Kuroda who said the BOJ will keep up current monetary easing to hit its 2% inflation target, even as that goal remains a distance away.

The dollar index is up +0.01%. EUR/USD is down -0.05%. USD/JPY is down -0.12% to a 2-week low.

Dec 10-year T-note prices are down -0.5 of a tick.

The ECB is considering reducing its QE program by half starting in Jan and extending the program for 9-months, according to unnamed officials because the deliberations are private. The ECB will reduce the pace of its asset purchases to 30 billion euros ($36 billion) a month from the current pace of 60 billion euros a month. The ECB will announce the future of their bond-buying program when they meet next on Oct 26.

The China Sep trade balance shrank to a surplus of $28.47 billion, smaller than expectations of +$38.00 billion and the smallest surplus in 6-months. Sep exports rose +8.1% y/y, weaker than expectations of +10.0% y/y. Sep imports rose +18.7% y/y, stronger than expectations of +14.7% y/y and the biggest increase in 6-months.



Key news today includes: (1) Sep CPI (expected +0.6% m/m and +2.3% y/y, Aug +0.4% m/m and +1.9% y/y) and Sep CPI ex food & energy (expected +0.2% m/m and +1.8% y/y, Aug +0.2% m/m and +1.7% y/y), (2) Sep retail sales (expected +1.7% and +0.9% ex autos, Aug -0.2% and +0.2% ex autos), (3) Boston Fed President Eric Rosengren (non-voter) delivers opening remarks at the Boston Fed conference on “Are Rules Made to be Broken? Discretion and Monetary Policy Text,” (4) prelim-Oct University of Michigan U.S. consumer sentiment (expected -0.1 to 95.0, Sep -1.7 to 95.1), (5) Aug business inventories (expected +0.7%, Jul +0.2%), (6) Chicago Fed President Charles Evans (voter) discusses current economic conditions and monetary policy at the Wisconsin Summit on Financial Literacy in Green Bay, WI, (7) Dallas Fed President Robert Kaplan (voter) speaks in a moderated Q&A session at the CFA Institute’s Fixed Income Management Conference in Boston, (8) USDA weekly Export Sales.



Dec S&P 500 E-mini stock futures this morning are up +1.50 points (+0.06). Thursday's closes: S&P 500 -0.17%, Dow Jones -0.14%, Nasdaq -0.19%. The S&P 500 on Thursday closed lower on weakness in energy stocks as crude oil prices fell -1.36% and on the +2.2% y/y rise in the U.S. Sep core PPI report (the largest year-on-year rise in 5-1/2 years) that was hawkish for Fed policy. A positive factor for stocks was the -15,000 decline in U.S. weekly jobless claims to 243,000, a bigger decline than -10,000 to 250,000.

Dec 10-year T-note prices this morning are down -0.5 of a tick. Thursday's closes: TYZ7 +5.00, FVZ7 +2.00. Dec 10-year T-notes on Thursday closed higher on carry-over support from a rally in German bunds after ECB Executive Board member Praet said "underlying inflation pressures are still too weak."

The dollar index this morning is up +0.008 (+0.01%). EUR/USD is -0.0006 (-0.05%) and USD/JPY is down -0.13 (-0.12%) at a 2-week low. Thursday's closes: Dollar Index +0.042 (+0.05%), EUR/USD -0.0029 (-0.24%), USD/JPY -0.22 (-0.20%). The dollar index on Thursday closed higher on the larger-than-expected increase in U.S. Sep core PPI, which was hawkish for Fed policy, and the larger-than-expected decline in U.S. weekly jobless claims, a sign of economic strength.

Nov crude oil this morning is up +93 cents (+1.84%) at a 1-1/2 week high and Nov gasoline is +0.0342 (+2.16%). Thursday's closes: Nov WTI crude -0.70 (-1.36%), Nov gasoline -0.0260 (-1.62%). Nov crude oil and gasoline on Thursday closed lower on a stronger dollar and the +1.32 million bbl increase in crude supplies at Cushing to a 4-1/2 month high. Gasoline prices were supported by the +2.49 million bbl increase in EIA gasoline stockpiles, more than expectations of +200,000 bbl. Crude oil found some support on the -0.8% decline in U.S. crude production to 9.48 million bpd in the week ended Oct 6.

Metals prices this morning are mixed with Dec gold -0.06 (-0.05%), Dec silver -0.016 (-0.09%) and Dec copper up +0.015 (+0.46%) at a 1-month high. Thursday's closes: Dec gold +7.6 (+0.59%), Dec silver +0.133 (+0.78%), Dec copper +0.0245 (+0.79%). Metals prices on Thursday closed higher with Dec gold and Dec silver at 2-week highs and Dec copper at a 1-month high. Metals prices were boosted by carry-over support from Wednesday afternoon's minutes of the Sep 19-20 FOMC meeting, which were released after metals markets closed, that Fed members were concerned about low inflation, which was dovish for Fed policy. Metals prices were also boosted by the stronger-than-expected U.S. Sep core PPI, which boosted demand for gold as an inflation hedge, and by tighter copper supplies after LME copper inventories fell -1,025 MT to a 4-week low of 285,900 MT.

Grain prices this morning are mostly higher with Dec corn unch, Nov soybeans +3.25 (+0.33%), and Dec wheat +0.50 (+0.12%). Grains on Thursday settled mixed: Dec corn +3.00 (+0.87%), Nov soybeans +26.75 (+2.77%), Dec wheat -2.75 (-0.63%). Dec corn on Thursday rebounded from a 1-month nearest-futures low up to a 1-week high as they followed soybean prices higher. Corn also garnered support from the USDA's cut in its global 2017/18 corn ending stocks estimate to 201 MMT, a bigger cut than expectations of 201.2 MMT. Overall, Thursday’s WASDE report was bearish for corn as the USDA unexpectedly raised its U.S. 2017/18 corn production estimate to 14.28 bln bu, higher than expectations of a cut to 14.171 bln bu. The USDA also raised its U.S. 2017/18 corn ending stocks estimate to a record 2.34 bln bu, higher than expectations of a cut to 2.251 bln bu. Nov soybeans rallied to a 2-1/2 month nearest-futures high after the USDA in Thursday's WASDE report kept is U.S. 2017/18 soybean production estimate unch at 4.431 bln bu, less than expectations of an increase to 4.437 bln bu, and cut its U.S. 2017/18 soybean ending stocks estimate to 430 mln bu, a bigger cut than expectations of a cut to 452 mln bu. The USDA also cut its global 2017/18 soybean ending stocks estimate to 96.05 MMT, a bigger cut than expectations of 96.7 MMT. Dec wheat tumbled to 1-month low after the USDA in Thursday's WASDE report hiked its U.S. 2017/18 wheat ending stocks estimate to 960 mln bu, higher than expectations of 944 mln bu, and raised its global 2017/18 wheat ending stocks estimate to 268.1 MMT, higher than expectations of a hike to 263.4 MMT. Last month, SovEcon boosted its Russia 2017 wheat crop estimate to a record 81.1 MMT from a previous estimate of 78.9 MMT. Chinese demand for U.S. soybeans is robust as China Jan-Aug China soybean imports of U.S. soybeans are up +18.5% y/y to 19.741 MMT. Tuesday's Crop Progress report showed 22% of the U.S. corn crop was harvested as of Oct 8, -15 points below the 5-year average of 37%. 36% of the U.S. soybean crop has been harvested as of Oct 8, -7 points below the 5-year average of 43%.

Livestock prices on Thursday closed lower: Dec live cattle -1.250 (-1.05%), Dec lean hogs -0.875 (-1.40%). Dec cattle prices on Thursday closed lower after the USDA raised its U.S. 2017/18 beef production estimate to a record 27.362 bln lbs from a Sep estimate of 27.342 bln lbs. Another negative is concern packer demand for cattle may wane after beef packer profit margins fell to a 6-week low. Cattle supplies are ample as USDA slaughter data shows 2.431 mln head of cattle processed this year through Oct 7, up +5.8% y/y.

The Sep 22 USDA Cattle on Feed report was negative as it showed cattle on feed as of Sep 1 rose +3.6% y/y to 10.504 million head, above expectations of +2.8% y/y, and cattle placements in feedlots during Aug unexpectedly rose +2.6% y/y to 1.928 million head, higher than expectations of a -2.1% y/y decline. The Sep 22 USDA Cold Storage report was mixed as it showed beef in cold storage in Aug rose +10.3% m/m and fell -0.1% y/y to 476.260 mln lbs. Foreign demand is strong after the USDA reported that U.S. Jan-Aug beef exports were up +14.5% y/y to 1.837 bln lbs and the USDA projects U.S. 2017/18 beef exports will climb +2.7% y/y to a record high of 2.910 bln lbs.

Dec lean hog prices on Thursday closed lower after the USDA raised its U.S. 2017/18 pork production estimate to a record 26.871 bln lbs from a Sep estimate of 26.731 bln lbs. Another negative is concern packer demand for hogs may decline after pork packer profit margins fell to a 1-1/2 month low. Also, higher hog weights may lead to bigger pork supplies after the USDA reported that the average hog carcass slaughter rate rose to 213.33 lbs on Friday, a 4-1/2 month high. On the positive side is a stronger cash market as cash hog prices rose to a 1-month high. Dec hogs had posted a 1-1/2 month high last Tuesday on support from the Sep 28 USDA Q3 Hogs & Pigs Inventory report that showed the U.S. pig herd on Sep 1 rose less than expected. Nearest-futures (V17) hogs on Sep 27 slumped to a 10-month low as a weak cash market and weak domestic pork demand pressure hog prices. Wholesale pork prices dropped to an 10-1/2 month low Sep 28. Foreign demand for U.S. pork is firm with U.S. Jan-Aug pork exports up +8.9% y/y at 3.666 bln lbs and the USDA projects that U.S. pork exports will climb +4.5% y/y to a record 5.965 billion lbs. The Sep 22 USDA Cold Storage report was mixed as it showed overall pork supplies in Aug rose +3.8% m/m and fell -5.5% y/y to 575.681 mln lbs.

The Sep 28 USDA Q3 Hogs & Pigs report was neutral to slightly supportive as it showed the U.S. pig herd as of Sep 1 rose +2.5% y/y to 73.549 mln, less than expectations for a +2.6% y/y increase, but still the highest Sep 1 inventory since the data began in 1964. Also, sows retained for breeding as of Sep 1 rose +1.2% y/y to 6.087 mln, right on expectations, and hogs marketed for slaughter rose +2.6 y/y to 67.462 million, less than expectations of +2.7% y/y, but still a record high for a Sep 1 (data from 1964). In addition, there was a record 10.65 piglets per litter in Q3.


Softs this morning are mixed with Mar sugar -0.03 (-0.21%), Dec coffee +0.10 (+0.08%), Dec cocoa +2 (+0.10%), and Dec cotton +0.16 (+0.24%). Softs on Thursday closed lower: Mar sugar -0.02 (-0.14%), Dec coffee -0.45 (-0.35%), Dec cocoa -7 (-0.33%), Dec cotton -0.89 (-1.29%). Mar sugar on Thursday closed slightly lower as they followed losses in crude prices. Weak crude prices undercut ethanol prices and reduces incentive for Brazil's sugar mills to boost ethanol production. Sugar supplies remain abundant as Unica reported that Brazil 2017/18 Center-South sugar production through Sep was 29.235 MMT, up +4.85% y/y. Also, India projects that its 2017/18 sugar crop will increase by +23% y/y to 25 MMT, the first gain in 3 years. Nearest-futures (V17) fell to a 1-1/2 year low Jun 28 as signs of robust supplies hammered sugar prices. Researcher F.O. Licht cut its global 2016/17 sugar deficit estimate to -4.2 MMT from a prior estimate of -5.5 MMT and raised its 2017/18 global sugar surplus estimate to 4.6 MT from a May forecast of 2.7 MMT, due to an unexpected surge in Pakistan sugar production. In addition, ISO projects a global 2017/18 sugar surplus of 3 MMT from a 2016/17 deficit of -6.465 MMT. Researcher Wilmar predicts Thailand 2017/18 sugar production may climb to a record 12 MMT.

Dec coffee prices on Thursday closed lower on forecasted rains for Brazil's coffee-growing regions. Also, supplies are robust as ICE-monitored coffee inventories rose to a 1-3/4 year high of 1.846 million bags on Wednesday. Coffee prices had climbed to a 2-week high Tuesday on concern Brazil coffee yields will suffer after MDA Weather Services forecast drier-than-normal weather over the next 2-weeks for Brazil's coffee-growing areas. Dec coffee had slumped to a 3-1/4 month nearest-futures low last Thursday on ample supplies. Data from the Green Coffee Association showed U.S. Aug coffee inventories rose +17.2% y/y to 7.266 mln bags, just below the 23-1/3 year high of 7.413 mln bags from Jul. Also, ICO data shows Oct-Aug global coffee exports are up +5.8% y/y to 113.3 mln bags. Nearest-futures (U17) coffee on Aug 8 jumped to a 6-1/2 month high on Brazil coffee crop concerns after Somar Meteorolgia said rainfall had been well below normal in Brazil’s coffee-growing regions. Dec coffee on Jun 22 plunged to a contract low and nearest-futures (N17) sank to a 1-1/2 year low on signs of robust supplies. ICO also hiked its global 2016/17 coffee production estimate to a record 153.9 mln bags from a prior estimate of 151.6 mln bags. However, supplies may tighten up since Confab said it sees Brazil's 2017 coffee output falling as much as 15% to 43.7 mln bags from 51.4 mln bags in 2016 as crops are in their lower-yielding half of their 2-year cycle. Also, Carafe predicts that Brazil 2017 coffee exports will fall -5.9% y/y to 32 million bags due to a lower-yielding coffee crop.

Dec cocoa prices on Thursday eked out a new 6-1/4 month nearest-futures high but gave up its advance on fund liquidation and closed lower. Signs of improved global demand are positive for cocoa prices after Wednesday's data from the European Cocoa Association showed European Q3 cocoa grindings rose +3% y/y to 353,544 MT, stronger than expectations of +2% y/y and the most for a Q3 in 6-years. Also, ICE-monitored cocoa inventories have trended lower over the past 3-months to a 6-3/4 month low Wednesday. Supplies are ample after the Ivory Coast, the world's biggest cocoa producer, reported cocoa purchases, a sign of production, rose to 2.015 MMT from Oct-Sep 24, up +29% y/y and a record high. The Executive Director of the ICO recently said that the global cocoa surplus may persist for the next 4 to 5 years if cocoa production remains at current levels. In addition, Ghana, the world's second-biggest cocoa producer, reported its 2016/17 cocoa crop had risen to 953,865 MT as of Sep 28, a 6-year high. The ICCO last month raised its 2016/17 global cocoa production estimate to a record 4.7 MMT from 4.692 MMT in Jun, and lowered its global 2016/17 surplus estimate to +371,000 MT from a 382,000 MT estimate in Jun, still the biggest surplus in 6-years.

Dec cotton on Thursday fell to a 1-week low and closed lower after the USDA in Thursday's WASDE report raised its global 2017/18 cotton production estimate to 120.9 mln bales from 120.8 mln in Sep and cut its global 2017/18 cotton ending stocks estimate to 92.4 mln bales, higher than expectations of a cut to 92.0 mln bales. The USDA also cut its U.S. 2017/18 cotton export estimate to 14.5 mln bales, from 15.0 mln bales forecast in Sep. On the positive side, the USDA cut its U.S. 2017/18 cotton production estimate to 21.12 mln bales, a bigger cut than expectations of 21.2 mln bales. The pace of the U.S. cotton harvest has accelerated after Tuesday's USDA Crop Progress report showed 25% of the U.S. cotton crop harvested as of Oct 8, +6 points above the 5-year average of 19%. Strength in U.S. exports is drawing down U.S. cotton stockpiles, led by exceptional Chinese demand, as China Jan-Aug cotton imports are up +36% y/y to 811,800 MT. Dec cotton rallied to a contract high and nearest-futures (V17) cotton posted a 4-month high on Sep 8 on concerns that heavy rains from Hurricane Irma would damage U.S. cotton crops that had already seen huge rains from Hurricane Harvey.



Global Calendar – Friday 10/13/17

US 0830 ET Sep CPI expected +0.6% m/m and +2.3% y/y, Aug +0.4% m/m and +1.9% y/y. Sep CPI ex food & energy expected +0.2% m/m and +1.8% y/y, Aug +0.2% m/m and +1.7% y/y.
0830 ET Sep retail sales expected +1.7% and +0.9% ex autos, Aug -0.2% and +0.2% ex autos.
0830 ET Boston Fed President Eric Rosengren (non-voter) delivers opening remarks at the Boston Fed conference on “Are Rules Made to be Broken? Discretion and Monetary Policy Text.”
0830 ET USDA weekly Export Sales.
1000 ET Prelim-Oct University of Michigan U.S. consumer sentiment expected -0.1 to 95.0, Sep -1.7 to 95.1.
1000 ET Aug business inventories expected +0.7%, Jul +0.2%.
1025 ET Chicago Fed President Charles Evans (voter) discusses current economic conditions and monetary policy at the Wisconsin Summit on Financial Literacy in Green Bay, WI.
1130 ET Dallas Fed President Robert Kaplan (voter) speaks in a moderated Q&A session at the CFA Institute’s Fixed Income Management Conference in Boston.
EUR 1015 ET ECB Vice President Vitor Constancio participates in a panel discussion on “The European Spring?” at a conference in Washington D.C. titled “The Quest for Normality in an Uncertain Word.”
GER 0200 ET Revised German Sep CPI (EU harmonized), prelim-Sep unch m/m and +1.8% y/y.
ITA 0400 ET Revised Italy Sep CPI (EU harmonized), prelim-Sep +1.3% y/y.

Sunday, Oct 15

US 0900 ET Fed Chair Janet Yellen, Bank of China Governor Zhou Xiaochuan, BOJ Governor Haruhiko Kuroda, and ECB Vice President Vitor Constancio hold a panel discussion titled “The Global Economy: Prospects for Broad-Based Growth” at a Group of 30 event in Washington, D.C.
UK 1901 ET UK Oct Rightmove house prices, Sep +0.3% m/m and +3.2% y/y.
CHI 2130 ET China Sep CPI expected +1.6% y/y, Aug +1.8% y/y. Sep PPI expected +6.3% y/y, Aug +6.3% y/y.