cmdty FMS Daily

Dec E-mini S&Ps this morning are up +1.02% and European stocks are up +0.38% as global equity markets recover from their 2-day rout. JPMorgan Chase is up 1% in pre-market trading to lead bank stocks higher after it reported Q3 adjusted EPS of $2.36, above consensus of $2.26. Strength in mining stocks and commodity producers are also higher with Dec COMEX copper up +0.54% at a 1-week high. Stronger-than-expected Eurozone Aug industrial production and concern about tight supplies is pushing copper prices higher after LME copper inventories dropped -3,500 MT to a 2-1/3 year low of 166,600 MT. Concern about the impact of the U.S.-China trade war eased slightly and improved confidence in the global economic outlook after China's Sep imports remained robust and its Sep exports rose more than expected. Asian stocks settled higher: Japan +0.46%, Hong Kong +2.12%, China +0.91%, Taiwan +2.44%, Australia +0.2-%, Singapore +0.71%, South Korea +1.53%, India +2.15%. China's Shanghai Composite rebounded from a new 3-3/4 year low and closed higher on optimism that escalation of the U.S.-China trade war can be averted after a report said the U.S. Treasury advised Secretary Mnuchin that China is not manipulating the yuan. Chinese stocks also received a boost on a WSJ report that President Trump plans to meet Chinese President Xi late next month. The rebound in Chinese stocks lifted Japan's Nikkei Stock Index off of a 1-month low and into positive territory.

The dollar index is up +0.08%. EUR/USD is down -0.09%. USD/JPY is up +0.06%.

Dec 10-year T-note prices are down -8 ticks.

Eurozone Aug industrial production rose +1.0% m/m, stronger than expectations of +0.5% m/m.

ECB President Drahi said preserving openness in trade is crucial if the global economy is to thrive and secure its growth potential and "the positive developments in the Eurozone are not independent of the global growth momentum."

The China Sep trade balance unexpectedly widened to a surplus of +$31.69 billion, more than expectations of a narrowing to +$19.20 billion. Sep exports rose +14.5% y/y, stronger than expectations of +8.2% y/y. Sep imports rose +14.3% y/y, weaker than expectations of +15.3% y/y.

The Japan Aug tertiary industry index rose +0.5% m/m, stronger than expectations of +0.3% m/m.



Key news today includes: (1) Sep import price index (expected +0.2% m/m and +3.1% y/y, Aug -0.6% m/m and +3.7% y/y) and Sep import price index ex petroleum (expected -0.1% m/m, Aug -0.2% m/m), (2) Chicago Fed President Charles Evans (non-voter) takes part in a moderated discussion at a conference in Ann Arbor, Michigan, (3) preliminary-Oct University of Michigan U.S. consumer sentiment index (expected +0.4 to 100.5, Sep +3.9 to 100.1), (4) Atlanta Fed President Raphael Bostic (voter) discusses recruitment, economics and the public policy profession at a conference in Atlanta, (5) 2-day meeting concludes of G-20 finance ministers and central bank chiefs in Bali, Indonesia.



Dec S&P 500 E-minis this morning are up sharply by +28.00 points (+1.02%). Thursday's closes: S&P 500 -2.06%, Dow Jones -2.13%, Nasdaq 100 -1.14%. The S&P 500 on Thursday plunged to 3-1/4 month low and closed sharply lower on continued concern about interest rates and on negative carry-over from a 5% sell-off in China's Shanghai Composite to a 3-3/4 year low on US/Chinese trade tensions. There was also increased market volatility that spurred concerns as the VIX volatility index jumped to a 6-1/4 month high. There was weakness in energy stocks as crude oil prices tumbled -3.01% to a 3-week low.



Livestock prices on Thursday settled mixed: Dec live cattle +0.300 (+0.26%), Dec hogs -1.525 (-2.73%). Dec cattle on Thursday closed higher after wholesale beef prices rose for the first time in the last seven sessions, which spurred short covering in cattle futures. Dec cattle on Wednesday fell to a 3-week low on signs of weak domestic beef demand after wholesale beef prices fell to a 9-1/4 month low. Another negative was the fall in beef packer profit margins to a 1-3/4 month low, which may curb demand for cattle by packers. Dec cattle last Monday rose to a contract high after the new U.S.-Mexico-Canada trade deal was announced, which eased trade concerns and may lead to increased foreign demand for U.S. beef. Foreign demand for U.S. beef remains strong as U.S. Jan-Aug beef exports are up +14.2% y/y at 2.096 bln lbs and the USDA projects U.S. 2018/19 beef exports will climb +2.6% y/y to a record 3.245 bln lbs. Supplies remain ample after the Sep 24 USDA Cold Storage report showed U.S. beef supplies in cold storage rose to a record high for an Aug of 503.449 mln lbs. The USDA reported U.S. Aug commercial beef production rose +1.2% y/y to 2.43 bln lbs. Future beef output may also increase as USDA slaughter data shows 24.948 mln head of cattle processed this year through Oct 6 up +2.6% y/y and the USDA projects U.S. 2018/19 beef production will climb +3.6% y/y to a record 27.973 bln lbs.

The most recent USDA Cattle on Feed report (Sep 21) was negative as it showed cattle on feed as of Sep 1 rose +5.9% y/y to a record for a Sep of 11.125 million head (data from 1996), above expectations of +5.2 y/y. Cattle placements in feedlots during Aug rose +7.4% y/y to 2.07 million head, above expectations of a +5.1% y/y. Cattle marketed for slaughter in Aug rose +0.2% y/y to 1.983 mln head, less than expectations of +0.3%. Last Monday's USDA Cold Storage report was negative as it showed U.S. beef supplies in cold storage in Aug rose +4.0% m/m and +5.6% y/y to 503.449 mln lbs, an August record since data began in 1915.

Dec hog prices on Thursday tumbled to a 3-week low as cash market weakness undercut futures prices after cash hogs dropped to a 2-week low. Another negative was the fall in pork packer profit margins Wednesday to a 2-1/4 month low, which may curb hog demand from packers. Dec hogs had rallied to a 3-1/2 month high last Monday on reduced trade concerns that may boost foreign demand for U.S. pork after the new U.S.-Mexico-Canada trade deal was announced. Weakness in the cash market had been a drag on futures prices through August as cash hog prices plunged to a record low of 36.57 cwt on Aug 31. Nearest-futures (V18) hog prices slumped to 1-3/4 year nearest-futures low on Aug 30 due to retaliatory tariffs from China, Canada and Mexico, which account for 60% of all U.S. pork exports. Abundant supplies amid tepid demand has weighed on hog prices as well as the USDA reported U.S. Aug pork production jumped +4.8% y/y to 2.32 bln pounds, and the USDA projects U.S. 2018/19 pork production will climb +5.2% y/y to a record 27.824 bln lbs. High slaughter rates are also negative for hog prices as USDA slaughter data showed 93.248 mln hogs processed this year through Oct 6, up +2.2% y/y. The Sep 24 USDA Cold Storage report was bearish as it showed overall pork supplies in Aug rose +6.0% m/m and +1.2% y/y to 582.592 mln lbs. Foreign demand for U.S. pork was solid through July with U.S. Jan-Aug pork exports up +6.3% y/y at 3.896 bln lbs and the USDA projects that U.S. 2018/19 pork exports will climb +3.5% y/y to a record 6.2 bln lbs.

The Sep 27 USDA Q3 Hogs & Pigs report was mixed as it showed that the U.S. pig herd as of Sep 1 rose +3.0% y/y to 75.486 mln, below expectations of +3.3%. Sows retained for breeding as of Sep 1 rose +3.5% y/y to 6.33 mln, more than expectations of +2.9%, and hogs marketed for slaughter rose +2.9 y/y to 69.156 million, below expectations of +3.3% y/y. In addition, piglets per litter in Q3 rose +0.7% y/y to 10.72, slightly below expectations of +1.0% y/y, but still a record high for a Q3.



Softs this morning are higher: Mar sugar +0.14 (+1.08%), Dec coffee +0.45 (+0.40%), Dec cocoa +16 (+0.76%), and Dec cotton +0.67 (+0.87%). Softs on Thursday closed higher: Mar sugar +0.07 (+0.54%), Dec coffee +1.00 (+0.89%), Dec cocoa +9 (+0.43%), Dec cotton +0.01 (+0.01%). Mar sugar on Thursday closed higher but remained below Wednesday's 7-month nearest-futures high. Sugar rallied to that 7-month high on smaller Brazilian sugar output after Unica reported Brazil's Center-South 2018/19 sugar output through Sep was down -24.8% y/y at 22.273 MMT, with the amount of sugar converted to ethanol at 24.386 mln liters, up +25.1% y/y. Also, recent strength in the Brazilian real spurred fund short-covering after the real rallied to a 2-month high against the dollar on Tuesday. Mar sugar on Sep 27 fell to a contract low and nearest-futures (V18) sank to a 10-year low on concern about bigger global supplies after India's government approved 55.38 billion rupees ($762 million) in subsidies to its sugar farmers, which may boost India's sugar exports by 5 MMT in the year starting Oct 1. Sugar prices have been hammered into late-Sep on signs of abundant global sugar supplies. ISO forecasts global 2018/19 sugar production will rise +0.6% y/y to a record 185.2 MMT and projects a global 2018/19 sugar surplus of 6.75 MMT, down from surplus of +8.6 MMT in 2017/18. The USDA's Foreign Agricultural Service (FAS) projects a record 2017/18 global sugar surplus of 10.73 MMT and record global 2017/18 sugar production of 184.95 MMT. The Indian Sugar Mills Association (SMA) projects 2018/19 sugar production in India, the world's second-largest sugar producer, will climb 10% to a record 35.5 MMT. The Thailand Office of Cane and Sugar Board reported Thailand 2017/18 sugar production rose to a record 14.47 MMT. Conab forecasts Brazil 2018/19 sugar production will fall -9.6% y/y to 34.25 MMT, a 3-year low. Brazil Aug raw-sugar exports dropped -33% y/y to 1.44 MMT, the lowest for an Aug in 10-years.

Dec coffee on Thursday closed higher but stayed below Wednesday's 3-1/4 month nearest-futures high. Coffee prices rallied to that 3-1/4 month high on fund short covering after the Brazilian real climbed to a 2-month high against the dollar, which reduces incentive for Brazil's coffee producers to boost exports. Coffee prices have been hammered over the past four months as Dec coffee fell to a contract low Sep 18 and nearest-futures (U18) sold-off to a 12-3/4 year low on signs of robust supplies. ICE-monitored coffee inventories rose to a 4-year high of 2.414 mln bags on Wednesday. The ICO reported global coffee exports from Oct-Aug were 112.5 mln bags, up +1.6% y/y. Conab raised its Brazil 2018 coffee production estimate to a record 59.9 mln bags from a prior estimate of 58 mln bags, up +33% y/y, as crops are in the higher-yielding half of their biennial cycle. The USDA on Jun 15 projected global 2018/19 coffee production will climb +7.1% y/y to a record 171.166 mln bags and global 2018/19 coffee ending stocks will increase by +11.6% to a 3-year high of 32.812 mln bags. Also, Vietnam coffee exports this year from Jan-Sep are up +19.6% y/y at 1.456 MMT. On the positive side, the USDA projects that global 2018/19 coffee consumption will climb +2.9% to a record 163.219 mln bags. Also, U.S. Aug green coffee inventories fell -8.3% y/y to 6.663 mln bags. In addition, ICO recently raised its global 2017/18 coffee deficit estimate to -3.5 mln bags from a previous estimate of -2.7 mln bags.

Dec cocoa prices on Thursday closed higher but remained below Wednesday's 1-week high. Signs of tighter supplies had boosted cocoa prices to that 1-week high after the Ghana Cocoa Board said the 2017/18 cocoa crop in Ghana, the world's second largest, was 899,209 MT, down -7.2% y/y. Dec cocoa last Monday sank to a 7-3/4 month nearest-futures low on harvest pressures from the Ivory Coast and Ghana main crops. Demand concerns remain after Barry Callebaut, the world’s biggest cocoa processor, warned that high cocoa prices will curb global cocoa demand in Q3. Q2 North American cocoa processing data released Jul 20 showed an unexpected decline of -3.1% y/y to 119,301 MT, weaker than expectations for a +0.3% y/y gain. Q2 Asia cocoa grindings rose +15.2% y/y to 185,394 MT, and European Q2 cocoa processing rose +7.3% to 356,109 MT, a Q2 record high in data going back to 2001. Nearest-futures (U18) cocoa prices rallied to a 2-year high in May on signs of stronger global demand along with concern excessive dry conditions in West Africa would reduce Ivory Coast and Ghana cocoa yields. ICCO projects that 2017/18 global cocoa production will fall -2.0% y/y to 4.645 MMT and that the global cocoa surplus will fall to +31,000 MT from 2016/17's 6-year high surplus of 296,000 MT.

Dec cotton on Thursday closed higher on tighter global supplies after the USDA in Thursday's WASDE report unexpectedly cut its global 2018/19 cotton ending stocks estimate to a 7-year low of 74.45 mln bales, less than expectations of an increase to 77.58 bln bales. Gains were limited after the USDA also unexpectedly raised its U.S. 2018/19 cotton ending stocks estimate to an 11-year high of 5 mln bales, more than expectations of a cut to 4.65 mln bales. Dec cotton on Tuesday posted a 1-week high on concern Hurricane Michael may damage cotton crops in the U.S. Southeast. Another positive factor is concern about lower cotton production in India, the world's biggest cotton producer, after researcher Kotak Commodity Services said 2018/19 cotton production in India, may fall 4% y/y to 35 mln bales after India' monsoon rains were 9% below normal this year. India's 2017/18 cotton production rose to a 3-year high of 36.5 mln bales, according to data from the Cotton Association of India. Cotton prices fell to a 7-1/2 month low last Monday on bearish factors that included (1) the action by Cotlook to cut its global 2018/19 cotton deficit estimate to -739,000 MT form a prior estimate of -1.14 MMT, and (2) ongoing China/U.S. trade tensions after China canceled a purchase of 90,200 bales of U.S. cotton. There is also concern about the Turkish financial crisis, which has dampened expectations for cotton demand from the third biggest buyer of U.S. cotton supplies. China Jan-Aug cotton imports were up +20.6% y/y at 980,000 MT, although trade tensions between U.S. and China may limit China's demand for U.S. cotton going forward. The USDA projects that global 2018/19 cotton use will climb to a record high of 127.76 mln bales. Tuesday’s USDA Crop Progress report showed that 25% of the U.S. cotton crop was harvested as of Oct 7, +7 points ahead of the 5-year average.



Nov WTI crude oil prices this morning are up +51 cents (+0.72%) and Nov gasoline is +1.70 (+0.88%). Thursday's closes: Nov crude oil -2.20 (-3.01%), Nov gasoline -8.77 (-4.34%). Nov crude oil and gasoline on Thursday closed lower with Nov crude at a 3-week low and Nov gasoline at a 1-month low. Crude oil prices were undercut by the sell-off in global equity markets, which undercut confidence in the economic outlook and energy demand. In addition, the EIA report was bearish with a +5.99 million bbl increase in EIA crude inventories (vs expectations of +2.5 million bbl) a +951,000 bbl increase in EIA gasoline supplies (vs expectations of unchanged) and a +0.9% increase in U.S. crude output the week of Oct 5 to a record 11.2 million bpd.



Metals prices this morning are mixed with Dec gold -4.1 (-0.33%), Dec silver +0.034 (+0.23%) and Dec copper +0.015 (+0.64%) at a 1-week high. Thursday's closes: Dec gold +34.2 (+2.87%), Dec silver +0.280 (+1.95%), Dec copper +0.0225 (+0.81%). Metals on Thursday closed higher with Dec gold at a 2-month high. Precious metals prices were boosted by increased safe-haven demand with the plunge in stocks and the fall in the dollar index to a 1-week low. Copper was boosted by supply tightness after LME copper inventories fell -3,400 MT to a 2-1/3 year low of 170,100 MT.



Dec 10-year T-notes this morning are down -8 ticks. Thursday's closes: TYZ8 +20.50, FVZ8 +10.25. Dec 10-year T-notes on Thursday rose to a 1-week high and closed sharply higher on the plunge in the S&P 500 to a 3-1/4 month low, which boosted the safe-haven demand for T-notes and was dovish for Fed policy. T-notes were also supported by the weaker-than-expected U.S. Sep core CPI report and reduced inflation expectations after the 10-year T-note breakeven inflation rate fell to a 3-week low.



The dollar index this morning is up +0.073 (+0.08%), EUR/USD is down -0.0010 (-0.09%), and USD/JPY is up +0.07 (+0.06%). Thursday's closes: Dollar Index -0.491 (-0.51%), EUR/USD +0.0073 (+0.63%), USD/JPY -0.11 (-0.10%). The dollar index on Thursday fell to a 1-1/2 week low and closed lower on the plunge in stocks and the weaker-than-expected U.S. Sep core CPI report, which were both dovish for Fed policy. USD/JPY tumbled to a 3-week low as the slump in global stocks boosted the safe-haven demand for the yen.



Grain prices this morning are mostly higher with Dec corn unch, Nov soybeans +5.50 (+0.64%), and Dec wheat +3.50 (+0.69%). Grain prices on Thursday settled mixed with Dec corn at a 1-1/2 month high: Dec corn +6.50 (+1.79%), Nov soybeans +6.00 (+0.70%), Dec wheat -2.50 (-0.49%). Dec corn rallied to a 1-1/2 month high after the USDA in Thursday's WASDE report unexpectedly cut its U.S. 2018/19 corn production estimate to 14.778 bln bu, less than expectations of an increase to 14.859 bln bu. The USDA also raised its U.S. 2018/19 corn ending stocks estimate to 1.813 bln bu, less than expectations of 1.913 bln bu, as they raised their U.S. 2018/19 corn export forecast to a record 2.475 bln bu. Nov soybeans moved higher after the USDA unexpectedly cut its U.S. 2018/19 soybean production estimate to 4.69 bln bu, less than expectations of an increase to 4.722 bln bu, and as they raised their U.S. 2018/19 soybean ending stocks estimate to a record 885 mln bu, less than expectations of 905 mln bu. Prices fell back from their best levels as the USDA raised its global 2018/19 soybean production estimate to a record 369.48 MMT and as they hiked their global 2018/19 soybean ending stocks estimate to a record 110.04 MMT, higher than expectations of 109.9 MMT. The USDA cut its global 2018/19 wheat production estimate to a 4-year low of 730.92 MMT and they lowered their global 2018/19 wheat ending stocks estimate to 260.2 MMT, less than expectations of 261.2 MMT. A bearish factor for wheat was the action by Russia's Agriculture Ministry to raise its Russia's wheat harvest estimate for this year to 68.8 MMT to 69 MMT from a prior estimate of 64.4 MMT. Increased Russian wheat exports are negative for wheat prices as Russian wheat exports from Jul 1-Sep 13 were 10.2 MMT, up +48% y/y. SovEcon reported that Russia Aug wheat exports rose +15% y/y to a record 4.5 MMT.

Tuesday's USDA Crop Progress report showed that 34% of the U.S. corn crop was harvested as of Oct 7, +8 points ahead of the 5-year average. The Crop Progress report also showed 32% of the U.S. soybean crop harvested as of Oct 7, -4 points behind the 5-year average. Meanwhile, 57% of the U.S winter wheat crop was planted as of Oct 7, +3 points ahead of the 5-year average.