Global Commodities Newsletter July 2021
- July 19, 2021
- ADMIS Research Team
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Market Outlook for US and South America Regions
The USDA WOB July report was neutral for corn and soybeans, but bullish for U.S. spring wheat prices. After the July USDA report, soybean, corn and wheat futures will focus on U.S. summer weather. The upper west Midwest two-week weather forecast is hot and dry. This is also true for Canada and the U.S. Pacific northwest.
Demand for cattle and for boxed beef moved in opposite directions in June. June 2021 live cattle on June 1 closed at the lowest price of the month at $113.35/cwt with a daily low of $111.47/cwt and then began to move higher throughout the month climbing to $124.22/cwt on May 22 with the highest price at $123.10/cwt to settle and out the month at $122.50/cwt.
June lean hog trading continued with the meteoric rally that began a year ago June 2020. For June 2021 lean hogs the low was $116.15/cwt on June 1, and June lean hogs rallied to the last trading day on June 14 on a contract high at $122.77/cwt. But that is only part of the picture for the month of June.
Stock Index Futures
S&P 500 and NASDAQ futures advanced to new record highs in July due to vaccine and fiscal stimulus optimism, along with better than expected quarterly corporate earnings results. In addition, the bulls were encouraged when Federal Reserve Chairman Jerome Powell told members of Congress that inflation will moderate and that the central bank plans to maintain its current ultra-low interest rate policies.
US Dollar Index
Flight to quality buying came into the U.S. dollar in light of concerns about the state of the global economic recovery. There was temporary pressure on the greenback when the U.S. employment numbers were released, which were on balance weaker than expected.
The euro currency peaked in late May and has since traded sideways to lower. There were only temporary gains for the euro on news that wholesale prices in Germany increased 10.7% year-on-year in June of 2021, which was the biggest increase since October 1981. Euro zone retail sales were down 3.1% from a month earlier in April, following an upwardly revised 3.3% growth in March and compared with market expectations of a 1.2% decline.
Crude oil prices trended higher in April until early July. Much of the price gains were linked to prospects of an improving global economy. However, there was some pressure more recently due to reports that OPEC reached a compromise with the United Arab Emirates, agreeing to increase the amount of oil the cartel member can eventually pump as part of a wider agreement with Russian-led producers to increase global supplies.
Gold prices advanced when Federal Reserve Chairman Jerome Powell said inflation remains a transitory phenomenon. The Fed chairman doubled down on his message that inflation was being caused by supply bottlenecks that should ease in time.
Market Outlook for China and Asia Regions
The key Chinese and Asian event over the last 30 days has been China’s strong performance in foreign trade and the ending of quantitative easing in New Zealand. China’s exports jumped 32.2% year-over-year and the New Zealand central bank reduced its bond purchasing on July 14. In June, Japan’s manufacturing sector expanded at the slowest pace in four months, as output took a hit from a global shortage of chips which reduced factory output. The final au Jibun Bank Japan manufacturing PMI in June slipped to 52.4 on a seasonally adjusted basis from last month’s 53.0.
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