cmdty FMS Daily

Mar E-mini S&Ps this morning are up +0.20% and European stocks are up +0.17% on reduced concerns over a global trade war after White House trade adviser Navarro said some countries may be exempt from tariffs provided they reach an updated Nafta deal with the U.S. Trading activity has been subdued ahead of the results of the ECB meeting and press conference from ECB President Draghi later this morning. M&A activity is also positive for stocks prices as Express Scripts surged 17% in pre-market trading after being acquired by Cigna for $54 billion in cash and stock. Asian stocks settled higher: Japan +0.54%, Hong Kong +1.52%, China +0.51%, Taiwan +0.73%, Australia +0.69%, Singapore +0.86%, South Korea +1.17%, India +0.96%. Chinese stocks moved higher after trade data showed China's Feb exports surged +44.5% y/y, the largest increase in 3-years. Japanese stocks gained on signs of stronger economic growth after Japan Q4 GDP was revised higher than expected.

The dollar index is up +0.18%. EUR/USD is down -0.23%. USD/JPY is up +0.06%.

Jun 10-year T-note prices are up +1.5 ticks.

German Jan factory orders fell -3.9% m/m, weaker than expectations of -1.8% m/m and the biggest decline in a year.

The China Feb trade balance was in surplus by +$33.74 billion, wider than expectations of -$5.70 billion. Feb exports surged +44.5% y/y, stronger than expectations of +11.0% y/y and the biggest increase in 3 years. Feb imports rose +6.3% y/y, weaker than expectations of +8.0% y/y.

Japan Q4 GDP was revised upward to +1.6% (q/q annualized) from the previously reported +0.5% (q/q annualized), stronger than expectations of +1.0% (q/q annualized).



Key news today includes: (1) Feb Challenger job cuts (Jan -2.8% y/y), (2) weekly initial unemployment claims (expected +10,000 to 220,000, previous -10,000 to 210,000) and continuing claims (expected -12,000 to 1.919 million, previous +57,000 to 1.931 million), (3) USDA weekly Export Sales, (4) USDA Mar WASDE crop production.



Mar S&P 500 E-mini stock futures this morning are up +5.50 points (+0.20%). Wednesday's closes: S&P 500 -0.05%, Dow Jones -0.33%, Nasdaq +0.24%. The S&P 500 on Wednesday closed lower on Tuesday afternoon's resignation of President Trump's economic advisor Gary Cohn, a free-trade advocate, which fueled concern President Trump will go ahead with his proposed tariffs on metal imports and ramp up his aggressive trade policies. Stocks were also undercut by the U.S. Jan trade deficit of -$56.6 billion, which was the widest deficit in 9-1/4 years and had negative implications for Q1 GDP. Stocks recovered from their worst levels on reduced trade concerns after White House Press Secretary Sanders said some countries may be exempt from tariffs based on national security considerations.



Grain prices this morning are weaker ahead of today's USDA WASDE report with May corn -0.50 (-0.13%), May soybeans -5.75 (-0.54%), May wheat -1.75 (-0.35%). Grains on Wednesday closed lower: May corn -1.00 (-0.26%), May soybeans -9.50 (-0.88%), May wheat -9.75 (-1.92%). Bearish factors included (1) concern a trade war with China will prompt China to boost its purchases of Brazilian soybeans at the expense of U.S. soybeans, (2) the forecast from World Weather that calls for increased snow and rain in the Great Plains for the second half of this month, and (3) foreign demand concerns for U.S. wheat as the export price of U.S. wheat has climbed to $40 a ton higher than Russian wheat. Bullish factors included (1) the +1.2% w/w increase in U.S ethanol output to 1.057 million bpd the week of Mar 2, a sign of stronger domestic corn demand, and (2) expectations that Thursday's monthly USDA WASDE report will show U.S. and global grain ending stocks tightened. Another positive for wheat is deterioration of the U.S. winter wheat crop after Monday's USDA data showed that 50% of the winter-wheat crop in Kansas, the biggest U.S. winter wheat producing state, was in poor or very poor condition as of Mar 4, up from 49% a week earlier. May soybeans rallied to a contract high last Thursday and nearest-futures (H18) rose to a 1-year high on concern that excessive dryness in Argentina, the world's largest soybean meal exporter, will damage its soybean crops after T-Storm Weather said the Dec to Feb period was the second-driest since 1980. The upside for wheat may be limited due to increased wheat exports from Russia, the world's biggest wheat exporter, that are up +43% y/y at 27.1 MMT from Jul 1-Feb 28. A negative for soybeans was the estimate by Agroconsult for Brazil's 2018 soybean crop to increase +2.5% y/y to a record 117.5 MMT. Strong Chinese soybean demand for U.S soybeans has been a major bullish factor for soybean prices as China 2017 soybean imports rose +13.9% y/y to a record 95.54 MMT, although recent data shows China Jan imports of U.S. soybeans fell -14.2% y/y to 5.816 MMT, while China Jan imports of Brazil soybeans surged +719.9% y/y to 2.074 MMT.



Livestock prices on Wednesday settled mixed: Apr live cattle +0.150 (+0.12%), Apr lean hogs -0.400 (-0.59%). Apr cattle on Wednesday closed higher on speculation packer demand for cattle will improve after beef packer profit margins rose to a 1-1/2 month high. Gains were limited on concern that countries may levy tariffs on U.S. beef exports if the U.S. goes ahead with tariffs on metal imports. Domestic beef demand remains strong after wholesale beef prices rose to an 8-month high Tuesday. Supplies are abundant as USDA slaughter data shows 5.348 mln head of cattle processed this year through Mar 3, up +2.5% y/y. Signs of larger future beef supplies may limit the upside in cattle prices after the USDA's monthly slaughter report on Feb 23 showed U.S. Jan beef production rose +7.5% y/y to 2.28 bln lbs. The USDA projects U.S. 2018 beef exports to climb +5.7% y/y to a record 3.025 bln lbs and projects U.S. 2018 beef production will climb +5.9% y/y to a record 27.792 bln lbs. Foreign demand for U.S. beef is robust with U.S. 2017 beef exports up +12% y/y to 2.862 bln lbs.

The Feb 22 USDA Cold Storage report was mixed as it showed beef in cold storage in Jan rose +2.4% m/m and fell -7.2% y/y to 499.554 mln lbs. The Feb 23 USDA Cattle on Feed report was negative as it showed cattle on feed as of Feb 1 rose +7.9% y/y to 11.63 million head, above expectations of +7.1% y/y, and cattle placements in feedlots during Jan unexpectedly rose +4.4% y/y to 2.068 million head, higher than expectations of a -0.2% y/y decline.

Apr lean hog prices on Wednesday closed lower but stayed above last Thursday's 2-1/2 month low. Apr hogs fell to that 2-1/2 month nearest-futures low on domestic pork demand concerns after wholesale pork prices fell to a 2-week low. Hog prices have been under pressure on concern future pork supplies may be on the rise after the Feb 23 USDA slaughter data showed the average hog carcass weight rose to 218.55 lbs, a 2-1/2 month high. The Feb 22 USDA Cold Storage report was negative as it showed overall pork supplies in Jan rose +15.9% m/m and rose +8.3% y/y to 567.84 mln lbs. Foreign demand for U.S. pork is solid with U.S. 2017 pork exports up +7.5% y/y at 5.632 bln lbs and the USDA projects that U.S. 2018 pork exports will climb +5.6% y/y to a record 5.9 billion lbs. The USDA also projects U.S. 2017/18 pork production to climb +5.1% y/y to a record 26.901 bln lbs.

The Dec 22 USDA Q4 Hogs & Pigs report was bearish as it showed the U.S. pig herd as of Dec 1 rose +2.4% y/y to 73.23 mln, more than expectations for a +2.3% y/y increase. Also, sows retained for breeding as of Dec 1 rose +1.1% y/y to 6.179 mln, more than expectations for a +0.9% increase, and hogs marketed for slaughter rose +2.5 y/y to 67.051 million, more than expectations of +2.2% y/y and a record high for a Dec 1 (data from 1964). In addition, there was a record 10.74 piglets per litter in Q4.



Softs this morning are higher with May sugar +0.26 (+2.03%), May coffee +0.05 (+0.04%), May cocoa +7 (+0.29%), May cotton +0.98 (+1.18%). Softs on Wednesday settled mixed: May sugar -0.66 (-4.91%), May coffee -0.50 (-0.41%), May cocoa +2 (+0.08%), May cotton +0.43 (+0.52%). May sugar on Wednesday closed lower on signs of bigger global supplies after India's SMA raised its 2017/18 India sugar production estimate to a record 29.5 MMT and said India may boost its sugar exports to a 4-year high of 2 MMT because of the record output. Also, researcher Green Pool Commodity Specialists raised their 2017/18 global sugar surplus estimate to 11.4 MMT from a prior estimate of 10.3 MMT and predicted the global sugar surplus will continue into 2018/19 with a surplus of 5.4 MMT. May sugar had posted a 3-week high Friday on speculation Brazil's sugar mills will divert more sugar supplies toward ethanol production after Brazil's ethanol prices rose to their highest since 2010. May sugar last Wednesday fell to a 2-1/2 year low and nearest-futures (H18) slumped to a 6-1/2 month low as signs of robust supplies sparked fund selling. Citigroup raised its global 2017/18 sugar surplus estimate to 10.8 MMT from a prior view of +6.4 MMT and data from Unica showed Brazil's Center-South 2017/18 sugar output in the crop year through mid-Feb up +1.62% y/y at 35.836 MMT. 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 raised its 2017/18 global sugar surplus estimate to 10.73 MMT from a May forecast of 8.07 MMT and raised its global 2017/18 sugar production estimate to a record 184.95 MMT from a May view of 179.64 MMT. On the positive side, researcher Sucden predicts global 2018/19 sugar production may fall -3.3% to 141 MMT.

May coffee prices on Wednesday fell to a 1-1/2 week low on reduced Brazil coffee crop concerns after Somar Meteorolgia reported 108% of the historical average of rainfall over the past week in Brazil's Minas Gerais region, Brazil's largest arabica-bean producing area. May coffee last Friday had posted a 2-week high on coffee crop concerns in Minas Gerais due to a lack of rains. Another positive is signs of tighter supplies after ICE-monitored coffee inventories fell to 1.891 mln bags on Feb 23, a 4-1/4 month low. ICE-monitored coffee inventories in Jan had climbed to a 2-1/4 year high of 2.017 mln bags. May coffee on Feb 22 posted a contract low nearest-futures (H18) slumped to an 8-1/2 month low as signs of robust supplies encouraged fund selling. Cooxupe, Brazil's largest coffee cooperative, said it sees Brazil's 2018/19 arabica coffee crop rising +20% y/y to 42 mln bags. Also, researcher Terra Forte predicts Brazil 2018/19 coffee output may climb +23% y/y to 59.2 mln bags. In addition, Vietnam said it expects its 2018 coffee exports to rise +9% y/y to 1.55 MMT. Supplies remain ample as ICO data shows global 2016/17 arabica coffee exports rose by +5.4% y/y to 76.23 mln bags, and 2017/18 global coffee exports from Oct-Jan are up +3.1% y/y at 40.74 mln bags. The ICO projects global 2017/18 coffee production will climb +0.8% y/y to a record 158.93 mln bags. The ICO projects a global 2016/17 coffee ending stocks surplus of 2.38 mln bags, the first surplus in 3 years. On the positive side, Brazil reported its Jan coffee exports fell -4.9% y/y to 2.33 mln bags, the lowest level for a Jan in 5-years, and Columbia, the world's second-biggest arabica bean producer, said its Jan coffee output fell -11% y/y to 1.13 mln bags. The USDA on Dec 15 projected that global 2017/18 coffee ending stocks will fall -8.6% to a 5-year low of 29.3 mln bags.

May cocoa prices on Wednesday closed little changed as they consolidated recent gains. May cocoa on Tuesday posted a 1-1/4 year high as excessive dryness in the Ivory Coast has raised crop concerns and spurred fund buying of cocoa futures. A recent report from Speedwell Weather said that over the past month the Ivory Coast has received less than 75% of normal rainfall. Also, the ICCO projects 2017/18 global cocoa production will fall -2.3% y/y to 4.638 MMT with a global cocoa surplus falling to +105,000 MT from a 300,000 MT surplus in 2016/17, a 6-year high. Current supplies are tighter after data showed Ivory Coast farmers delivered 1.387 MMT of cocoa beans to Ivory Coast ports from Oct 1-Mar 4, down -1.4% y/y. Another supportive factor is signs of stronger global demand. Recent data from Barry Callebaut showed global chocolate sales rose +3.1% in the three months through Oct and the European Cocoa Association reported European Q4 cocoa processing rose +4.4% y/y to 353,286 MT, higher than expectations of +3.4% y/y and the most for a Q4 since the data began in 1999. However, Q4 Asia cocoa grindings rose +4.2% to 196,476 MT, below expectations of +8% y/y, and Q4 North American cocoa grindings unexpectedly fell -1.3% to 116,080 MT, weaker than expectations for a +2.5% increase. The Ivory Coast on Dec 21 boosted its 2017/18 main cocoa crop forecast to 1.40 MMT to 1.45 MMT from a prior forecast of 1.35 MMT. The ICCO projected 2016/17 global cocoa production at a record 4.748 MMT with a 6-year-high surplus of +300,000 MT. Ghana said its 2016/17 cocoa production rose +25% y/y to 969,438 MT, a 6-year high, although the ICCO projects Ghana's 2017/18 cocoa production will fall -7% y/y to 900,000 MT.

May cotton on Wednesday closed higher but remained below Tuesday's contract high. May cotton posted that contract high and nearest-futures (H18) posted a 3-3/4 year high after the NWS forecast warmer-than-normal temperatures with limited precipitation over the next month for the drought-stricken southern Plains. Also, expectations are for the USDA in Thursday's WASDE report to cut its estimates for U.S. and global cotton ending stocks. Cotlook projects a global 2018/19 cotton deficit of -583,000 MT from a 2017/18 surplus of +160,000 MT. Cotton prices posted a 9-1/4 month nearest-futures high Jan 12 on expectations of increased foreign demand for U.S. cotton. Chinese cotton demand has been robust as China's 2017 cotton imports rose +28.9% y/y to 1.15 MMT and China Jan cotton imports rose +15.9% y/y to 133.7 MT. The Pakistan Textile Mills Association on Dec 6 said Pakistan may need to import 2.5 mln bales of cotton in 2018. Recent foods in Pakistan, the world's fourth-largest cotton producer, may reduce its cotton crop and prompt it to import as much as 1 mln bales this year, according to researcher Rose Commodity Group. The USDA projects global 2017/18 cotton use will climb to 120.5 mln bales, a 10-year high. The Cotton Advisory Board recently predicted 2017/18 cotton production in India, the world's biggest cotton producer, will climb +9.3% y/y to a 3-year high of 37.7 mln bales.



Apr crude oil this morning is down -14 cents (-0.23%) and Apr gasoline is -0.0105 (-0.55%). Wednesday's closes: Apr WTI crude -1.45 (-2.32%), Apr gasoline -0.0228 (-1.18%). Apr crude oil and gasoline on Wednesday closed lower on a stronger dollar, and on the +0.8% increase in U.S. crude production the week of Mar 2 to a record high of 10.369 million bpd. Crude oil prices were supported by the -605,000 bbl decline in crude supplies at Cushing to a 3-year low and by the unexpected -788,000 bbl decline in EIA gasoline inventories versus expectations for an increase of +1.5 million bbl.



Metals prices this morning are weaker with Apr gold -1.8 (-0.14%), May silver -0.014 (-0.08%), and May copper -0.046 (-1.45%) at a 3-week low. Wednesday's closes: Apr gold -7.6 (-0.57%), May silver -0.290 (-1.73%), May copper -0.0230 (-0.73%). Metals on Wednesday closed lower on a stronger dollar and on concern that the Trump administration's aggressive trade policies could lead to a trade war that reduces demand for industrial metals.



Jun 10-year T-note prices this morning are up +1.5 ticks. Wednesday's closes: TYM8 unch, FVM8 -0.25. Jun 10-year T-notes on Wednesday closed little changed. T-note prices found support on the the wider-than-expected U.S. Jan trade deficit of -$56.6 billion, which was negative for Q1 GDP. T-note prices were also supported by the decline in stocks, which boosted the safe-haven demand for T-notes. T-note prices were undercut by hawkish comments from Fed Governor Brainard who said stronger global growth and "very substantial" U.S. fiscal stimulus gives her confidence in the inflation outlook. T-note prices were also undercut by the Fed Beige Book that said a tight labor market was contributing to "moderate inflation" in most Fed districts.



The dollar index this morning is up +0.163 (+0.18%). EUR/USD is down -0.0028 (-0.23%) and USD/JPY is up +0.06 (+0.06%). Wednesday's closes: Dollar Index +0.019 (+0.12%), EUR/USD +0.0007 (+0.06%), USD/JPY -0.06 (-0.06%). The dollar index on Wednesday recovered from a 2-week low and closed slightly higher on the stronger-than-expected U.S. Feb ADP employment report, which was hawkish for Fed policy, and on the upbeat Fed Beige Book that stated the U.S. economy expanded at a "modest to moderate" pace.