cmdty FMS Daily

Dec E-mini S&Ps this morning are down -0.09% and European stocks are down -0.17% on concern about slowing growth in China after China Oct industrial production rose less than expected and China Oct retail sales posted their slowest pace of increase in a year. Losses in European stocks were limited after German Q3 GDP rose more than expected and after the German Nov ZEW survey expectations of economic growth climbed to a 6-month high. Asian stocks settled mostly lower: Japan unch, Hong Kong -0.10%, China -0.53%, Taiwan +0.03%, Australia -0.88%, Singapore -0.59%, South Korea -0.21%, India -0.28%. Chinese stocks fell back on weaker-than-expected economic data on Oct industrial production and retail sales and Japan's Nikkei Stock Index fell to a 1-1/2 week low before recovering as the market consolidates following its sharp rally to a 25-3/4 year high last week.

The dollar index is down -0.25% at 2-week low. EUR/USD is up +0.50% at a 2-week high on stronger-than-expected German Q3 GDP. USD/JPY is up +0.02%.

Dec 10-year T-note prices are up +1 tick.

Dallas Fed President Kaplan said he's "actively considering" a Fed rate hike in Dec.

Eurozone Q3 GDP rose +0.6% q/q and +2.5% y/y, right on expectations.

Eurozone Sep industrial production fell -0.6% m/m, right on expectations.

German Q3 GDP rose +0.8% q/q and +2.3% y/y (nsa), stronger than expectations of +0.6% q/q and +2.0% (nsa).

The German Nov ZEW survey expectations of economic growth rose +1.1 to 18.7, weaker than expectations of +1.9 to 19.5 but still a 6-month high.

China Oct industrial production rose +6.2% y/y, weaker than expectations of +6.3% y/y.

China Oct retail sales rose +10.0% y/y, weaker than expectations of +10.5% y/y and the slowest pace of increase in a year.



Key news today includes: (1) Chicago Fed President Charles Evans (voter) takes part in a panel discussion at an ECB conference in Frankfurt on “Communications Challenges for Policy Effectiveness, Accountability and Reputations,” (2) Fed Chair Janet Yellen takes part in a ECB panel discussion on “Challenges and Opportunities of Central Bank Communication” with ECB President Mario Draghi, BOJ Governor Haruhiko Kuroda and BOE Governor Mark Carney, (3) Oct PPI final demand (expected +0.1% m/m and +2.3% y/y, Sep +0.4% m/m and +2.6% y/y) and Oct PPI ex food & energy (expected +0.2% m/m and +2.2% y/y, Sep +0.4% m/m and +2.2% y/y), (4) Atlanta Fed President Raphael Bostic (non-voter) speaks on the economic outlook and monetary policy at a forum in Montgomery, Alabama.



Dec S&P 500 E-mini stock futures this morning are down -2.25 points (-0.09%). Monday's closes: S&P 500 +0.10%, Dow Jones +0.07%, Nasdaq +0.11%. The S&P 500 on Monday closed higher on strength in energy stocks as crude oil prices rose +0.04% and on M&A news after Mattel surged over 20% on a report that Hasbro has discussed an acquisition of the company.



Grain prices this morning are mixed with Dec corn -0.25 (-0.07%), Jan soybeans +1.50 (+0.15%), and Dec wheat -0.25 (-0.06%). Grains on Monday closed lower with Jan soybeans at a 1-month low: Dec corn -1.25 (-0.36%), Jan soybeans -12.75 (-1.29%), Dec wheat -7.25 (-1.68%). Bearish factors included (1) a stronger dollar, and (2) weather forecasts for dry conditions over the rest of this week in the central U.S., which should allow farmers to finish the fall harvest. Another negative for wheat is increased wheat exports from Russia, the world's biggest wheat exporter, as Russia wheat exports from Jul 1-Nov 8 are up +20% y/y at 13.5 MMT. Dec corn fell to a 2-month nearest-futures low Thursday after the USDA raised its U.S. 2017/18 corn production estimate to 14.578 bln bu, higher than expectations of 14.327 bln bu, as they raised their yield estimate to a record 175.4 bu per acre. The USDA also raised its U.S. 2017/18 corn ending stocks estimate to a record 2.487 bln bu, higher than expectations of 2.361 bln bu, and raised its global 2017/18 ending stocks estimate to 203.9 MMT, higher than expectations of no change at 201 MMT. Strong Chinese soybean demand is bullish for soybean prices as China Sep soybean imports rose +12.6 % to 8.11 MMT, a record high from the month of Sep. Chinese demand for U.S. soybeans is robust as China Jan-Sep China soybean imports of U.S. soybeans are up +14.8% y/y to 20.679 MMT. Monday's Crop Progress report showed 83% of the U.S. corn crop was harvested as of Nov 12, -8 points below the 5-year average of 91%. 93% of the U.S. soybean crop has been harvested as of Nov 12, just below the 5-year average of 95%.



Livestock prices on Monday settled mixed: Dec live cattle unch, Dec lean hogs -0.175 (-0.28%). Dec cattle prices on Monday recovered from a 2-week low and settled unchanged after wholesale beef prices rose to a 4-month high, a sign of stronger domestic demand. Cattle prices had posted that 2-week low on concern packer demand for cattle will decline after beef packer profit margins fell to a 6-month low. Another negative is a weak cash market with cash cattle prices at a 1-week low. Dec cattle on Nov 2 rose to a 5-month nearest-futures high on strong foreign demand with U.S. Jan-Sep beef exports up +14.5% y/y to 2.080 bln lbs and the USDA projections for U.S. 2017/18 beef exports to climb +4.0% y/y to a record high of 2.970 bln lbs. Supplies remain ample, though, as the USDA in last Thursday's WASDE report raised its U.S. 2017/18 beef production estimate to a record 27.687 bln lbs, up from an Oct estimate of 27.362 bln lbs.

The Oct 20 USDA Cattle on Feed report was negative as it showed cattle on feed as of Oct 1 rose +5.4% y/y to 10.813 million head, above expectations of +4.5% y/y, and cattle placements in feedlots during Sep rose +13.5% y/y to 2.15 million head, higher than expectations of a +7.3% y/y. The Oct 23 USDA Cold Storage report was mixed as it showed beef in cold storage in Sep rose +2.4% m/m and fell -6.0% y/y to 487.812 mln lbs.

Dec lean hog prices on Monday fell to a 1-month low on concern increased hog weights may lead to bigger future pork supplies after USDA slaughter data showed hog carcass weights rose to a 6-1/2 month high Friday of 215.49 lbs. Another negative is weak cash prices after the price of cash hogs fell to a 3-week low Friday. In addition, the USDA in last Thursday's WASDE report cut its U.S. 2017/18 pork export estimate to 5.900 billion lbs from an Oct estimate of 5.965 billion lbs, and raised its U.S. 2017/18 pork production estimate to a record 26.941 bln lbs, up from an Oct estimate of 26.871 bln lbs. Dec hogs on Oct 31 had posted a contract high on signs of strength in pork demand. U.S. Jan-Sep pork exports are up +8.1% y/y at 4.088 bln lbs and the USDA projects that U.S. pork exports will climb +5.6% y/y to a record 5.9 billion lbs. Another positive for hog prices is the increase in pork packer profit margins to a 1-1/4 month high Monday, which may boost packer demand for hogs. The Oct 23 USDA Cold Storage report was mixed as it showed overall pork supplies in Sep at +7.1% m/m and -4.0% y/y to 616.312 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 +0.02 (+0.13%), Dec coffee +0.20 (+0.16%), Dec cocoa -13 (-0.59%), and Dec cotton +0.34 (+0.49%). Softs on Monday settled mixed: Mar sugar +0.17 (+1.14%), Dec coffee +0.05 (+0.04%), Dec cocoa -15 (-0.67%), Dec cotton -0.17 (-0.25%). Mar sugar on Monday rallied to a 5-1/2 month nearest-futures high on signs that Brazil's sugar millers are diverting sugar supplies toward ethanol production as data from Unica showed the percentage of sugar cane used for ethanol was 57.15% in the second half of Oct versus 50.71% for the same time last year. The rally in crude oil prices last Monday to a 2-1/3 year high has prompting fund short-covering on speculation Brazil's sugar mills may divert more sugar supplies toward ethanol production with the higher crude and gasoline prices. Researcher Datagro last Tuesday forecast Brazil 2018/19 sugar production at 32.6 MMT, down -10.4% y/y from 36.4 MMT in 2017/18. Current supplies remain ample after Unica reported that sugar production in the crop year through Oct in Brazil's Center-South region was up +2.8% y/y at 33.102 MMT. Also, India projects that its 2017/18 sugar crop will increase by +23% y/y to 25 MMT, the first gain in 3 years. In addition, the Thai Sugar Millers Corp. predicted that 2017/18 Thailand sugar production may climb +10% y/y to 11 MMT, a 6-year high. ISO projects a global 2017/18 sugar surplus of 3 MMT, following the global 2016/17 deficit of -6.465 MMT.

Dec coffee prices on Monday closed higher but remained below Friday's 1-month high. Coffee rallied to that high on short-covering spurred on after Brazil reported Oct coffee exports fell -11.1% y/y to 2.644 mln bags, the fifth straight month Brazil's coffee exports have fallen year-over-year. Dec coffee fell to a 4-3/4 month nearest-futures low Nov 1 on robust supplies. ICO data shows Oct-Sep global coffee exports are up +4.8% y/y to 122.45 mln bags and ICE-monitored coffee inventories Nov 3 rose to a 2-year high of 1.926 million bags. Also, the ICO Tuesday revised up its global 2016/17 coffee ending stocks estimate to a surplus of 2.38 mln bags from a forecast last month for a deficit of -1.2 mln bags. That surplus would be the first in 3 years. The ICO also raised its global 2016/17 coffee production estimate to a record 157.44 mln bags from a prior estimate of 153.9 mln bags. Finally, data from the Green Coffee Association showed U.S. Sep coffee inventories rose +16% y/y to 7.19 mln bags, just below the 23-1/3 year high of 7.413 mln bags from Jul. Brazil's 2017 coffee output according to Confab may fall as much as -15% to 43.7 mln bags from 51.4 mln bags in 2016 since crops are in their lower-yielding half of their 2-year cycle.

Dec cocoa prices on Monday closed lower as a stronger dollar induced long liquidation in cocoa futures. Dec cocoa rallied to a 9-3/4 month nearest-futures high Friday on signs of stronger global chocolate demand after Barry Callebaut, maker of 25% of the world's chocolate, reported a +9.2% increase in volume in the three months through Aug. Cocoa prices were already in rally mode as ICE-monitored cocoa inventories have trended lower over the past 4 months down to an 8-1/2 month low Friday. Current cocoa output appears robust after Ghana, the world's second-largest producer, said its 2016/17 cocoa production rose +24% y/y to 969,438 MT, a 6-year high. Cocoa demand is generally strong with Q3 Asia cocoa grindings up +13% y/y to 167,737 MT, European Q3 cocoa grindings up +3% y/y to 353,544 MT, and Q3 North American cocoa grindings up +0.7% y/y to 125,263 MT. 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. ICCO says 2016/17 global cocoa production reached a record 4.7 MMT, resulting in a 6-year-high global 2016/17 surplus of +371,000 MT.

Dec cotton on Monday posted a new 2-week high, but a stronger dollar spurred long liquidation in cotton and prices closed lower. Dec cotton posted that 2-week high on expectations for stronger global cotton demand after the USDA projected global 2017/18 cotton use will climb to 119.25 mln bales, the most since 2009. On the negative side, the USDA in Thursday's WASDE report unexpectedly raised its U.S. 2017/18 cotton production estimate to an 11-year high of 21.4 mln bales, more than expectations of a cut to 20.9 mln bales, and raised its global 2017/18 cotton production estimate to a 5-year high of 12.46 MMT from an Oct estimate of 120.8 MMT. The USDA also unexpectedly raised its U.S. 2017/18 cotton ending stocks estimate to a 9-year high of 6.1 mln bales, more than expectations of a cut to 5.5 mln bales. Dec cotton on Tuesday fell to a 1-1/2 week low as the pace of the U.S. cotton harvest picked up. Monday's USDA Crop Progress report showed 64% of the U.S. cotton crop harvested as of Nov 12, right on the 5-year average. A positive for cotton is strength in Chinese cotton demand as Chinese customs data show China Jan-Sep cotton imports up +37.7% y/y to 904,500 MT.



Dec crude oil this morning is down -28 cents (-0.49%) and Dec gasoline is down -0.0170 (-0.95%). Monday's closes: Dec WTI crude +0.02 (+0.04%), Dec gasoline -0.0195 (-1.08%). Dec crude oil and gasoline on Monday settled mixed. Crude oil prices were boosted by expectations that OPEC will extend its crude production cuts after OPEC Secretary-General Mohammad Barkindo said the crude output cuts are the "only viable option" to rebalance a global market still contending with excess crude supplies. Crude oil prices were undercut by a slightly stronger dollar.



Metals prices this morning are weaker with Dec gold -6.2 (-0.48%) at a 1-week low, Dec silver -0.122 (-0.72%) and Dec copper -0.015 (-0.47%). Monday's closes: Dec gold +4.7 (+0.37%), Dec silver +0.176 (+1.04%), Dec copper +0.0405 (+1.32%). Metals on Monday closed higher on fund buying of gold as long positions in gold ETFs rose to a 1-week high Friday. There were also signs of tighter copper supplies after LME copper inventories fell -1,875 MT to a 2-month low of 258,275 MT.



Dec 10-year T-note prices this morning are up +1 tick. Monday's closes: TYZ7 -2.50, FVZ7 -3.50. Dec 10-year T-notes on Monday dropped to a 2-week low and closed lower on negative carry-over from a fall in 10-year German bunds to a 2-week low and on hawkish comments from Philadelphia Fed President Harker who said he's looking for another Fed rate hike this year.



The dollar index this morning is down -0.239 (-0.25%) at a 2-week low. EUR/USD is up +0.0058 (+0.50%) at a 2-week high and USD/JPY is up +0.02 (+0.02%). Monday's closes: Dollar Index +0.099 (+0.10%), EUR/USD +0.0002 (+0.02%), USD/JPY +0.09 (+0.08%). The dollar index on Monday closed higher on hawkish comments from Philadelphia Fed President Harker who said he's looking for another Fed rate hike a next month's FOMC meeting. There was also weakness in EUR/USD on dovish comments from ECB Vice President Constancio who said, "an ample degree of monetary stimulus remains necessary in order for underlying inflation pressures to continue to build-up and support headline inflation over the medium-term."



Global Calendar – Tuesday 11/14/17

0305 ETChicago Fed President Charles Evans (voter) takes part in a panel discussion at an ECB conference in Frankfurt on “Communications Challenges for Policy Effectiveness, Accountability and Reputations.”
0500 ETFed Chair Janet Yellen takes part in a ECB panel discussion on “Challenges and Opportunities of Central Bank Communication” with ECB President Mario Draghi, BOJ Governor Haruhiko Kuroda and BOE Governor Mark Carney.
0830 ETOct PPI final demand expected +0.1% m/m and +2.4% y/y, Sep +0.4% m/m and +2.6% y/y. Oct PPI ex food & energy expected +0.2% m/m and +2.3% y/y, Sep +0.4% m/m and +2.2% y/y.
1305 ETAtlanta Fed President Raphael Bostic (non-voter) speaks on the economic outlook and monetary policy at a forum in Montgomery, Alabama.