CRB FMS Daily Report
Sep E-mini S&Ps this morning are up +0.27% and European stocks are up +0.92%. Gains in French stocks are leading European bourses higher after Sunday's second-round of French elections showed French President Macron's party won about 350 seats in France's 577-member National Assembly, the largest majority in 15-years. Jul WTI crude is up +0.29% and is giving a boost to energy stocks after data from OPEC showed that compliance with OPEC crude production cuts was 110% in May. Asian stocks settled higher: Japan +0.62%, Hong Kong +1.16%, China +0.68%, Taiwan +0.92%, Australia +0.54%, Singapore +0.49%, South Korea +0.59%, India +0.82%. Japan's Nikkei Stock Index rose to a 1-week high on signs of strength in the Japanese economy after trade data showed Japan May exports rose at the fastest pace in 2-1/3 years and Japan May imports climbed at the fastest pace in 3-years. Hong Kong stocks rallied over 1% before a decision Tuesday on whether MSCI will include China shares in global indexes.

The dollar index is down -0.06%. EUR/USD is up +0.10%. USD/JPY is up +0.09%.

Sep 10-year T-note prices are up +3 ticks.

China May new home prices rose in 56 of 70 cities tracked by the government, down from 58 cities that gained in April, due to the government's measures to tighten liquidity and cool the housing market.

The Japan May trade balance unexpectedly fell into deficit by -203.4 billion yen, when expectations were for a 43.3-billion-yen surplus. May exports rose +14.9% y/y, weaker than expectations of +16.0% y/y, but still the largest increase in 2-1/3 years. May imports rose +17.8% y/y, stronger than expectations of +14.5% y/y and the largest increase in 3 years.



Key news today includes: (1) New York Fed President William Dudley (voter) holds a business roundtable discussion with the North Country Chamber of Commerce and North Country Regional Economic Development Council in Plattsburgh, NY, (2) Chicago Fed President Charles Evans (voter) discusses current economic conditions and monetary policy at a Money Marketeers of New York University event, (3) weekly grain export inspections, (4) USDA crop conditions and planting progress.



Sep E-mini S&Ps this morning are up +6.50 points (+0.27%). Friday's closes: S&P 500 +0.03%, Dow Jones +0.11%, Nasdaq -0.34%. The S&P 500 on Friday closed slightly higher. Stocks prices were boosted by strength in energy stocks as crude oil rallied +0.63% and by reduced inflation expectations that may keep the Fed from additional rate hikes after the 10-year T-note breakeven inflation rate dropped to a 7-1/2 month low. Stocks were undercut by the unexpected -5.5% fall in U.S. May housing starts to an 8-month low of 1.092 million (weaker than expectations of +4.1% to 1.22 million) and by a sell-off in food retailers after Amazon.com bought Whole Foods Markets for $13.7 billion, which raises concern that other food retailers will have to cut prices to compete with Amazon, which will hurt their earnings.

Sep 10-year T-notes this morning are up +3 ticks. Friday's closes: TYU7 +3.50, FVU7 +3.50. Sep 10-year T-notes on Friday closed higher: T-note prices were boosted by the unexpected decline in U.S. May housing starts to an 8-month low and the fall in May building permits to a 13-month low. T-note prices were also boosted by the larger-than-expected decline in the June University of Michigan U.S. consumer sentiment index to a 7-month low and by reduced inflation expectations after the 10-year T-note breakeven inflation rate dropped to a 7-1/2 month low.

The dollar index this morning is down -0.061 (-0.06%). EUR/USD is up +0.11 (+0.10%) and USD/JPY is up +0.10 (+0.09%). Friday's closes: Dollar index -0.29 (-0.30%), EUR/USD +0.0053 (+0.48%), USD/JPY -0.05 (-0.05%). The dollar index on Friday closed lower on the weaker-than-expected U.S. May housing starts and building permits, which bolsters the case for the Fed to refrain from further tightening, and the slide in stocks, which boosted the safe-haven demand for the yen.

Jul WTI crude oil prices this morning are up +13 cents (+0.29%) and July gasoline is +0.0047 (+0.32%). Friday's closes: Jul crude +0.28 (+0.63%), Jul gasoline +0.0191 (+1.33%). Jul crude oil and gasoline on Friday closed higher on a weaker dollar and on the increase in the crack spread to a 4-session high, which may boost refinery demand for crude oil to refine into gasoline.



Metals prices this morning are mixed with Aug gold -3.9 (-0.31%) at a 1-month low, Jul silver -0.026 (-0.16%) and Jul copper +0.022 (+0.84%). Friday's closes: Aug gold +1.9 (+0.15%), Jul silver -0.055 (-0.33%), Jul copper -0.0015 (-0.06%). Metals on Friday settled mixed. Copper prices were undercut by increased copper supplies after weekly Shanghai copper inventories rose +8,752 MT, and by the unexpected declines in U.S. May housing starts and building permits, which signals weaker copper demand. Gold closed higher on a weak dollar.

Grains this morning are mixed with July corn -4.50 (-1.17%), Jul soybeans +3,50 (+0.37%), and July wheat -0.50 (-0.11%). Grains on Friday closed higher with Jul wheat at a 1-year nearest-futures high: Jul corn +4.50 (+1.19%), Jul soybeans +4.25 (+0.45%), Jul wheat +11.50 (+2.53%). Bullish factors Friday included (1) a weaker dollar, and (2) weather concerns with excessive heat and limited precipitation forecast for next week in the central U.S. Monday's Crop Progress report showed 45% of the spring wheat crop in good-to-excellent condition as of Jun 11, down -10 points w/w and the worst condition for this time of year since 1988. Monday's USDA weekly Crop Progress report also showed that 67% of the U.S. corn crop was in good-to-excellent condition as of Jun 11, down -1 point w/w and down from 75% the same time last year. The U.S. soybean crop was 66% in good-to-excellent condition as of Jun 11, down from 74% the same time last year and the lowest for the date in 5-years.

Livestock prices on Friday closed higher: Aug live cattle +0.675 (+0.57%), Jul lean hogs +0.275 (+0.34%). Aug cattle prices on Friday closed higher as a weak dollar spurred fund short covering. Aug cattle on Thursday fell to a 1-month low on cash market weakness after cash cattle prices fell to a 2-month low. Supplies are ample as well as USDA slaughter data showed 14.294 mln head of cattle processed this year through Jun 17, up +5.7% y/y. Also, the USDA in the Jun 9 WASDE report raised its U.S. 2017/18 beef production estimate to a record 27.177 bln lbs, up +3.4% y/y. Aug cattle on Jun 6 posted a contract high on signs of strength in domestic demand after wholesale beef prices soared to a 23-month high. Also, cattle prices have support on speculation that packer demand for cattle will increase after beef packer profit margins last Tuesday rose to a record high (data from 2013). The May 26 USDA Cattle on Feed report was negative as it showed cattle on feed as of May 1 rose +2.0% y/y at 10.9984 million head, higher than expectations of +0.8% y/y, and cattle placements in feedlots during Apr rose +11.1% y/y to 1.848 million, higher than expectations of a +6.7% y/y and the most for the month of April in 14 years. Cattle prices rallied sharply to a contract high May 4 on expectations of increased Chinese demand after China lifted its ban on U.S. beef, which it halted back in 2003 due to a case of mad cow disease found in the U.S. The May 22 USDA Cold Storage report showed beef in cold storage in Apr fell -1.2% m/m and -2.0% y/y to 458.460 mln lbs. Foreign demand is strong after the USDA reported that U.S. Jan-Apr beef exports are up +20.2% y/y to 869.234 mln lbs. The USDA projects U.S. 2017/18 beef exports to climb +1.0% y/y to a record high of 2.835 bln lbs.

Jul lean hog prices on Friday closed higher on strength in domestic pork demand after wholesale pork prices rose to a 2-1/2 year high. Gains were limited as pork packer profit margins fell to a 3-3/4 month low, which may curb packer demand for hogs. Jul hogs last Monday fell to a 3-week low on signs of increasing supplies after USDA slaughter data showed 54.607 mln hogs processed this year through Jun 17, up +2.7% y/y. Jul hogs on Jun 1 posted a contract high on signs of strong demand. USDA trade data shows U.S. Jan-Apr pork exports up +14.6% y/y at 1.985 bln lbs. The May 22 USDA Cold Storage report showed pork supplies in cold storage in Apr rose +9.0% m/m and fell -6.0% y/y to 599.112 mln lbs. The Mar 30 USDA Q1 Hogs & Pigs report showed the U.S. pig herd as of Mar 1 rose +4.2% y/y to 70.976 mln, more than expectations for a +3.4% y/y increase, and that sows retained for breeding as of Mar 1 rose +1.5% y/y to 6.068 mln, higher than expectations of +1.4% y/y. In addition, there were a record 10.43 piglets per litter in Q1. The USDA projects that U.S. 2017/18 pork production will rise +3.9% y/y to a record 26.926 bln lbs and that 2017/18 U.S. pork exports will climb +3.8% y/y to a record 5.965 billion lbs.


Softs this morning are higher with July sugar +0.07 (+0.52%), July coffee +0.50 (+0.40%), July cocoa +2 (+0.10%), and July cotton +0.47 (+0.65%). Softs on Friday closed lower: July sugar -0.03 (-0.22%), July coffee -2.25 (-1.79%), July cocoa -51 (-2.52%), July cotton -0.03 (-0.04%). July sugar on Friday tumbled to a fresh 1-1/4 year low as signs of ample supplies prompted fund selling. Data from Unica showed Brazil 2017/18 Center-South sugar production for the second half of May at 1.754 MMT, up +3.95% y/y. Last Monday, 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, the ISO recently projected a global 2017/18 sugar surplus of 3 MMT from a 2016/17 deficit of -6.465 MMT. Data from Unica show that 35.628 MMT of sugar was produced in Brazil's Center South in the 2016/17 year, up +14.1% y/y. Researcher Wilmar predicts Thailand 2017/18 sugar production may climb to a record 12 MMT and India's National Federation of Cooperative Sugar Factories predicts 2017/18 sugar production in India, the world's second biggest producer, will climb +25% y/y to 25 MMT as normal rains last year helped the sugar crop. On the positive side, Copersucar cut its Brazil 2017/18 sugar output estimate to 35.5 MMT from a previous estimate of 36 MMT.

Jul coffee prices on Friday slid to a 1-year nearest-futures low as abundant supplies encouraged fund selling. ICE-monitored coffee inventories last Tuesday rose to 1.517 mln bags, a 1-1/4 year high while data from the Green Coffee Association showed U.S. May coffee inventories rose +16.9% y/y to a 23-year high of 7.1115 mln bags. ICO data showed global coffee exports from Oct-Apr are up +3.1% y/y to 69.51 mln bags. Nearest-futures (Z16) coffee last Nov surged to a 2-1/4 year high on supply concerns. Conab 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, Cecafe predicts that Brazil 2017 coffee exports will fall -5.9% y/y to 32 million bags due to a lower-yielding coffee crop.

Jul cocoa prices on Friday closed lower on ample supplies. Ivory Coast farmers sent 1.747 MMT of cocoa beans to ports from Oct 1-Jun 11, up +23.7% y/y. Also, the ICCO on Jun 7 raised its 2016/17 global cocoa production estimate to a record 4.692 MMT from 4.552 MMT, up +18.3% y/y, and raised its global 2016/17 surplus estimate to +382,000 MT from 264,000 MT, the biggest surplus in 6-yrs. Jul cocoa last Tuesday rose to 1-month high after a slide in the dollar index to a 7-month low spurred fund short-covering. Jul cocoa on May 25 fell to a 1-1/2 month low on signs of abundant supplies after ICE-monitored cocoa supplies rose to a record high of 5.849 mln bags, the most since the data series began in 1999. Jul cocoa on Apr 20 had posted a contract low and nearest-futures (K17) cocoa fell to a 9-1/2 year low as fund selling pummeled cocoa prices on signs of robust supplies amid weak demand. Ghana, the world's second biggest cocoa producer, said its 2016/17 cocoa production had risen to 812,153 MT as of May 25, up +4.4% y/y and a 3-year high. ICCO projects Ivory Coast 2016/17 cocoa output to jump +20% y/y to a record 1.98 MMT and Ghana cocoa output to climb +4% to 850,000 MT. Demand is mixed as data from the National Confectioners Association reported that North America Q1 cocoa grindings rose +1% y/y to 118,790 MT, weaker than expectations of an increase of +1.2% y/y. On the positive side, Q1 Asian cocoa processing jumped +19.17% y/y to 177,450 MT, higher than expectations of +10% y/y. Q1 European cocoa processing rose +1.1% to 339,485 MT, close to expectations.

Jul cotton on Friday sold off to a 5-1/2 month nearest-futures low on ample supplies after ICE-monitored cotton inventories rose to 476,100 bales, a 3-3/4 year high. Also, signs of improved U.S. cotton conditions have eased crop concerns after Monday's USDA weekly Crop Progress report showed 66% of the U.S. cotton crop in good-to-excellent condition as of Jun 11, up +5 points w/w and +13 points y/y. Another negative was the Jun 9 WASDE report where the USDA cut its U.S. 2017/18 export estimate to 13.5 mln bales from 14.0 mln bales and raised its U.S. 2017/18 cotton ending stocks estimate to a 9-year high of 5.5 mln bales, more than expectations of 5.0 mln bales. The USDA also hiked its global 2017/18 cotton ending stocks estimate to 87.71 MMT, higher than expectations of 87.5 MMT, although still a 6-year low. Jul cotton on May 15 rallied to a 3-year nearest-futures high on fund buying spurred on from strong demand amid tighter supplies. Chinese cotton demand is exceptional as the China Cotton Association reported that Chinese Jan-Apr cotton imports surged +72% y/y to 480,000 MT. Foreign demand for U.S. cotton in on fire as USDA export data shows U.S. cumulative cotton exports this marketing year through May 25 up +72.4% y/y.



Global Calendar – Monday 6/19/17

US 0800 ET New York Fed President William Dudley (voter) holds a business roundtable discussion with the North Country Chamber of Commerce and North Country Regional Economic Development Council in Plattsburgh, NY.
1100 ET USDA weekly grain export inspections.
1600 ET USDA crop conditions and planting progress.
1900 ET Chicago Fed President Charles Evans (voter) discusses current economic conditions and monetary policy at a Money Marketeers of New York University event.
EUR 0500 ET Eurozone Apr construction output, Mar -1.1% m/m and +3.6% y/y.

Tuesday, Jun 20

US 0315 ET Fed Vice Chair Stanley Fischer is keynote speaker at a macroprudential conference in Amsterdam jointly hosted by the Dutch and Swedish central banks.
0745 ET Boston Fed President Eric Rosengren (non-voter) speaks at a macroprudential conference in Amsterdam jointly hosted by the Dutch and Swedish central banks.
0830 ET Q1 current account balance expected -$123.6 billion, Q4 -$112.4 billion
1500 ET Dallas Fed President Robert Kaplan (voter) discusses current economic conditions and monetary policy with the Commonwealth Club in San Francisco.
JPN 0130 ET Japan May nationwide department store sales, Apr +0.7% y/y.
GER 0200 ET German May PPI expected -0.1% m/m and +2.9% y/y, Apr +0.4% m/m and +3.4% y/y.
EUR 0400 ET Eurozone Apr current account, Mar +44.8 billion euros (nsa).
CAN 0830 ET Canada Apr wholesale trade sales, Mar +0.9% m/m.