CRB FMS Daily Report
Dec E-mini S&Ps this morning are down -0.16% on weakness in technology stocks, led by a -0.5% decline in Apple in pre-market trading, on a less than enthusiastic response to the company's unveiling of its new iPhone late Tuesday. Geopolitical tensions also rose after U.S. Treasury Secretary Mnuchin warned that the U.S. may impose sanctions on China if it doesn't follow through on the newly imposed United Nations restrictions against North Korea. In its first response to the newly imposed sanctions, North Korea said it will accelerate its plans to acquire a nuclear weapon that can strike the U.S. mainland. European stocks are up +0.12% after Eurozone Jul industrial production rose as expected, and as energy stocks gained with Oct WTI crude up +0.91% after the IEA increased its 2017 global crude oil demand estimate by +100,000 bpd to 1.6 million bpd, a 2-year high. Weakness in mining stocks is limiting the advance in European equities with Dec COMEX copper prices down -1.50% to a 3-week low on signs of ample supplies after LME copper inventories surged +27,850 MT to a 3-week high. Asian stocks settled mixed: Japan +0.45%, Hong Kong -0.28%, China +0.14%, Taiwan -0.73%, Australia -0.04%, Singapore -0.16%, South Korea -0.14%, India +0.09%. Japan's Nikkei Stock Index climbed to a 1-month high on signs of optimism in the Japanese economy after the Japan Q3 BSI large manufacturing business conditions rose +12.3 to 9.4, a 2-year high.

The dollar index is down -0.05%. EUR/USD is up +0.14%. USD/JPY is down -0.17%.

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

The UK ILO unemployment rate unexpectedly fell -0.1 to 4.3% for the 3-months through Jul, better than expectations of no change at 4.4% and a 42-year low.

Eurozone Jul industrial production rose +0.1% m/m, right on expectations.

Japan Q3 BSI large manufacturing business conditions rose +12.3 to 9.4, stronger than expectations of +7.9 to 5.0 and a 2-year high.



Key news today includes: (1) weekly MBA mortgage applications (previous +3.3% with purchase sub-index +1.4% and refi sub-index +5.1%), (2) Aug PPI final demand (expected +0.3% m/m and +2.5% y/y, Jul -0.1% m/m and +1.9% y/y) and Aug PPI ex food & energy (expected +0.1% m/m and +2.1% y/y, Jul -0.1% m/m and +1.8% y/y), (3) Treasury auctions $12 billion of 30-year T-bonds, (4) Aug monthly budget statement expected -$119.0 billion, Jul -$42.9 billion, (5) EIA Weekly Petroleum Status Report.



Dec S&P 500 E-mini stock futures this morning are down -4.00 points (-0.16%). Tuesday's closes: S&P 500 +0.34%, Dow Jones +0.28%, Nasdaq +0.25%. The S&P 500 on Tuesday climbed to a fresh all-time high and settled higher after U.S. Jul JOLTS job openings unexpectedly rose by +54,000 to 6.17 million, stronger than expectations of -163,000 to 6.00 million and a record high (data from 2000). Stocks rallied further after Treasury Secretary Mnuchin said President Trump will begin pushing for a tax overhaul that will lower tax rates and provide more incentives for multinational corporations based in the U.S. to bring home profits stashed in tax havens overseas.

Dec 10-year T-note prices this morning are up +3 ticks. Tuesday's closes: TYZ7 -11.50, FVZ7 -6.50. Dec 10-year T-notes on Tuesday fell to a 2-week low and closed lower on signs of strength in the U.S. labor market that bolsters the case for additional Fed rate hikes after the Jul JOLTS job openings unexpectedly rose to a record high 6.17 million. T-notes also fell back after the S&P 500 rallied to a fresh all-time high and on an increase in inflation expectations after the 10-year T-note breakeven inflation rate rose to a 3-1/2 month high.

The dollar index this morning is down -0.05 (-0.05%). EUR/USD is up +0.0017 (+0.14%) and USD/JPY is down -0.19 (-0.17%). Tuesday's closes: Dollar Index +0.007 (+0.01%), EUR/USD +0.0014 (+0.12%), USD/JPY +0.78 (+0.71%). The dollar index on Tuesday closed slightly higher after the S&P 500 posted a new record high, which reduced safe-haven demand for the yen and sent USD/JPY to a 1-week high, and on an increase in the 10-year T-note yield to a 2-week high, which improves the dollar's interest rate differentials.

Oct crude oil this morning is up +44 cents (+0.91%) and Oct gasoline is +0.0142 (+0.86%). Tuesday's closes: Oct WTI crude +0.16 (+0.33%), Oct gasoline +0.0218 (+1.33%). Oct crude oil and gasoline on Tuesday closed higher on a report from people familiar with the matter who said that OPEC is considering extending oil-production cuts that expire in Q1 of next year until Q2 of next year. Signs of educed OPEC crude output were also supportive as OPEC Aug oil production fell -140,000 bpd to 32.71 million bpd. Gains in crude were limited on expectations for Wednesday's EIA crude inventories will increase by +4.0 million bbl.

Metals prices this morning are mixed with Dec gold +5.8 (+0.44%), Dec silver +0.125 (+0.70%) and Dec copper -0.046 (-1.50%) at a 3-week low. Tuesday’s closes: Dec gold -3.0 (-0.22%), Dec silver -0.012 (-0.07%), Dec copper -0.0300 (-0.98%). Metals on Tuesday closed lower with Dec gold at a 1-week low and Dec copper at a 2-1/2 week low as the dollar strengthened and after the S&P 500 rallied to a new all-time high, which curbed safe-haven demand for precious metals. Copper prices were also under pressure after LME copper inventories increased by +10,300 MT.

Grain prices this morning are mixed with Dec corn -0.25 (-0.07%), Nov soybeans +3.75 (+0.39%), and Dec wheat +2.75 (+0.62%). Grains on Tuesday settled mixed with Dec corn and Nov soybeans at 1-week lows: Dec corn -6.00 (-1.68%), Nov soybeans -9.50 (-0.9%), Dec wheat +7.25 (+1.67%). Corn prices fell after the USDA in Tuesday’s WASDE report unexpectedly raised its U.S. 2017/18 corn production estimate to 14.185 bln bu, higher than expectations of a cut to 14.003 bln bu as they raised their yield estimate to 169.9 bu per acre, higher than expectations of a cut to 167.9 bu per acre. The USDA also unexpectedly hiked its U.S. 2017/18 corn ending stocks estimate to 2.335 bln bu, more than expectations of a cut to 2.125 bln bu, and raised its global 2017/18 corn ending stocks estimate to 202.47 MMT, higher than expectations of a cut to 197.8 MMT. Soybeans moved lower after the USDA unexpectedly hiked its U.S. 2017/18 soybean production estimate to a record 4.431 bln bu, higher than expectations of a cut to 4.322 bln bu, as they raised their yield estimate to 49.9 bu per acre, higher than expectations of a cut to 48.7 bu per acre. Wheat rallied after the USDA lowered its global 2017/18 wheat ending stocks estimate to 263.14 MMT, lower than expectations of a cut to 264.3 MMT. On the negative side, the USDA kept its U.S. 2017/18 wheat ending stocks estimate unch at 933 mln bu, higher than expectations of a cut to 914 mln bu. On Monday, SovEcon boosted its Russia 2017 wheat crop estimate to a record 81.1 MMT from a previous estimate of 78.9 MMT. Chinese demand for soybeans is robust as China Jul soybean imports climbed to a record 10.08 MMT and Jan-Jul China soybean imports are up +16.8% y/y at 54.89 MMT. Monday's USDA Crop Progress report showed 95% of the U.S. spring wheat crop has been harvested as of Sep 10, +8 points above the 5-year average. Monday's Crop Progress report also showed 61% of the U.S. corn crop in good-to-excellent condition as of Sep 10, unch w/w and well below last year's level of 74%. The condition of the U.S. soybean crop 60% in good-to-excellent condition, down -1 point w/w and well below last year's 73%.

Livestock prices on Tuesday closed lower: Oct live cattle -0.925 (-0.86%), Oct lean hogs -2.125 (-3.45%). Oct cattle prices on Tuesday closed lower on domestic beef demand concerns after wholesale beef prices fell to a 1-week low, just above the 6-3/4 month low from Aug 25. Losses were limited on speculation packers may increase their cattle purchases with beef packer profit margins just below a 2-month high from last Thursday. Oct cattle on Aug 31 fell to a 5-3/4 month low on weakness in the cash market as cash cattle prices have fallen steadily over the past 3-months down to a 10-month low last Wednesday.

The Aug 25 USDA Cattle on Feed report was supportive as it showed cattle on feed as of Aug 1 rose +4.3% y/y to 10.604 million head, less than expectations of +4.8% y/y, and cattle placements in feedlots during Jul rose +2.7% y/y to 1.615 million, less than expectations of a +6.0% y/y. The Aug 22 USDA Cold Storage report was mixed as it showed beef in cold storage in Jul rose +3.6% m/m and fell -8.4% y/y to 430.429 mln lbs. Foreign demand is strong after the USDA reported that U.S. Jan-Jul beef exports were up +14.5% y/y to 1.573 bln lbs. The USDA forecasts that U.S. 2017/18 beef exports will climb +2.7% y/y to a record high of 2.860 bln lbs.

Oct lean hog prices on Tuesday tumbled to a 9-month nearest-futures low and closed lower on domestic demand concerns after wholesale pork prices fell to a 4-month low. A weak cash market is also pressuring hog prices as cash hogs have fallen steadily over the past 3-weeks down to a 4-1/4 month low Monday. On the positive side, packer demand for hogs may increase after pork packer profit margins rose to an 8-month high. Foreign demand for U.S. pork is strong with U.S. Jan-Jul pork exports up +10.0% y/y at 3.248 bln lbs. The Aug 22 USDA Cold Storage report was supportive as it showed overall pork supplies in Jul fell -1.2% m/m and -7.1% y/y to 556.179 mln lbs. The Aug 22 USDA Cold Storage report also showed Jul pork bellies in cold storage plunged -65.4% y/y to 17.6 mln lbs, a record low for the month of Jul (data from 1957).

The Jun 29 USDA Q2 Hogs & Pigs report was bearish as it showed the U.S. pig herd as of Jun 1 rose +3.4% y/y to 71.65 mln, more than expectations for a +3.3% y/y increase, and the highest Jun 1 inventory since the data began in 1964. Also, sows retained for breeding as of Jun 1 rose +1.5% y/y to 6.069 mln, higher than expectations of +1.4% y/y, and hogs marketed for slaughter rose +3.6% y/y to 65.581 million, higher than expectations of +3.4% y/y and a record high for a Jun 1 (data from 1964). In addition, there was a record 10.55 piglets per litter in Q2. The USDA projects that U.S. 2017/18 pork production will rise +3.6% y/y to a record 26.751 bln lbs and that 2017/18 U.S. pork exports will climb +3.7% y/y to a record 5.965 billion lbs.


Softs this morning are mixed with Oct sugar +0.12 (+0.86%), Dec coffee +0.90 (+0.67%), Dec cocoa +17 (+0.87%), and Dec cotton -0.41 (-0.59%). Softs on Tuesday settled mixed: Oct sugar -0.27 (-1.89%), Dec coffee +3.20 (+2.43%), Dec cocoa +17 (+0.88%), Dec cotton -3.00 (-4.16%). Oct sugar on Tuesday closed lower on ample supplies after Unica reported that Brazil 2017/18 Center-South sugar production through Aug was 23.2605 MMT, up +3.37% y/y. Oct sugar had posted a 1-week high the Brazilian real rose to a 5-1/2 month high against the dollar, which reduces incentive for Brazil's sugar producers to boost exports. Oct sugar rose to a 5-week high Aug 31 after gasoline prices surged to a 2-year high, which benefits ethanol prices and gives incentive to Brazil sugar mills to boost ethanol production at the expense of sugar supplies. Oct sugar on Jun 28 fell to a 1-1/2 year nearest-futures low as signs of robust supplies have hammered sugar prices. India's Meteorological Department recently reported that monsoon rains were normal from Jun 1-Aug 2 in India, which should benefit India's sugar crop, the world's second-largest. 2017/18 India sugar output is expected to increase by +23% y/y to 25 MMT, the first gain in 3 years. Researcher F.O. Licht recently 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, ISO projects a global 2017/18 sugar surplus of 3 MMT from a 2016/17 deficit of -6.465 MMT. Researcher Wilmar predicts Thailand 2017/18 sugar production may climb to a record 12 MMT.

Dec coffee prices on Tuesday rose to a 3-week high on Brazil crop concerns with no rain forecast for Brazil's Minas Gerais, Brazil's biggest arabica bean growing region, for the next 2-weeks. Another supportive factor was Monday's data from Cecafe that showed Brazil Aug arabica coffee exports fell -21.4% y/y to 2.09 million bags. Coffee prices had posted a 2-1/2 month low last Wednesday on signs of robust supplies as ICE-monitored coffee inventories have moved steadily higher this year and rose to a 1-1/2 year high Monday of 1.756 million bags. Also, recent data from the Green Coffee Association showed U.S. Jul coffee inventories rose +17.5% y/y to a 23-1/3 year high of 7.413 mln bags. Dec coffee on Aug 8 jumped to a 4-1/2 month high on Brazil coffee crop concerns after Somar Meteorolgia said rainfall had been well below normal in Brazil’s coffee-growing regions. The ICO recently hiked its global 2016/17 coffee production estimate to a record 153.9 mln bags from a prior estimate of 151.6 mln bags. Dec coffee on Jun 22 plunged to a contract low and nearest-futures (N17) sank to a 1-1/2 year low on signs of robust supplies. ICO data shows that global coffee exports from Oct-Jun are up +5.6% y/y to 92.29 mln bags. However, supplies may tighten up since Confab 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, Carafe predicts that Brazil 2017 coffee exports will fall -5.9% y/y to 32 million bags due to a lower-yielding coffee crop.

Dec cocoa prices on Tuesday closed higher on signs of tighter supplies after ICE-monitored cocoa inventories fell to a 5-month low Monday. The upside in cocoa appears limited on signs of adequate current cocoa supplies as Ivory Coast farmers sent 1.97 MMT of cocoa beans to ports from Oct 1-Sep 10, up +25.9 y/y. Also, Ghana, the world's second-biggest cocoa producer, recently reported its 2016/17 cocoa crop had risen to 919,000 MT as of Aug 17, a 6-year high. Demand remains weak, too, as data from Barry Callebaut, the world's biggest cocoa processor, shows global chocolate sales down -0.6% y/y in the 9 months through April. Also, Q2 North American cocoa grindings unexpectedly fell -1.1% to 123,125 MT, weaker than expectations of a +2.2% increase to 127,170 MT. Q2 European cocoa processing rose +2.1% y/y to 331,850 MT, weaker than expectations of +3.0% y/y, and Q2 Asian cocoa processing rose +9.9% to 160,878 MT, weaker than expectations of +12% y/y. The ICCO on Friday raised its 2016/17 global cocoa production estimate to a record 4.7 MMT from 4.692 MMT in Jun, and lowered its global 2016/17 surplus estimate to +371,000 MT from a 382,000 MT estimate in Jun, still the biggest surplus in 6-years.

Dec cotton on Tuesday plunged to a 2-week low and settled limit-down on a bearish USDA WASDE report. The USDA unexpectedly raised its U.S. 2017/18 cotton production estimate to a 12-year high of 21.76 mln bales, higher than expectations of no change at 20.6 mln bales. The USDA also unexpectedly hiked its U.S. 2017/18 cotton ending stocks estimate to a 9-year high of 6.0 mln bales, higher than expectations of a cut to 5.7 mln bales. The USDA also raised its global 2017/18 cotton production estimate to a 5-year high of 120.75 mln bales, above expectations of 117.8 mln bales, and unexpectedly raised its global 2017/18 cotton ending stocks estimate to 92.54 mln bales, above expectations of a cut to 89.9 mln bales. Dec cotton had rallied to a contract high and nearest-futures (V17) cotton posted a 3-month high Friday on concerns that heavy rains from Hurricane Irma will damage U.S. cotton crops that had already seen huge rains from Tropical Storm Harvey. U.S. cotton supplies have tightened after ICE-monitored cotton inventories fell to a 2-1/3 year low of 8,402 bales on Monday. Strength in U.S. exports is drawing down cotton stockpiles, led by exceptional Chinese demand, as China Jan-Jul cotton imports are up +38% y/y to 728,000 MT. Foreign demand for U.S. cotton is on fire as USDA export data shows U.S. cumulative cotton exports this marketing year through Jul 27 up +64.6% y/y. Monday's USDA Crop Progress report showed 63% of the U.S. cotton crop in good-to-excellent condition as of Sep 10, down -2 points w/w, but up +16 points from the same time last year.



Global Calendar – Wednesday 9/13/17

US 0700 ET Weekly MBA mortgage applications, previous +3.3% with purchase sub-index +1.4% and refi sub-index +5.1%.
0830 ET Aug PPI final demand expected +0.3% m/m and +2.5% y/y, Jul -0.1% m/m and +1.9% y/y. Aug PPI ex food & energy expected +0.1% m/m and +2.1% y/y, Jul -0.1% m/m and +1.8% y/y.
1030 ET EIA Weekly Petroleum Status Report.
1300 ET Treasury auctions $12 billion of 30-year T-bonds.
1400 ET Aug monthly budget statement expected -$119.0 billion, Jul -$42.9 billion.
GER 0200 ET Revised German Aug CPI (EU harmonized), previous +0.2% m/m and +1.8% y/y.
0200 ET German Aug wholesale price index, Jul -0.1% m/m and +2.2% y/y.
UK 0430 ET UK Aug jobless claims change, Jul -4,200. Aug claimant count rate, Jul 2.3%.
0430 ET UK ILO unemployment rate expected unch at 4.4% for the three months through Jul, previous 4.4% for the three months through Jun.
0430 ET UK Jul avg weekly earnings expected +2.3% 3-mo avg y/y, Jun +2.1% 3-mo avg y/y. Jul weekly earnings ex-bonus expected +2.2% 3-mo avg y/y, Jun +2.1% 3-mo avg y/y.
1901 ET UK Aug RICS house price balance expected 0%, Jul 1%.
EUR 0500 ET Eurozone Jul industrial production expected +0.1% m/m and +3.3% y/y, Jun -0.6% m/m and +2.6% y/y.
0500 ET Eurozone Q2 employment, Q1 +0.4% q/q and +1.5% y/y.
CAN 0830 ET Canada Aug Teranet/National Bank home price index, Jul +2.0% m/m and +14.2% y/y.
CHI 2200 ET China Aug industrial production expected +6.6% y/y, Jul +6.4% y/y.
2200 ET China Aug retail sales expected +10.5% y/y, Jul +10.4% y/y.

Thursday, Sep 14

US 0830 ET Weekly initial unemployment claims expected +2,000 to 300,0000, previous +62,000 to 298,000. Weekly continuing claims expected +10,000 to 1.950 million, previous -5,000 to 1.940 million.
0830 ET Aug CPI expected +0.3% m/m and +1.8% y/y, Jul +0.1% m/m and +1.7% y/y. Aug CPI ex food & energy expected +0.2% m/m and +1.6% y/y, Jul +0.1% m/m and +1.7% y/y.
0830 ET USDA weekly Export Sales.
1100 ET Treasury announces amount of 10-year TIPS to be auctioned Sep 21.
JPN 0030 ET Revised Japan Jul industrial production, previous -0.8% m/m and +4.7% y/y. Jul capacity utilization, Jun +2.1% m/m.
EUR 0200 ET Eurozone Aug new car registrations, Jul +2.1% y/y.
FRA 0245 ET Revised France Aug CPI (EU harmonized), previous +0.6% m/m and +1.0% y/y.
ITA 0400 ET Revised Italy Aug CPI (EU harmonized), previous +1.4% y/y.
UK 0430 ET UK Aug retail sales ex-auto fuel, Jul +0.5% m/m and +1.5% y/y.
0430 ET UK Aug retail sales including auto fuel, Jul +0.3% m/m and +1.3% y/y.
0700 ET BOE announces interest rate decision and asset purchase target, expected no change to the 0.25% benchmark rate or to the 435-billion-pound asset purchase target.
CAN 0830 ET Canada Jul new housing price index expected +0.3% m/m, Jun +0.2% m/m and +3.9% y/y.