Open: London Session | Forex, Metals, Oil, Agriculture September 11, 2020



Farmers in Russia reduced their sugar beet sowing area by 18% this year as profitability was pressured by weak domestic sugar prices. MARKET NEWS Chicago soybean futures rose, with the market on track for a fifth consecutive weekly gain on strong demand from China, the world’s largest importer of the oilseed. Large wheat-growing areas in the South American grains powerhouse have had unusually dry conditions, prompting a reduction in sowing area and yield expectations.
Meanwhile, Reuters confirms China has made several massive buys of soybeans and has also bought record levels of U.S.-produced beef. The exchange estimates that 6.5 million hectares were finally planted with wheat this season, with harvesting expected in December-January. Louis Dreyfus veteran Tancredi leaves commodity trader Anthony Tancredi is leaving Louis Dreyfus Company (LDC) after three decades at the global agricultural commodity merchant, notably at its cotton business.
Russia has doubled sugar output over the past decade to end its reliance on imports. Since the meeting, Bloomberg has reported China will buy a “record amount of American soybeans in 2020”. Arabica coffee futures on ICE closed more than 2% up on Thursday, partially recovering from the steep falls in the last two sessions.


It has now recouped about 1.7 per cent from a 28-month hit low early in September.The yen was broadly steady for the week at 106.14 per dollar. If major world powers dumped their Treasury holdings and stopped accepting U.S. currency in international trade, the U.S. dollar’s privileged status and value would collapse. Of course, gold and silver stand to gain against all fiat currencies that trade against the U.S. dollar. That could put the $1.20 level back in play, suggesting all eyes including Madame Lagarde’s will be across the Atlantic next week to observe the euro’s next move.
The relentless mega trend of dollar depreciation (i.e., inflation) ensures hard money will gain value versus fiat Federal Reserve notes. More pressingly, the upcoming Federal Reserve meeting has the potential to kick start a fresh wave of bearish dollar commentary, should policy makers skew dovish. Her comments provided the single currency license to resume its bounce against the dollar.
So have the role of copper in the growing electric vehicle (EV) market and the weakening U.S. dollar, which has lifted all commodities. From April to date, aluminum has jumped some 20%, largely as a result of a weakening dollar and recovering Chinese demand sucking in imports. But just comparing copper to aluminum, the latter lifted only in proportion to the weakening dollar.


Yet, some copper producers have coped remarkably well, and their performance rather undermines the copper market’s supply anxiety. Remarkably, the volume of copper production in the country remains stable despite the overall drop in general industrial production in Chile, which was equivalent to -9%. At the same time, China has imported 440,000 tons more copper in the first half of this year than last. In the first half of the current year, Chile’s copper output totaled 2.9 million tonnes, ResourceWorld reported.
The mine produces more than 320,000 metric tons of copper per year. Reuters reports there is much speculation the state is stockpiling copper, suggesting current imports are not necessarily a result of end-user demand. Some projects have been suspended in recent months, the article reports, including Chuquicamata, one of the largest copper mines in the country. State-owned Codelco, the world’s largest copper producer, increased its output by 4.7% in the first six months of 2020 on a year-over-year basis.
All this suggests that while copper may have further to rise, its fundamentals are not as solid as bulls would have us believe.
But copper has risen some 33%, driven by the same dynamics but with the added anxiety of supply-side risks from major suppliers in South America.


Brent crude futures, the global oil benchmark, fell 0.40 per cent to $39.90 per barrel. Ever since the double shock of collapsing oil prices and the advent of the pandemic six months ago, it has looked as though the existing order cannot hold. The company maintains the risk of a long-term decline in oil prices, however, at this time the fundamentals for shareholder returns are sound. US crude was flat at $37.30, having fallen 2 per cent in the previous session.
The company suffers from the potential of a long-term secular decline in oil prices, or short-term collapses caused by COVID-19. Yet the brighter view isn’t universal, with some of the most beaten down sectors like banks, travel, oil and autos still facing a gloomy outlook. We believe that oil prices have significant potential to recover. Yet Mexico s president wants to keep the oil producer pumping, no matter what. Occidental Petroleum (NYSE: OXY) has suffered along with the remainder of the oil markets.
Occidental Petroleum plans to take advantage of a $40 WTI breakeven on its old dividend with its new sustaining capital.

United States

With the Fed’s new “average inflation targeting” policy framework, the monthly jobs report will be losing some of its cachet. It is easy to see why the Fed might have neglected to describe its plans for dealing with a future uptrend in inflation in explaining its new strategy. Inflation rates may be set to accelerate as the Fed aims for an “average” of 2%. Second, there is no indication of how the Fed would react to a steady uptrend in price inflation.
We all know the Fed won’t be raising rates for quite a while even if we get some blowout jobs reports in the months to come. This would undoubtedly lead to a long term totalitarian structure that, once again, benefits the elites that inhabit every aspect of government including Trump’s White House. The Trump administration’s Iran policy seems guided by the desire to appear tough, regardless of the long-term harm, Bloomberg Opinion editors write. The Fed will have to wait to see the “whites of inflation’s eyes” before pulling the trigger.
Not long ago, students could receive an internship visa almost automatically if they have a job offer in the US. But, as I noted in last week’s blog post on the Federal Reserve (Fed), a move back toward the 1% threshold remains the base case.


The movie received swift backlash for being partly filmed in Xinjiang, where as many as 1 million Uighurs have been detained in camps. Beijing claims Taiwan as “sacred” territory and threatens to invade the country if it refuses to unify with Mainland China. Last November, Taiwan warned that the threat of a Chinese invasion would increase if Beijing could not stabilize its economy.


Five Things You Need to Know The U.K. and EU are headed for a chaotic split without a trade deal after talks frayed. The EU yesterday gave the U.K. until the end of the month to amend a controversial bill that overrules parts of the Brexit treaty or face legal consequences. Photographer: Richard Wainwright/AAP Greece is pushing the EU to draw up severe sanctions against Turkey over its energy exploration in disputed waters in the eastern Mediterranean. Agreeing on any of these will require EU nations to put aside former national red lines and could risk U.S. retribution.
They ll pore over the EU s landmark recovery fund and, crucially, debate how to pay off jointly issued debt to help their economies rebound.
The U.K. government refused and the EU gave Prime Minister Boris Johnson until the end of the month to back down. A call between Chancellor Merkel, the leaders of EU institutions and Chinese president Xi is the other main scheduled item of the week ahead. Some ECB officials are also said to have wanted Lagarde to provide a more optimistic view of the economy. Messy Brexit Anyone hoping for some substantial progress on Brexit will likely emerge from this week disappointed.
Europe becomes a virus hotspot again, the ECB’s policies will be pored over and Brexit is getting even messier.