Open: London Session | Forex, Metals, Oil, Agriculture September 25, 2020



In its monthly update, the inter-governmental body reduced its global corn crop forecast by 6 million tonnes to a still record high of 1.16 billion tonnes. Corn yields have also been pretty solid, though this is a minor crop for SLC Agricola. With corn, prices are quite a bit weaker in Brazil, as COVID-19-related disruptions have reduced demand for corn-based ethanol for vehicle fuel. As I said, though, corn is a minor crop for SLC Agricola, so this isn’t too disruptive.
Raw sugar prices edged back up towards the previous session’s one-month high on Thursday, boosted by worries over adverse weather conditions in several growing regions. The other major crop, cotton, is currently in its growing phase. Cotton is a different situation.


However, the trough for the week in the dollar came on Friday and the dollar’s value has risen since then. Investors still seem to believe that a strong dollar is important and will support the dollar when possible. This argument seems to be the only one that is consistent, however, with falling commodity prices and a rising value to the dollar. The dollar has lost 98.2% of its purchasing power since the failure of the London gold pool in the late 1960s.
But, this seemed to be bad news for the US dollar as this kind of a monetary policy was not conducive to a stronger value for the currency. In fact through the end of August, the value of the dollar against the euro declined by almost 11 percent since March. It had seemed as if all factors were pointing toward a continued decline in the value of the dollar through the end of the year. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.01 per cent down at 93.34.
Losing nearly half a per cent, the rupee (INR) closed at 73.9 yesterday against the dollar (USD). On Thursday, the rupee dived 32 paise to touch a near one-month low of 73.89 against the US dollar.


I’ve also included new residential construction spending (gold), which is the least volatile of all housing measures, but also less leading. But, the price of oil was also down through the same time period as was the price of gold. Even Warren Buffet got in on the rise in gold prices.


Like we said in yesterday’s update, most of the selling recently has centered around oil majors, or, to be more precise, mega-cap integrated oil companies. Malaysian palm oil futures firmed, spurred by stronger global equities and expectations of higher September exports, but were heading for their steepest weekly fall in nearly seven months. Suncor’s reserves allow it to produce oil for 30+ years, while owning an integrated system that allows it to sell at refining margin-type pricing.
Brent crude futures, the global oil benchmark, rose 0.60 per cent to USD 42.19 per barrel. (Source: Suncor) We estimate that if WTI averages $60/bbl, Suncor could easily generate C$5.6 billion in free cash flow per year. Suncor is our favorite integrated oil name. (Source: HFI Research Estimate) We estimate that the stock would be worth ~C$36 per share if WTI gets to a $60/bbl long-term average. For those that remember the WCS debacle back in 2018, Suncor’s new Fort Hill mine, combined with the egress issue, sent WCS spreads to negative $50/bbl to WTI.

United States

This would imply that investors still would like to see the US government’s budget policy become more disciplined, fiscally. Of course, the US economy should be rebounding strongly following the record plunge of (annual rate) in the 2Q, sparked by the COVID-19 pandemic and the ensuing economic lockdown. In case you haven’t noticed, the US economy is rebounding much better than most forecasters’ predictions. Back in March, most forecasters predicted the US unemployment rate would soar to before peaking this year.
We already discussed in a previous article, that the Empire Fed manufacturing index rose from 3.7 to 17. As they await Trump’s choice, many are mourning Ruth Bader Ginsburg, a rockstar in black robes who championed liberal values for decades. Forever #NotoriousRBG President Trump may tomorrow name Amy Coney Barrett as his nominee for the Supreme Court, which he says could decide the 2020 election. As you can see above, the Fed’s latest estimate is well above that of most economic forecasters.
During this time period, the US stock market rose. Nevertheless, the US and global economies are consistently beating expectations, and a very strong surge in GDP is expected for the 3Q which ends on September 30.


Although the company claims the letter is fake, the questions in it regarding systemic risk are real for investors and Beijing. There s still work to do, but foreign money retains clout in Beijing.


Shortly afterwards a cabinet office document of ‘worst case scenarios‘ was revealed that detailed what may happen should a no deal Brexit coincide with a ‘second wave‘ of Covid-19. Boris Johnson’s deadline of October 15th for a trade deal, which coincides with a European Council meeting, is quickly approaching, as is the threat of a second lockdown. Brexit can and I think will play a part in global planners attempting to reconstruct the economic system in their own image.
But no female candidates could raise eyebrows among EU lawmakers who ll have to weigh in, though ultimately cannot bloc the appointment. Central bankers speak of the ‘post Brexit architecture‘ in terms of the the future make-up of the global economic system. A economically ruinous lockdown that would largely be blamed on Brexit. Apple Pay | The EU is weighing legislation that could force Apple to open iPhone payment technology to competitors. We also publish the Brexit Bulletin, a daily briefing on the latest on the U.K. s departure from the EU.
Week-Ahead | EU leaders will have another go at holding a summit on Thursday and Friday next week. Ian Wishart and Nikos Chrysoloras What s Happening ECB Race | Eurozone governments have until today to nominate candidates for a seat on the ECB executive board.