Open: New York Session | Forex, Metals, Oil, Agriculture October 16, 2020

Agriculture

China is the biggest buyer of Australian cotton and the trade worth was worth about A$900 million ($637.4 million) during the 2018/19 crop year. Mid-Iowa Cooperative will build a new soybean processing plant with capacity to crush 38.5 million bushels a year. Commodity traders have for years used coffee certified by third parties to meet consumer demand for ethical and sustainable sourcing, but the system has to date had limited success. The coronavirus pandemic is increasing demand for soybean oil as consumers rushing to online shopping are boosting traffic for trucks, which usually run on diesel and its renewable forms.
The country’s farmers harvest wheat in December and January. Coffee may revisit its September high while cocoa its July low. Bearish trend continued at the Vashi wholesale sugar market on Friday on eased demand. The Bombay Sugar Merchants Association spot rates (₹/quintal): S-grade 3,226 – 3,292 and M-grade 3,276 – 3,440.

Currencies

Bond issuance remains highs but the peaks are behind us The rupee (INR) settled lower at 73.38 on Thursday versus preceding day’s close of 73.29 against the dollar (USD). Ultimately, if the US dollar falls apart then we may just take off to the upside, looking towards the major supply area at the $27 level. Further, Gupta said “until the deal is released we won’t see optimism in market sentiments and USD/INR spot will follow the direct relationship with dollar index.
The dollar revenue growth stood at 6.4% at US$ 2,507 million and the company posted constant currency revenue growth at 4.5%. If this fuels demand for haven assets, such as the US Dollar, that could in-turn send gold prices to the downside. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.16 per cent to 93.70. During the session, the rupee witnessed an intra-day high of 73.27 and a low of 73.42 against the US dollar.
The rupee on Friday settled almost flat at 73.35 against the US dollar in the absence of any fresh trigger. Elsewhere, a look at a worrying jobless claims report, the latest status for key US dollar pairs and more. I think we can expect to see sub forty dollar oil until well into 2022.

Metals

In other words, Barrick saw margin expansion at both ends (costs and realized gold price), which resulted in gold margins of $940 per ounce. Image: Lamaque Gold Mine Source (Mining.com) The Vancouver-based Eldorado Gold (EGO) released its preliminary production results for the third quarter of 2020 on October 13, 2020. Porgera is a 500,000+ ounce per year gold mine, with Barrick’s 47.5% stake amounting to 284,000 ounces of gold in 2019. Despite zero output from the company’s Porgera mine in Papua New Guinea last quarter (more on this later), total gold production still increased compared to Q2 2020.
As expected, gold margins expanded aggressively last quarter and hit that $900-1,000 per ounce range. It’s safe to say that with higher output and $940 per ounce gold margins, Q3 2020 OCF and FCF figures were exceptional. Shandong Gold, one of China’s biggest gold producers, in May offered C$230 million for struggling TMAC Resources. The company stated that the realized gold price in Q3 was $1,909, or an increase of $184 per ounce compared to Q2.
The Gold Edge is my premium, research-intensive service that provides that knowledge as I’m sharing all of my thoughts, ideas, and research on the gold sector. Gold price averaged about per ounce in the third quarter of 2020, up sequentially.

Oil

After 50+ years of production, the oil sands remain among the world’s most carbon-intensive large-scale crude oil operations. I have worked in the areas of oil refining, natural gas production, synthetic fuels, ethanol production, butanol production, and various biomass to energy projects. Demand for oil may not justify more E&P in the oil patch, which means such headwinds could persist until Q1 2021. China’s oil buying frenzy slows on high stocks, limited quotas China has hit the brakes on its oil buying spree as swelling inventories and limited import quotas stifle purchases.
Oil services firms must maintain ample liquidity to survive volatile oil markets.
Remember, we went from oil glut in the early 1990s to peak oil forecasts in 2005. Shut crude oil production is 24% or, 439,823 barrels per day (bpd). Polo Alagoas produced an average of 2,300 barrels per day of oil from January through September and 878,000 cubic meters of gas, the company said. Brent crude futures, the global oil benchmark, fell 0.58 per cent to USD 42.91 per barrel. My focus is in the financial markets, cyber-security, hacking, agriculture, natural gas, crude oil, geopolitics and alternative investments.

United States

Five Things Follow Us Get the newsletter Mnuchin says Trump would lobby senators over stimulus, decision day for Johnson, and retail sales data due. For the US, trade in services has been becoming a bigger part of the overall trade picture, and the pandemic may give it an additional boost. Now, even with markets seemingly back to normal, the Fed is still buying about $80 billion of Treasuries a month. A smooth Presidential election in the US plus the smooth transition into Jay Powell’s monetary ecstasy of inflation is going to bring on the BOND ROUT!!!!
Nasdaq Futures are trading down by 10 points (down 0.1%), while Dow Futures are trading down 27 points (down 0.1%). Nasdaq Futures are trading up by 16 points (up 0.1%), while Dow Futures are trading down by 27 points (down 0.1%). As the week wraps up, US retail sales and University of Michigan consumer sentiment are due during the Wall Street trading session. That may the wrong question, as Trump’s fellow Republicans want only a skinny $500 billion deal.
S. stock futures wobbled Friday, signaling a potentially muted end to a volatile week on Wall Street. McConnell may also be counting out Trump – who continues trailing rival Joe Biden in national and state polls.

Europe

The ECB will also continue to buy more than the net issuance of government bonds going forward, see our note: Bond Watch: PEPP rally. For the first nine months of the year, the ECB has bought an estimated EUR 570bn in government debt vs. net issuance of EUR 510bn in EUR government bonds. The large issuance needs also increase the odds that the ECB will be a big net buyer in the EUR government bond markets for a long time. The ECB will continue to buy more than the net issuance of government bonds also going forward.
Since it’s clear that Brussels doesn’t want a more comprehensive “Canada-style” deal, BoJo said his office would instead seek an “Australia”-style deal, a far less “comprehensive” option. We think neither the October 15 deadline nor the EU’s October 30 deadline constitute a hard stop and we expect negotiations to continue in coming weeks. While an agreement remains elusive, the EU’s chief negotiator Michel Barnier said they remain determined to reach a “fair deal.”
While the ECB has slowed down the pace of its purchases, also issuance pressure has eased compared to the spring and early summer. Regarding the EUR swap curve shape, the 5-year sector should remain low, assuming that the ECB will keep rates at current or lower levels for a long time. assuming no 5-year EU bond issuance (yet) and no related paying flows from investors, the 2/5/10y butterfly spread may stay low.

0