Written Commentary
Good morning,
The market rallied to its highest level in nearly three weeks mainly on the back of a very positive macro picture as the USD dropped after good inflation figures. The market had opened unchanged before improving slightly. However, selling appeared around the highs of the previous session which triggered some selling which took prices down to the lows of the day. However, as US traders got to their desks prices started to improve. A couple of buy stops were triggered at 23.70 which saw prices swiftly rise to the highs of the day and breaking above the recent high of 23.83. The market managed to hit 24 cents before falling back. However, the market close near the highs although the trading volume remained rather underwhelming at 94.9k lots. The VH and HK both improved by 1 point to end at -12 and +134 respectively. In London the spot month continued to see a good premium over the rest of the board with two trading sessions until expiry. The QV ended at +19.40 and the VZ also up slightly at +8.80. The OI in Q-23 dropped to 6,159 with another 6,815 lots traded yesterday suggesting a very small delivery is likely. The action yesterday was mainly prompted by the strong macro after US inflation figures were lower than expected. Inflation rose 3% in the year to June and at its slowest pace since March 2021. However, another rise in interest rates again later this month. However, the lower than expected Unica data released the previous day also added a bullish ait to the market with some chatter that rainfall across Thailand was pretty intermittent at the moment although rainfall looks to be picking up over the next 5 days.
In its latest report released yesterday, the USDA have slightly raised their expected imports during 2023/24 to 3.42 million short tonnes from 3.35 million short tonnes in their previous report. However, they have cut their expected consumption so their key stocks to use ratio has improved to 13.5% from 10.6% in June.
This morning the market opened unchanged before slipping back. Currently, prices are 3 points lower. The VH is unchanged at -12 while the HK is 1 point weaker at +133. In early London trading the QV is unchanged at +19.40 while the VZ is firmer at +10.50. The macro is still a relatively positive picture with most commodities trending higher. The USD Index is slightly weaker and at its lowest level since April 2022. The BRL ended a tad firmer at 4.81 yesterday. Technically, the market has performed well since pushing off the three month lows reached at the end of June. However, it is likely the market will struggle to improve significantly from current levels despite there being limited selling above the market with most producers very well priced through to the end of the year. Nevertheless, there is enough uncertainty with weather that should mean the downside is probably limited to around 23 cents at the moment.
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Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
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