The CBOT will begin trading this morning at 8:30 AM Central Time. Crude oil traded a buck forty higher an hour after opening last evening.
Highlights
Yesterday, a drone launched by Ukraine hit the main base for Moscow's strategic bombers hundreds of miles deep into Russia, who said it had shot the drone down causing it to crash at the Engels Air Base. The base is the main airfield for the bombers that was used to attack Ukraine’s infrastructure. Three Russian service members were killed as a result of Ukraine’s attack.
Beijing and Shanghai citizens went back to work yesterday as China's two biggest cities edged closer to living with COVID-19 as medical workers scrambled to cope with millions of cases. China’s official news agency reported, "Our country's new coronavirus epidemic prevention and control is facing new situations and new tasks.”
Non-government personnel report the virus is spreading largely unchecked across the country. The official news from China’s government report there have been no COVID deaths reported for the six days ending Sunday.
Russian President Putin and his Chinese counterpart Xi Jinping will speak this week. No details are available of what they will talk about. They will certainly talk about crude oil. Thus, if you are trading crude oil, be careful. We do not expect any crude oil or soybean market surprises, but both are possible.
Tidbits
Two countries export more than 90% of the world’s palm oil. One is Indonesia, whose president said he will announce a commodity export ban on Wednesday. It will likely be bauxite (aluminum ore) or palm oil or both. Palm oil holds the world’s largest market share of the veg oil market; soybean oil is second.
Malaysia is the other major palm oil exporter and excessive wet weather is reducing its palm oil production and exports.
Four states have banned the sale of gasoline and diesel powered vehicles effective 2035:
California, New York, Oregon, and Washington.
Yesterday, Taiwan reported 71 Chinese military aircraft had entered Taiwan's air space in the past 24 hours. It was the largest incursion to date. Taiwan made sure the world knew China was being a bully, but no one was concerned. After all, China’s military has been violating Taiwan’s airspace for a couple years and Taiwan’s recent elections put pro-China politicians in charge of their government come 2023.
The USA finished construction of the Panama Canal in 1914, owned and operated it. The Canal shortened the seaborne distance between the east and west coasts of the USA from 13,000+ miles to about 5,200 miles. More than 600 million tons of goods are transported through the Canal each year. Just as important as a benefit to commerce, The Canal is of major importance for the national security of the USA.
In 1979, US President Jimmy Carter signed over ownership of The Canal to Panama effective in 1999. A few years after the transfer, Panama sold the management authority of The Canal to China. In 2006, Panama decided to expand (with China’s insistence and money) the canal’s locks to allow Cape vessels to traverse the Canal carrying as many as 13,000 containers. Before expansion, the most containers a ship could carry through The Canal was 3,000 as the locks were 110 feet wide. A Panamax vessel is no more than 109 feet, 6 inches wide and can carry 55,000 to 60,000 mt of grain. Now vessels can pass through The Canal with as much as 130,000+ mt of grain.
China’s influence in Panama has grown substantially since 2017 when Panama’s President Carlos Varela severed diplomatic ties with Taiwan and recognized China, further opening the door to China’s expanded footprint in the critical Canal infrastructure and laying the groundwork for future domination of Central America with Chinese money.
We now have two “satellite” China countries in the Americas, namely Panama and Peru. There will soon be several more.
Certainly, the funds play a major role in the price direction of commodities. The charts below show the net position of the "managed money funds" (big specs and index funds) as of the most recent Commitment of Traders (COT) report for the CFTC. As you look at the charts below, ask yourself if you want to be buying before or after managed money has bought. If you have not done so, read the Joe Kennedy Story www.wrightonthemarket.com/post/the-joe-kennedy-story. Keep in mind, if you have unpriced grain or oilseeds in the bin, on a basis contract, call options bought, put options written or long futures, you have already bought the market. Each graph has the current position of managed funds (green circle) compared to the previous four years. Note: just because the managed money funds have a very bearish (or bullish) position does not mean they will become buyers (or sellers) any time soon. However, for sure, you do not want to be the last person to buy or the last person to sell. You want to be one of the first to buy, not one of the last to buy.
Market Data
This morning:
Crude oil is at $79.75, up $0.19
The dollar index is at 104.06, down 0.26
July palm oil is at 4,025 MYR, up 244. The contract high was made September, 1st at 4,365 MYR. Palm oil owns 36% and soybean oil owns 28% world market share.
July cotton is at $84.91, up $1.40 per cwt. The contract high was made September, 1st at $101.64 per cwt. Cotton competes with soybeans and corn for acres.
July natural gas is at $4.447, up 0.056. The contract high was made September, 6th at $5.938. Natural gas is the primary cost to manufacture nitrogen fertilizer.
July ULSD is at $2.9042 per gallon, up 0.0369. The contract high was made November, 4th at $3.1450. ULSD stands for Ultra Low Sulfur Diesel.
March Dow Futures is at 33,584, up 209. The lifetime high is 36,832 on January 5th, 2022.
Rain Days Update
The 6 to 10 day forecast updated every day at: https://www.cpc.ncep.noaa.gov/products/predictions/610day/
Explanation of Rain Days