Energies: May crude oil closed at $97.12 per barrel, up 54c tied to the weak dollar but with better than expected U.S. economic data demand may improve. Declining inventories also suggest renewed demand and prompted short covering coming into the three-day holiday weekend. We continue to prefer the short side of crude based on our ongoing expectation of a return to global recessionary trends.
Copper: May copper closed at $3.4040 per pound, down 3.95con weaker demand from the world’s largest consumer of copper, China. Concern over the on-going Eurozone debt crisis also a factor in the recent weakness for copper. For the month, copper prices declined 4.3% and for the quarter have lost 4.9%. Global copper inventories are at a nine-year high as expectation for stronger economic growth prompted inventory build-ups. We have been bearish for copper and see no reason to change for now.
Precious Metals: June gold closed at $1,596.80 per ounce, down $10.40 and lost almost 5% for the first quarter. A rally in U.S. equities prompted the shift from the “safe haven” precious metals, but our expectation for a “bubble” in equities could prompt shortcovering and renewed interest in the “safe haven” commodities such as precious metals. We prefer the sidelines but for those that must have a precious metal, try silver, which over the years has outperformed gold on a percentage basis. May silver closed at $28.315 per ounce, down 29.7c. July platinum closed at $1,575.70 per ounce, down $7.80 or 0.5% while June palladium lost $3.85 per ounce, or 0.5% closing at $772.15. Stay with the long palladium, short platinum spread.
Grains and Oilseeds: May corn closed limit down 40c per bushel at $6.95 ¼ tied to the USDA report showing inventories larger than analyst forecasts and that farmers will be planting the most since 1936. The USDA report showed inventories of corn on March 1 were down 10% from 2012 to a nine-year low, but the plantings figure was the highest in 77 years and that prompted the heavy long liquidation in corn. We still suggest the sidelines. May wheat closed at $6.88 ¼ per bushel, down 48c or 6.5% but had traded as low as $6.82 ¾ early in the session. As has been the case of late, we prefer the sidelines here as well. May soybeans closed at $14.04 ¾ per bushel, down 49c or 3.4%. The USDA report caused the general selloff in grains and beans and leaves us once again on the sidelines.
Meats: June cattle closed at $1.2440 per pound, up 1.425c tied to a recently reported reduction in the U.S. cattle herd. However, demand had shifted to the Australian export market and we could see renewed selling after the recent shortcovering dissipates. However, we would buy a few calls here just in the event the withholding of animals by farmers continues and provides the impetus for a meaningful rally. June hogs closed at 91.20 per pound, up 52.5 points but reported reduction in domestic and foreign demand for pork could prompt a new round of long liquidation. We don’t like hogs from here.
Coffee, Cocoa and Sugar: May coffee closed at $1.3650 per pound, down 10 ticks tied to sufficient world supplies and increased exports from Vietnam and Brazil. Stay out for now. May cocoa closed at $2167 per tonne, up $17 in sideways trade. We prefer the sidelines in cocoa for now. May sugar closed at 17.62c per pound, down 23 points but remains stable in anticipation of a possible lifting by the U.S. government on sugar curbs for this “controlled” industry. Adequate supplies continue to pressure prices so we are on the sidelines.
Cotton: May cotton closed at 88.39c per pound, down 14 points tied to the U.S. report showing sowings 1.0m acres over the industry forecast of last month. The market hoped higher prior to the report trading at 90.27c, up 1%, then selling off sharply to close down 0.2%. We are on the sidelines for now after having been bullish recently.