Commodity Wrap - Wheat, Corn, Oil, Aluminium

Wheat:

• Strong rises in corn and wheat prices due to uncertainty regarding planting

• Seasonality suggests a possible price rise lasting between 4 and 6 weeks in the middle of the year

• Winter wheat quality in the US as well as in the vicinity of the Black Sea remains high

• US govt tries to help its farmers, however, we have yet to be given details regarding this program

• There are expectations regarding a substantial increase in wheat production in the EU (+13% r/r)

• The first decline in quality of wheat crop due to heavy rainfall and too high temperature

• Winter spring planting has been in line with expectations

The first decline in quality of wheat crop this year. Source: Bloomberg

Wheat prices eye the key technical level but there is still room to get the last year’s peak. Source: xStation5

Corn:

• Soggy soil in the Midwest causes some difficulties in corn planting

• No declarations regarding governmental subsidies have been made so far

• Another USDA report regarding actual planting should show notably lower area being sown compared to the March report

• A substantial increase in soybean production in China may encourage Us farmers to switch to corn

• USDA projects the price for farmers for bushel of corn equal 330c, down 20c compared to the same period last year, the lowest since 2006/07

• The negative tone of the previous USDA report increases the odds to see an improvement this time around

Progress in corn planting is the lowest at least in 30 years. Source: Bloomberg

Short positions in the corn market are being closed due to the strong price rally. If no rebound of longs takes place, it could be a warning signal for buyers. Source: Bloomberg

Corn prices have approached the important resistance as well as the levels lately seen in 2015/16. Source: xStation5

Oil:

• In the past week oil prices made the greatest price decline this year mainly due to concerns regarding the trade war

• Further price declines are on the cards as trade negotiations are nowhere to be ended with success

• A lot depends on a possible OPEC’s decision regarding higher crude output, this decision could be taken in June

• A rise of production limit may be a negative signal for buyers, hence further price drops could be possible

• US oil inventories keep rising due to constrained demand from refineries

Oil prices remain low due to expectations of low demand in the future. Source: xStation5

Aluminium:

• A high amount of warrants as well as falling stocks may lead to speculative price movements

• Aluminium keeps moving at the low levels which is related to stuttering economic growth in the world

• Lower production in China is expected which may lead to the lowered supply in the world

• Current aluminium prices are too low for Chinese and Brazilian smelters which may limit supply going forward, the price should be at least $1900 to break even

• A Reuters poll points to the price between $1950 and $2050 this and the following years

A number of warrants in the LME is very high which could support higher price levels. This is especially true if China cuts its output. Source: Bloomberg

Aluminium prices remain under downward pressure. The closest support is localized at around the 78.6% retracement. However, possible supply constraints may lead to a bounce in prices. Nevertheless, a possible price rebound is unlikely to be more long-lived. Source: xStation5