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July 2019 - Monthly Commodity Outlook Sample

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Stocks & Bonds

Despite the mantra of sell in May and go away, the stock market has typically rallied during several periods of summer.  For example, the S&P 500 has usually been moderately higher in late July than in late June.  Is that more because selling has dried up than because buying is heavy?

Market-driven US interest rates have traditionally made their seasonal high in April/May, when monetary liquidity has tightened due to the massive transfer of capital from out of the private and into the public sector as income taxes are paid in mid April.  As those monies begin to find their way back into the economy, however, rates have usually begun to ease and continued to do so into September as the US fiscal

For example, ten-year Treasuries have historically closed higher in early September than in early July albeit not without drawdowns.  Similarly, long bonds have usually run higher from late July through the first two weeks or so of August.  As of late May, both were making multi-month highs.


Australia's fiscal year (FY) runs July-June.  The A$ has tended to decline through May and then run higher through June and July during the transition from one FY to the next.  Even during the downtrend last year (visible on long-term charts), the strategy still worked.  After an 18-month downtrend, will it find support again just below 70.00?

The British FY runs April-March.  The pound has tended to decline during the last half of June only to rally during most of July.  Of course, Brexit has put great pressure on the pound for months.  Will 120.00 continue to offer support?

The Japanese FY runs April-March.  The yen has typically made a seasonal bottom sometime between early April and June before beginning an uptrend into October.  The move higher from mid July into late August has especially coincided with dollar weakness.

Metals & Energy

Metals tend to be soft in spring and then look for a bottom in summer.  With demand weak, silver has tended to decline during June as deliveries against July futures approach and speculative longs are liquidated.  But sometime after First Notice Day, many of those longs are reinstated into the next most active contract in anticipation of future strength.

Copper is used most heavily in the construction industry.  Late in the season, new demand slows and prices can droop especially going into deliveries against September futures.  Per the monthly chart, major support appears to be at 250 and resistance at 300.

The heating season for natural gas begins in November.  In preparation, the industry accumulates inventory through summer.  But hot-weather regions depend on gas to generate electricity to run air conditioners during summer.  Distributors in those areas aggressively liquidate stocks they stored in spring.  That selling has tended to pressure price lower into September even as supplies priced for November grow.

Softs, Grains & Soy

Florida orange juice is produced January through June, sometimes spilling over into July.  Prices tend to rally from mid June into July on the prospect of ending production, but they then fall during summer as summer drinks cut into consumption amid large inventories.  Will it test 15-year support near 80?

The US corn crop has gotten off to a historically slow start.  The USDA reported that, as late as May 26, only 58% of the US crop had been planted versus the 5-year average of 90%.  Indiana and Ohio were at only 22% each, and Illinois the second largest producer at only 35%.  Thus, both acreage and yield will be less than the industry had anticipated only weeks before.  How anxious will the market be going into July when the crop pollinates?  With still-large stocks of old-crop, prices for new-crop may still be jumpy into mid July or until that anxiety eases.  In other words, carryover still best represented by September futures will not
be as burdensome as originally assumed.

The US soybean crop is also well behind, with only 29% of the total crop planted by 5/26 versus the 5-year average of 66%.  There remains more time for planting, and who knows how many acres originally designated for corn will be planted to soybeans instead.  Still, the soy complex has usually declined during the last half of July, when the corn crop is typically being made and weather prospects for the soybean crop itself are less murky.  Producers typically empty their bins in July in preparation for the new harvest, and deliveries against August futures the last old-crop contract approach.


Larger numbers of cattle already on feed and late planting of the corn crop have driven feeder prices lower.  Will potentially more expensive feed discourage higher prices for feeders?  Feedlot operators usually price feeders to fill feedlots to take advantage of corn at harvest.

Prices for fat cattle normally decline through August.  Retail beef supplies are still heavy and consumption slow during the heat of summer.

Fall hogs also usually decline in August as peak consumption winds down.  Further, slaughter weights normally surge in October as producers take advantage of newly harvested and usually plentiful, cheap corn.

Last Updated on Wednesday, 19 June 2019 08:45  

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