Commodity Wrap - Oil, Silver, Coffee, Corn

Oil:
- Oil prices were recently impacted by turmoil in the Middle East, G20 meeting and OPEC agreement
- Trump says he has a lot of time to negotiate with Iran hinting at potential de-escalation or at least lack of further escalation
- Trade truce improves outlook for the oil demand in the second half of the year
- OPEC decided to extend the output cut agreement over the next 9 months
- Extending the output cut agreement does not mean that the production cannot rise as Saudi Arabia was delivering deeper than agreed cuts earlier and declines in the Russian output were result of problems with pipelines

Oil stockpiles took a major dive lower in the previous week but clearly lag behind seasonal patterns. Source: Bloomberg

Combined production of OPEC and Russia is at the lowest level since 2015. Nevertheless, the bulk of this drop is due to the US sanctions being imposed on Iran and Venezuela. Meanwhile, the US production keeps booming. Source: Bloomberg

Silver:
- The latest upward impulse took silver price 9% higher, what was much smaller gain than the one observed on the gold market. Silver revisited highs from March 2019 while gold price broke to fresh 6-year high
- Silver may benefit from improved outlook for the global economy in the second half of the year
- ETFs are increasing their silver holdings at the fastest pace since the first half of 2017. Net speculative position for silver is rising.
- Copper-to-silver price ratio is relatively high in comparison to the 10-year US yields hinting that copper may underperform silver in the future

ETFs increase silver holdings as the precious metal regains some of its shine. Source: Bloomberg

Copper-to-silver price ratio is high compared to the 10-year US yields. Copper may underperform silver in case the divergence is to be closed. Source: Bloomberg

Coffee:
- Coffee price has been on the rise during the past few sessions due to a number of reasons
- Cooperation between Brazilian and Columbian producers in order to set a minimum price for coffee
- BRL strengthens against the US dollar pushing coffee prices higher
- Concerns over potential light frost in Brazil that may harm next year’s crop are the main driver for coffee prices right now
- Parana region that is responsible for 10% of the Brazilian coffee production is said to have the highest probability of light frost occuring
- Coffee price broke above the key resistance level at 110 cents per pound (61.8% Fibo level of the latest major downward impulse). In case no catalyst for downward move emerges, the price may rally towards resistance levels at 118 and 125 cents per pound

Coffee stockpiles in the US ports (inverted axis) are declining. Similar situation was played out in 2004, 2007, 2008 and 2013. Source: Bloomberg

Corn:
- Surprisingly good data on actual plantings in comparison to expected plantings
- Platings declined compared to the plan but increased compared to a year ago
- 91.7 million acres of corn has been planted
- Market participants keep pointing to optimistic assumptions of USDA as a source of concern
- Quality of corn crop at the lowest level in many years
- In case data continues to show crop struggling and acreage shrinking, an extension of the upward move cannot be ruled out

USDA estimates on actual plantings are at the high-end of sector’s expectations. Source: USDA

US corn crop quality is at the lowest level since 2013. Source: Bloomberg