Commodity Wrap - Copper, Silver, Sugar, Corn (11.05.2021)

12:32 PM May 11, 2021


  • Copper price reached fresh record highs

  • US dollar is one of the key factors for copper. Higher yields lead to USD strengthening and it is a negative development for copper. On the other hand, higher yields resutls from higher inflation expectations, what is a positive development for industrial metals

  • Traders hint at a very high demand for copper recently. However, high prices also increase risk of a correction

  • Backwardation on the copper market decrease recently, signalling that short-term demand is decreasing relative to long-term demand

  • Copper Study Group says that copper market may be in a small surplus this year

  • Copper stockpiles stopped declining, inventories in China began to rise slowly

  • In spite of record copper prices, copper-to-gold ratio remains below 6. Copper rally that followed the previous crisis pushed the ratio above 7

Copper stockpiles stopped declining, what may signal that the market has enough of the commodity. Source: Bloomberg

On the other hand, copper-to-gold ratio remains relatively low. Yields may react to the price ratio and provide hints for price movements on both copper and gold. Source: Bloomberg

Copper has reached a potential resistance at $10,700. On the other hand, range of rally that followed GFC signals that current upward impulse may extend to as high as $11,800 per tonne. Source: xStation5


  • Silver price reacted to the first major resistance. Realization of the inverse head and shoulders range is still possible but a lot will depend on USD performance and yields

  • CPI data from the United States will be released tomorrow. Market expects acceleration in price growth, mostly due to base effects

  • Nevertheless, pick-up in inflation may trigger large moves on the bond market therefore yields remain key-short term factor for silver

  • Industrial as well as investment demand will be key for silver in medium- and long-term

  • Investment demand in Q1 2021 was strong but ETFs have been selling out silver since the beginning of Q2

Lows in demand from ETFs in 2008 and 2010 deserve some attention. They were important signals for price reversals. On the other hand, changes in investment demand in 2012-2019 period were frequent. Source: Bloomberg


  • Sugar price gains may be limited by uncertainty related to the future of oil rally

  • Brent tested $70 mark earlier but has struggle to revisit this area since

  • On the other hand, Brazilian real has been gaining since November/December 2020, thanks to a tighter monetary policy in Brazil

  • Brazil and Thailand, largest sugar producers may experience a production drop of 7-8 million tonnes this year due to bad weather

  • Brazil and Thailand account for around a third of the global sugar production

  • India increases share of ethanol in gasoline mix. Ethanol content may rise from current 5% to as high as 8.5% this year. Share of ethanol is expected to increase to 20% by 2025

  • Nevertheless, sugar price gains may be limited to around 19 cents per pound as India launched additional exports of the commodity

Sugar prices remain dependent on oil prices. Declines on the oil market in March put a pressure on sugar prices. Source: xStation5


  • Corn price jumped above 700 cents per bushel and reached 78.6% retracement of the downward impulse launched in 2012

  • Peak season for corn may potentially take place in the first week of June

  • Speculative positioning remains near record lows

  • Market waits for USDA report scheduled for Wednesday. Investors expect ending stocks to decline for soybean and corn

  • Sowing season is going really well but strong demand offsets good supply data

Corn sowing progress above highs from the previous 5 seasons. Source: Bloomberg

Market expects the WASDE report to show a good production outlook. Expected drop in ending stocks hints at strong demand. Source: Bloomberg

Corn trades near the upper limit of the range of previous major rallies. Production outlook is improving and seasonal patterns hint that a peak period may be approaching. On the other hand, demand remains strong and may lead to further declines in ending stocks. Source: xStation5


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