WEEKLY MARKET SUMMARY

Transcription

1 For the Week of November 20, 2017 BONDS: Treasuries were unable to hold onto early strength, but still managed to finish last Friday's trading session with moderate gains as Bonds continue to lead the way higher. A negative shift in risk sentiment going into the weekend helped Treasuries to receive safe-haven inflows. While housing starts and building permits beat market forecasts, a sizable "miss" on the KC Fed manufacturing index dampened Fed rate hike prospects during Fresh political wrangling in Germany, residual fear from the junk bond sector, a lack of forward progress on tax reform and a lack of definitive forward progress in US economic readings leaves the bull camp with an edge in Treasuries. Holding back Treasuries is news of a Chinese 5 Year auction of 26.4 billion, news of an Indian government bond offering and a forecast from Goldman that the US will see four rate hikes next year. We also think that Treasuries have managed at least part of the gains off the mid November lows off the idea that the US Fed might not hike rates next month because of somewhat suspect US jobs readings and the lack of legislative stimulus from Washington! While the path of least resistance remains up this morning the trade will be presented with an October reading on the Conference Board's leading indicators that is expected to see a moderate uptick from September's -0.2% reading. Furthermore the net spec and fund long in Bonds should be escalating from the 28,922 contract reading from the Commitments of Traders Futures and Options report as of November 14th. The Commitments of Traders Futures and Options report as of November 14th for US Treasury 10 Year Notes showed Non-Commercial and Non-reportable combined traders held a net short position of 135,827 contracts and that represents a significant decrease of 53,023 contracts in the net short position held by these traders. The rapid decrease in the net short positioning in Notes is another artifact of the prospect of a slight reduction in US December rate hike expectations which could also be taking place because some Fed members are not expecting legislative stimulus from tax reform this year! CURRENCIES: The Dollar's recovery move ran out of steam as it was unable to shake off early pressure and finished Friday's trading with a moderate loss. News of fresh subpoenas from Special Counsel Robert Mueller put the Dollar on the defensive during overnight trading, and mixed results from US data was unable to provide underlying support later in the day. The Yen and Swiss Franc continued to benefit from safe-haven inflows as they both posted sizable gain for the day. While the dollar has shown signs of consolidating recently and it has managed a four day high early the magnitude of the benefit from the lack of a German government coalition by the current Chancellor suggests the dollar is having difficulty throwing off the November slide. While we expect scheduled US data today to provide some support the dollar sits just above a very critical pivot point at Pushed into the market we favor the downward track for the Dollar until there are signs of a possible tax deal that actually includes tax cuts for the middle class without offering items that make passage of the bill likely. The Commitments of Traders Futures and Options report as of

2 November 14th for US Dollar showed Non-Commercial and Non-reportable combined traders held a net long position of 3,904 contracts. This represents a decrease of 4,287 contracts in the net long position held by these traders. The euro was at least initially undermined as a result of the political travails in Germany, but the currency has done a very impressive job of rejecting the slide below In fact, the lack of a distinct and sustainable rally in the Dollar following the developments in Germany goes a long way toward diffusing the negative fundamental and technical conditions in the euro. However due to the political events in Germany the minor gain in German producer prices is mostly ignored by the currency trade. Despite the rejection of the four day low in the euro early this morning we remain bearish toward the euro until the currency manages a rise back above The Commitments of Traders Futures and Options report as of November 14th for Euro showed Non-Commercial and Non-reportable combined traders held a net long position of 95,094 contracts. While the overall global macroeconomic/political uncertainty isn t extreme, the path of least resistance in the Yen remains up overall ranges ahead might be limited. Certainly the Yen is short-term overbought following the big range up/breakout on Friday but the market does appear to be poised to rise back into a range just below the level. While the safe haven tilt should hold the focus of the trade early this week, the Yen was also supported overnight by favorable export data which in turn continues to improve the economic recovery view in Japan. While the events in Germany is probably serving to thicken overhead resistance in the December Swiss around the level, the Swiss like the Yen might expect to see some safe haven support. Despite fresh headlines regarding the exodus of UK-based corporate headquarters from the UK because of BREXIT, the British Pound has forged another higher high and it has reached the highest level since November 2nd in a fashion that seems to target levels up around Perhaps the trade views the UK government announcement of support for industries of the future as a fresh benefit to the UK economic recovery effort. It would appear as if the Canadian dollar remains under pressure because of the lack of political stimulus below its southern border and it would also appear as if the Canadian may be undermined as a result of fresh NAFTA posturing. There could be thin psychological support at the level, and it is possible that the Canadian might find support from the resumption of weakness in the US dollar but neither currency appears to have a distinct trend to start this week. STOCKS: Global markets saw a negative shift in tone late last Friday that diminished risk sentiment going into the weekend. Elevated risk concerns overseas combined with uncertainty over whether US tax reform measures would be passed this year to put across the board pressure on equity markets. The major US stock indices finished the day in negative territory, and were led by the Dow Jones which ended up with a weekly loss. Global equity markets were mixed at the start of this week with European stocks under pressure because of the failure of the German Chancellor to achieve a 3 way coalition government. Unless there appears to be a breakthrough on US tax reform ahead of the holiday the path of least resistance in US equities looks to remain down. Fortunately for the bull camp, there doesn t

3 appear to be noted anxiety or economic disappointment dominating the headlines. Lingering concern toward GE shares, fears toward the brick and mortar retail sector in the shopping season and negative US charts leaves the downtrend from the end of last week in place to start the new trading week It would appear as if the markets have continued to price in legislative disappointment and a fear of disappointing earnings news from a number of key cyclical US companies this week. However there was a buyout story involving Marvell technology and Cavium as well as buyout activity from Alibaba. Without a trade back above , we leave the near term path of least resistance pointing downward. The Commitments of Traders Futures and Options report as of November 14th for E-Mini S&P 500 showed Non-Commercial and Non-reportable combined traders held a net long position of 155,571 contracts and with the COT report this week showing an increase of 36,728 contracts in the net long, the E-Mini should be vulnerable from a short term technical perspective. With a fresh lower low in the Mini-Dow to start early today the path of least resistance from the charts remains down. We suspect that the Dow stocks and investors remain fearful of a delay in tax reform and/or a lack of actual tax reductions from Washington. The Commitments of Traders Futures and Options report as of November 14th for Dow Jones Index $5 showed Non- Commercial and Non-reportable combined traders held a net long position of 87,286 contracts and that should leave the market short term technically vulnerable to long liquidation pressures. Despite some positive news over the weekend from Alibaba, Marvell Technology and Qualcomm, the NASDAQ also made a lower low in a move that seems to put the index in a negative footing to start the new trading week. In order to throw off the slight bearish tilt might require an early trade back above The Commitments of Traders Futures and Options report as of November 14th for the Nasdaq Mini showed Non-Commercial and Non-reportable combined traders held a net long position of 22,772 contracts and that might leave the market minimally vulnerable to long liquidation. GOLD, SILVER & PLATINUM: While the precious metals markets benefited from a wave of fresh safe-haven support at the end of last week, they are starting out this week on a weaker footing despite potentially supportive political developments in Germany. However, the Dollar is showing only minor gains in the wake of the failure to see a 3 way coalition formed by the German leader and that suggests the Greenback is still mostly out of favor because of the lack of progression on tax reform and health care reform. In fact, with the Dollar finding little benefit from positive US housing data late last week, we have to leave the path of least resistance in the Dollar pointing downward and that in turn could help the gold and silver markets find support after this morning's weak start. In fact, given the looming US holiday period ahead and the wide difference between the two parties on almost every legislative agenda item, the markets are beginning to think any work in Washington will be delayed until next year. With US economic data recently softening and the dollar softening, that leaves a favorable environment for gold and silver directly ahead. In fact, given the impressive technical breakout action at the end of last week, the bull camp should have control to start the new trading week. The gold market was also helped higher last week and might continue to be helped by talk of improving demand from India and talk of a general increase in gold smuggling in several demand markets.

4 The Commitments of Traders Futures and Options report as of November 14th for Gold showed Non-Commercial and Non-reportable combined traders held a net long position of 223,304 contracts. This represents an increase of 2,039 contracts in the net long position held by these traders. The Commitments of Traders Futures and Options report as of November 14th for Silver showed Non-Commercial and Non-reportable combined traders held a net long position of 80,194 contracts. This represents a decrease of 947 contracts in the net long position held by these traders. While the PGM sector finished the week on a very positive note last week they are seeing some needed back and fill balancing to start today. Political issues in Zimbabwe, South Africa and Germany have thrust the complex into an increased volatility period at the same time that platinum has regained the upper hand on palladium. While the threat against African PGM supply is present but not overly important, that issue is joined by reports that Russian Norilsk plans to increase its purchases of palladium from the Russian central bank as a way to supplement its efforts to meet customer demand. An issue that might serve to limit the PGM complex is a slight tempering of macroeconomic optimism and the periodic threat of a risk off commodity environment because of political uncertainty in Germany and the US. The Commitments of Traders Futures and Options report as of November 14th for Palladium showed Non- and Non-reportable combined traders held a net long position of 23,127 contracts. This represents a decrease of 266 contracts in the net long position held by these traders. The Commitments of Traders Futures and Options report as of November 14th for Platinum showed Non-Commercial and Non-reportable combined traders held a net long position of 31,076 contracts. This represents an increase of 2,986 contracts in the net long position held by these traders. COPPER: Copper prices were able to rebound from a new 5 1/2 week low to finish last Friday's trading session with a moderate gain in a fashion that suggests the oversold technical condition was balanced. Unfortunately, the copper market has not benefited from the potential supply disruption threat in Zimbabwe and it also hasn't benefited this morning from news that the Philippine President has left an open pit mining ban in place and that is a telling sign of the ongoing existence of the October and November downtrend. Shanghai exchange copper stocks saw a third sizable weekly build in as many weeks last Friday, which dampened Chinese copper demand prospects and that should embolden the bear camp going forward. However, a sizable decline in LME copper stocks to a new 2-month low Friday helped to soothe global demand concerns and that combined with a weaker Dollar should help copper limit the extension of the downtrend. The Commitments of Traders Futures and Options report as of November 14th for Copper showed Non-Commercial and Non-reportable combined traders held a net long position of 45,590 contracts. This represents a decrease of 3,681 contracts in the net long position held by these traders. ENERGY COMPLEX: The energy markets finished last week on a positive note as crude oil leaped higher in the wake of the trade jumping to the conclusion that major oil producers might be poised to extend the output restraint deal beyond March. Also lifting prices at the end of last week were ideas that

5 Chinese demand was running better than expected off reports that Chinese crude oil inventories have fallen for the first time in 12 months due in part to strong refinery processing levels which in turn has helped to shore up global demand prospects. Furthermore with US oil production fears tempered slightly following news that the Baker Hughes oil rig count posted an unchanged reading from last week, the bull camp is also helped by news that Saudi September oil exports declined from 6.7 million barrels per day to 6.5 million barrels per day. Unfortunately for the bull camp, the market has burned a lot of speculative buying fuel with last week's rally as the combined net spec and fund long position hit a new record level at 633,884 contracts. If the market sees a revival of macroeconomic optimism this week, further weakness in the Dollar and normal to below normal US temperatures that could set the stage for a return back to the early November highs. The Commitments of Traders Futures and Options report as of November 14th for Crude Oil showed Non-Commercial and Non-reportable combined traders held a net long position of 633,884 contracts. This represents a rather large increase of 56,173 contracts in the net long position over the last week. Clearly more seasonable temperatures and talk that the coming winter might finally be colder than normal serves to push November ultralow sulfur diesel (ULSD) within striking distance of contract highs. However the 6 to 10 day forecast is not overly cool and heating oil has become moderately short-term overbought and the tart today hints at weakness. Relatively speaking, the gasoline market is cheap relative to both crude oil and heating oil and it could take a return to the November highs in crude oil just to pull the December gasoline market up and away from a recent value zone of $ A critical pivot point in December gasoline to start the trading week is seen at $ However, the gasoline contract might continue to receive some residual support from the troubles at the Port Arthur, Texas refinery which is expected to be restarted in several more days. The heating oil market is at least partially overbought with the noncommercial net long hitting a new record level at 60,420 contracts as of early last week. The Commitments of Traders Futures and Options report as of November 14th for Heating Oil showed Non-Commercial and Non-reportable combined traders held a net long position of 85,599 contracts. This represents a decrease of 898 contracts in the net long position held by these traders. The Commitments of Traders Futures and Options report as of November 14th for Gasoline (RBOB) showed Non-Commercial and Nonreportable combined traders held a net long position of 95,116 contracts. This represents an increase of 4,708 contracts in the net long position held by these traders. While natural gas prices have periodically found support from below average storage levels at the start of the North American winter heating season the market has failed in a fashion that might set the stage for a slide back to $3.00. However, seeing storage levels begin to settle in below five year average levels would seem to suggest to us that the long-term supply bear market has finally found some form of equilibrium pricing around the $3.00 level. Unfortunately for the bull camp, the next 10 days offers merely normal temperatures and the weekly Baker Hughes natural gas drilling rig count was up eight last week to stand at 177. The Commitments of Traders Futures and Options report as of November 14th for Natural Gas showed Non-Commercial and Non-reportable combined traders held a net short position of 43,435 contracts. This represents a decrease of 26,048 contracts in the net short position held by these traders. Unfortunately we see little in the way of support from a fundamental or technical perspective until the $3.014 level.

6 BEANS: Losses early this week were led by palm oil as India (the world's largest vegetable oil importer) raised the import tax on crude palm oil to 30% from 15% and on refined palm oil to 40% from 25% previous. Taxes on crude soybean oil imports were also raised to 30% from 17.5% previous. This has put pressure on soybean oil. Traders will monitor southern Brazil and Argentina for La Nina dryness trends ahead. With strong demand from China, uncertain weather in South America and the outlook for tightening soybean oil stocks in the US, the short-term trend for soybeans may have turned up with the bullish technical action on Friday. January soybeans settled up 18 1/2 cents on the session Friday and this left the market up 3 1/2 cents on the week. The market closed above all three moving averages (50 day at 983, 100 day at 982 1/2, 200 day at 979 1/2) which is a positive technical signal. South Korea seeks 170,000 tonnes of non-gmo soybeans for Dec 2018 to August 2019 delivery. The strength in the market is tied to rumors of possible Chinese soybean purchases out of the Pacific Northwest. While Brazil looks to get beneficial rains into the end of November, traders remain cautious of the recent dryness in Argentina as well as the longer term La Nina implications. The soybean meal market surged higher last Friday with speculative buying anticipating the drier trend could be an issue. Argentina is the world's #1 soybean meal exporter, and many traders recall the $60.00 dollar soybean meal rally in 2016 due to excessive rains that damaged the crop. The Buenos Aires Grains Exchange estimated the soybean planting progress at 23.8% complete versus 12% last week. The total planted area remains unchanged at 18.1 million hectares. The Buenos Aires province approved of a 50% tax hike on farmland and traders see less input usage in the region and possibly lower yield potential. Informa released a new US planted acreage estimate at 89.6 million acres down 720,000 from their previous estimate and compared to 90.2 million in The Commitments of Traders reports as of November 14th showed non-commercial traders were net long 36,481 contracts, a decrease of 21,256 contracts on the week. Non-Commercial and Nonreportable combined traders held a net short position of 1,141 contracts. These traders have gone from a net long to a net short position. Commodity Index traders held a net long position of 118,511 contracts, down 5,806 contracts for the week. For Soybean Oil, Non-Commercial traders were net long 70,266 contracts, an increase of 1,384 contracts for the week. Non-Commercial and Nonreportable combined traders held a net long position of 79,182 contracts, and increase of 2,973 contracts for the week. Commodity Index traders held a net long position of 97,901 contracts, down 3,222 contracts for the week. For Soybean Meal, Non-Commercial traders were net long 33,850 contracts, an increase of 1,509 contracts for the week. Non-Commercial and Nonreportable combined traders held a net long position of 42,427 contracts, down 87. Commodity Index traders held a net long position of 82,542 contracts, down 2,932 contracts for the week. CORN: On top of rumors that China may have increased interest in US ethanol or even corn, Japan's market for ethanol will open up to US corn based ethanol in April. Japan is the world's third largest oil consumer and US ethanol is currently priced at a 35% discount to Brazil sugar ethanol. With a non-commercial net short position at a record high, the turn up on Friday might be the start of a more significant technical recovery. March corn closed up 6 cents on the session Friday, but still finished down 1 3/4 cents on the week.

7 The market surged higher with big volume from rumors of Chinese buying of US corn and ethanol. Talk of as much as 10 cargoes of corn and 18 cargoes of ethanol have been booked. China's recent shift in policy to increase E10 in gasoline blends has been anticipated by the trade. Old corn stocks dating back 3-5 years are thought to be used for most of the increase processing, but if these rumors are verified, it may kick off further exports into China. Fears that the US trade issues like NAFTA will disrupt exports is seen as a potential negative force. The fuel for the rally also emerged on expectations that the managed money trader's net short position would be near or above the recent record of 229,176 contracts. The report showed a record net short of 230,556 contracts. The open interest in corn went up 14,015 contracts on Thursday and is up nearly 100,000 contracts over the last six sessions. China expects 2017 grain output at 600 million tonnes with increases in wheat and rice production and lower corn production according to the Ag Minister. The USDA estimated Chinese corn production at 215 million tonnes with some analysts pegging China's production closer to 210 million tonnes. Informa released a new estimate for corn acres at 91.4 million, up 955,000 acres from their previous estimate and compared to 90.4 million acres in Using 91.4 million acres and a 173 yield with aggressive demand assumptions, the ending stocks for would come in above billion bushels. The Commitments of Trader reports as of November 14th showed Non-Commercial traders were net short a record 166,835 contracts, an increase of 34,174 contracts for the week. Non- Commercial and Nonreportable combined traders held a net short position of 164,897 contracts, up a significant 46,427 contracts in just one week and this leaves the market extremely oversold. Commodity Index traders held a net long position of 317,111 contracts, down 2,703 contracts for the week. WHEAT: With Russia wheat prices down for three weeks in a row and exports so far this season up 26% from last year's pace, the market is struggling to find much support. Some light crop concerns and a significant short-covering trend noted in the COT update are factors which could support the market this week. Chicago March wheat closed up 5 1/2 cents on the session on Friday, and this left the market down 5 1/2 cents on the week. Kansas City March wheat was up 5 cents on the session Friday but down 10 1/2 cents on the week. Minneapolis March wheat settled up 4 3/4 cents on the day but down 9 1/4 cents on the week. Short covering was the feature Friday, and pushed prices higher prior to the COT update. Some concerns are also starting to develop with the lack of rainfall in the hard red winter wheat belt over the last four weeks. The lack of moisture will likely cause a less developed crop with plants having only 1-2 tillers versus the normal 3-5 tillers which could be more exposed to winter kill. There is no rain in the 5-day forecast and the 6-10 day forecast shows above normal temperatures and below normal precipitation. The 8-14 day models show some chances in the central plains. There also are also some concerns of extensive dryness in areas in France, northwest Germany, Spain, U.K., and northern Italy and could be detrimental to winter wheat crops to be harvested next year. French wheat plantings were seen at 95% complete as of November 13th. This

8 compares to 90% last week and 94% last year. French soft wheat exports are estimated to be down 1.4% at 18.1 million tonnes due to strong competition from Black Sea region wheat and Argentina. MATIF wheat futures traded to an 11-week low and are down 1.4% on the week. Egypt bought 240,000 tonnes of Russian wheat on Thursday at an average price of $ CNF per tonne compared to the last tender in early November at $ CNF per tonne. This is the sixth consecutive Egyptian tender with only Russian origin wheat purchased. The last non-russian cargo that was bought by Egypt was on August 29th when one Ukrainian cargo was sold. Jordan is tendering for 100,000 tonnes. The Commitments of Traders reports as of November 14th showed Non-Commercial traders were net short 81,206 contracts, a decrease of 14,846 contracts for the week. Non-Commercial and Nonreportable combined traders held a net short position of 81,603 contracts, down 14,584 contracts for the week. Commodity Index traders held a net long position of 137,025 contracts, up 5,427 contracts for the week. For Kansas City Wheat, Non-Commercial traders were net long 684 contracts, an increase of 10,815 contracts in just one week which represents a change from a net short to net long position. Non-Commercial and Nonreportable combined traders held a net long position of 1,029 contracts. These traders have also gone from a net short to a net long position. Commodity Index traders held a net long position of 47,435 contracts, up 1,756 contracts for the week. HOGS: With a large net long position from speculators, the short-term downtrend could accelerate if longs move to the sidelines into the holiday. Slaughter continues to come in below expectation and this could spark even higher weights and heavier production in the weeks ahead "if" the USDA Hogs and Pigs report is correct. The big discount to the cash market for December hogs sparked aggressive short-covering early in the session Friday but the bounce to could not hold and the market closed with a small gain. Ideas that there is plenty of pork to absorb over the near-term and more talk that some hogs may be backed-up in the country helped to spark a set-back from the highs. The CME Lean Hog Index as of November 15th came in at 65.97, down 40 cents from the previous session and down from the previous week. This left December hogs at a $5.45 discount to the cash market versus a 5-year average discount of $0.35 for this time of the year. The USDA estimated hog slaughter came in at 461,000 head Friday and 154,000 head for Saturday. This brought the total for last week to million head, down from million the previous week and down 2.1% from a year ago. Slaughter should be running near 2-3% above a year ago so the news may be seen as bearish as more heavier-weight hogs could be moving in the weeks just ahead if the last Hogs and Pigs report was correct. USDA pork cutout values released after the close Friday came in at $80.03, up 27 cents from Thursday but down from $80.98 the previous week. The Commitments of Traders reports as of November 14th showed Non-Commercial traders were net long 76,440 contracts, a decrease of 1,072 contracts for the week. Non-Commercial and Nonreportable combined traders held a net long position of 47,418 contracts, down 1,398 contracts for the week.

9 CATTLE: With a bearish USDA COF update and a huge net long shown by speculators in the COT update, the market looks vulnerable to more selling ahead. The Cattle on Feed report was bearish for the market, as placements of cattle into feedlots for October came in at 110.2% of last year (six year high for Oct) compared with trade expectations for 108%. Marketings for the month of October came in 105.6% versus trade expectations at 105.5%. This left November 1st Cattle-On-Feed supply at 106.3% of last year, compared with trade expectations for 105.7%. Cheap corn and a better supply of heifers available for feedlots were seen as reasons for the higher placements. With the higher than expected placements, the slaughter levels for the January-April timeframe may come in a bit higher than previously expected. If the Plains feedlot areas were expected to see some early harsh weather, we would be interested in buying February cattle before the wet and cold winter weather arrived. However, the forecasts suggest that it may be well into December before the weather is bad enough to create any concerns. The 1-5 day, 6-10 day, and 8-14 day weather models show a warm and dry trend, which is typical for La Nina winters in the southern Plains. December cattle traded lower on the session Friday and the selling pushed the market down to the lowest level since October 24th. The USDA estimated cattle slaughter came in at 118,000 head Friday and 48,000 head for Saturday. This brought the total for last week to 639,000 head, up from 623,000 the previous week and up 1.6% from a year ago. USDA boxed beef cutout values were down $1.68 at mid-session Friday and closed $3.00 lower at $ This was down from $ the prior week and this is the lowest since October 31st. The Commitments of Traders reports as of November 14th showed Non-Commercial traders were net long 158,822 contracts, a decrease of 68 contracts for the week. Non-Commercial and Nonreportable combined traders held a net long position of 120,906 contracts, down 302 contracts for the week. Commodity Index traders held a net long position of 128,047 contracts, up a significant 3,176 contracts for the week. COCOA: Cocoa remains on a roller-coaster ride this month as the market has given back more than half of its early November updraft. While cocoa s demand prospects should remain positive, its nearterm direction may hinge on West African output over the next few weeks. March cocoa survived an early retest of Wednesday s weekly low, but fell back into negative territory late as it finished last Friday s trading session with a modest loss. For the week, March cocoa finished with a loss of 81 points (3.6% lower) which followed its highest weekly close since January. Sluggish risk sentiment going into the weekend kept cocoa on the defensive for much of the day, which more than offset moderate gains for the Eurocurrency and British Pound that provided modest underlying support. West Africa output should see an upsurge over the next few weeks due to several periods of good weather over the past few months. With the region s dry season about to start, however, Ivory Coast and Ghana remain on-course for at least a 10% decline in output this season. The latest COT report showed a sizable increase to cocoa s net spec long position that puts it at its highest level since late 2016.

10 The Commitments of Traders Futures and Options report as of November 14th for Cocoa showed Non-Commercial traders were net long 19,134 contracts, an increase of 10,889 contracts. Non- Commercial and Nonreportable combined traders held a net long position of 29,014 contracts. This represents an increase of 11,822 contracts in the net long position held by these traders. Commodity Index traders held a net long position of 32,623 contracts. This represents an increase of 2,280 contracts in the net long position held by these traders. COFFEE: Coffee has fallen back towards the lower end of its October/November consolidation zone, due in part to rising optimism towards an upcoming Brazilian crop that will not see its harvest begin for over seven months. With both demand and near-term supply factors starting to shift positive, however, coffee should at least hold its ground above the early November lows. March coffee traded down to a new 1 1/2 week low at (2.3% lower) before finishing last Friday s session with a sizable loss. For the week that included last Tuesday s wide sweeping outside day down, March coffee finished with a loss of 3.65 cents (2.8% lower). The USDA s attache cut their forecast for Brazil s 2071/18 production by 900,000 bags to 51.2 million, which includes a 6.8 million bags decline in Arabica output from the 2016/17 season. The Brazilian analytics firm Safras pegged their nation s 2017/18 coffee sales at 60% complete as of November 14th, which compares to 68% last year and a five year average of 58%. This sales total would be equivalent to 30.3 million bags and implies overall Brazilian production around million bags. ICE exchange coffee stocks were unchanged on Friday, and remain down for the month of November. While the latest COT report showed a modest weekly decline, coffee s net spec short position remains very large and would provide plenty of fuel for additional short-covering. The Commitments of Traders Futures and Options report as of November 14th for Coffee showed Non-Commercial traders were net short 37,227 contracts, a decrease of 3,383 contracts. Non- Commercial and Nonreportable combined traders held a net short position of 31,259 contracts. This represents a decrease of 2,225 contracts in the net short position held by these traders. Commodity Index traders held a net long position of 36,656 contracts. This represents an increase of 3,530 contracts in the net long position held by these traders. COTTON: The cotton market seems to have the supply fundamentals to turn lower, but a strong demand tone and impressive export pace continues to support. March cotton closed 17 higher on the session last Friday, and this left the market up 21 points for the week and the highest close since September 11th. Weekly export sales on Thursday were a whopping 506,700 bales. This was the highest weekly total since January 22nd, As of November 9th, cumulative cotton sales stand at 67.0% of the USDA forecast for 2017/2018 (current) marketing year versus a 5 year average of 59.4%. Sales of 117,000 bales are needed each week to reach the USDA forecast. Even if the USDA adjusts exports up by 500,000 bales, ending stocks will still be 5.6 million bales which is up from 2.75 million bales last year and still a nine year high. The Commitments of Traders reports as of November 14th showed Non-Commercial traders were net long 57,680 contracts, an increase of 78 contracts for the week. Non-Commercial and Nonreportable combined traders held a net long position of 57,731 contracts, an increase of 1,874 contracts for

11 the week. Commodity Index traders held a net long position of 70,279 contracts, up 370 contracts for the week. SUGAR: Sugar s 99 tick rally (6.8% higher) over the past two weeks has taken prices to their highest level since early August, but the market will need to have continued strength in energies to maintain its uptrend. March sugar traded up to (1.3% higher) before finishing last Friday with a moderate gain, as it finished the week up 41 ticks (2.7% higher). Sugar continues to find support from speculation that Brazilian mills will use more cane to make ethanol as energy costs increase, which was reinforced by crude oil and the products posting solid gains on Friday. The International Sugar Organization (ISO) sees 2017/18 global production exceeding consumption by 5.03 million tonnes as big production gains in India, EU, Thailand, and China will more than make up for production decline in Brazil. In addition, the ISO also projects a possible 2018/19 global production surplus of about 3 million tonnes. On the other hand, the USDA is forecasting 2017/18 global production at a record high of 185 million tonnes versus global consumption at 174 million, as they expect Brazilian sugar output to come in above 40 million tonnes this season. A significant positive turnaround in its net spec position could leave sugar vulnerable to a negative shift in risk sentiment going into the Thanksgiving holiday. The Commitments of Traders Futures and Options report as of November 14th for Sugar showed Non-Commercial traders were net long 17,996 contracts, an increase of 48,268 contracts which represents a change from a net short to net long position. Non-Commercial and Nonreportable combined traders held a net long position of 24,085 contracts, which was a net increase of 53,011 contracts as these traders have gone from a net short to a net long position. Commodity Index traders held a net long position of 199,212 contracts. This represents an increase of 6,785 contracts in the net long position held by these traders. Please contact us at or via at sales@admis.com for any questions or comments on this report or would like more information about ADMIS research. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. Any reproduction or retransmission of this report without the express written consent of ADM Investor Services, Inc. is strictly prohibited. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by Archer Daniels Midland Company. Copyright ADM Investor Services, Inc. Follow, Fan and Connect w/admis on Social Media LinkedIn ADMIS Futures & Options Daily Group!