Consecutive weeks of decline were reversed on Friday as the May-17 contract expired 86 points higher at 16.04 USc/lb. A record delivery of 1.5mmt of raws delivered to the tape. A sole deliverer and multiple receivers has the market conducive on a change in sentiment. Rather, we believe this expiry helping develop the theme of overestimated consumption and higher stocks. UNICA released their first report for 17/18 crop, data showed significantly lower numbers than the same time last year. Additionally, the latest COT report showed a reduction of 18,500 logs to 5,500 lots net long. Expectations are that this has increased following an uptick at expiry. Weather forecast for Brazil is mostly fine this week, with isolated rains for India.
Despite recent underperformance in commodity currencies, the AUD has lifted overnight on soft USD inflation and manufacturing data. Interestingly, broad improvements in yields and equities failed to drag the AUD higher. Following President Trump’s tax reform package announcement, Canada were given a 20% tariff on lumber which was also perceived as notice to all other commodity countries. A busy calendar week for economic data, with the RBA rate announcement today and trade balances Thursday. In the US, we have the FOMC meeting, non-farm payrolls, and trade balances of note this week also.
Chart Sources: Bloomberg