** NEW Quarterly Overview**
Soft commodities posted across-the-board gains since August 3, with cotton rallying nearly 6.9% and cocoa moving 5.13% higher. Sugar, coffee, and FCOJ futures moved over 2% higher over the past week. The Brazilian real moved around 4% higher, pushing sugar, coffee, and FCOJ prices higher since August 3.
The total number of open long and short positions in soft commodities edged higher in sugar, and coffee, with FCOJ posting the most significant increase. The total number of open long and short positions fell in cocoa and edged marginally lower in cotton.
The short-term trend in sugar turned higher. The trend in FCOJ is higher, while coffee, cotton, and cocoa futures are consolidating after downside corrections and were turning higher.
- We are long the CANE ETF product. At $9.03 I rate it a hold.
- We are long the JO ETN product. At $59.96, I rate it a hold and would add to long positions on a scale-down basis to the $1.76 level on the nearby ICE coffee futures contract. I expect that coffee futures will eventually reach $3 per pound or higher.
- We are long two units of the NIB ETN product at an average of $26.29. I rate NIB a hold at $26.00 per share.
A Final Note
August is a funky month in the commodities asset class as European companies tend to close for vacation. The recent price action in the bond market and the dollar index fostered recoveries from lows during the raw material market’s correction on the back of rising rates and the highest level for the US currency since 2002.
The GDP data and July consumer price index could cause the Fed to slow its trajectory of interest rate hikes, which is typically bullish for commodities. However, low liquidity during the summer exacerbates price volatility and could cause false signals. Stocks and cryptos have recovered and moved higher over the past weeks.
Approach markets across all asset classes with a clear and defined risk-reward plan. Stick to the risk side and adjust the rewards to reflect the current market price action. Be careful out there as plenty of issues facing the global economy and geopolitical landscape could cause sudden volatility.
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Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.