The prices of coffee futures contracts dropped sharply over the past week, while the agricultural and metals sectors saw mixed movements across commodities.

Key Macroeconomic Developments

United States:The U.S. economy showed mixed signals last week. The Federal Reserve (Fed) cut the overnight interest rate by 50 basis points, bringing the rate to a range of 4.75% to 5.00%. This larger-than-expected cut aims to counter slowing economic growth.

Retail data showed consumer spending remained steady, with sales rising by 0.1% in August, though slightly below expectations. This indicates consumer demand continues to drive the economy despite broader uncertainties. Manufacturing data and August employment reports missed expectations, triggering a one-day sell-off. However, jobless claims decreased by 12,000 this week, providing some positivity to the stock market sentiment.

China:Unemployment for the 16-24 age group (excluding students) rose to 18.8% in August from 17.1% in July, three and a half times higher than the overall unemployment rate. On monetary policy, the People's Bank of China (PBoC) unexpectedly kept its benchmark lending rate unchanged during Friday's monthly meeting, with the 1-year Loan Prime Rate (LPR) remaining at 3.35% and the 5-year LPR steady at 3.85%. Recently, the PBoC reduced the 14-day reverse repo rate from 1.95% to 1.85% and injected ¥74.5 billion (around $10.6 billion) into the banking system to boost liquidity.

U.S. Stock Market (Sept 16-20, 2024):U.S. stock markets reached new milestones last week. The Dow Jones rose by 1.62%, closing at a record 42,063.36 points on Sept 20. The S&P 500 and Nasdaq Composite both saw slight declines of 0.19% and 0.36%, respectively. However, both indices posted weekly gains, with the S&P 500 up 1.36% and Nasdaq Composite up 1.49%. The Fed's 0.5% rate cut fueled market optimism, particularly in tech stocks like Nvidia. The U.S. stock market's performance reflects investor confidence in the Fed's ability to engineer a soft landing for the economy.

U.S. Dollar Movements:The U.S. dollar dropped sharply against major currencies following the Fed's interest rate cut. The U.S. Dollar Index (DXY) hit a new low midweek, contributing to price increases in commodities, especially in the agricultural and metals sectors. Soybean and corn prices benefited from the weaker dollar, with increased buying from international markets, particularly China. The U.S. dollar is expected to remain under pressure as investors anticipate more rate cuts from the Fed in the coming months.

Fed Chairman Jerome Powell addressed concerns, affirming that the central bank remains vigilant in balancing inflation risks with economic growth. Powell emphasized that the rate cut was driven by a significant reduction in inflation risks since early 2023. Despite these reassurances, investors are divided on the long-term impact of such aggressive cuts. Some view it as necessary to stimulate the economy, while others fear the Fed may be responding to more severe economic challenges than anticipated.

Commodity Markets Movements

In the week of Sept 16-20, 2024, crude oil prices registered their second consecutive weekly gain despite a slight dip at the end of the session on Sept 20. Brent crude fell by 0.52% to $74.49 per barrel, while WTI dropped 0.4% to $71.92 per barrel. Oil prices were supported by the Fed’s rate cut and reduced crude supplies due to Hurricane Francine. Although demand from China weakened, escalating tensions in the Middle East continued to bolster oil prices.

The U.S. Energy Information Administration (EIA) reported that U.S. crude oil inventories decreased by 2.1 million barrels in the week ending Sept 15, 2024, reflecting higher consumption during the summer and a recovery in fuel production.

U.S. crude oil production reached a record in 2024, averaging 12.9 million barrels per day, surpassing both Russia and Saudi Arabia. This growth was driven by export demand from Europe and Asia, as these regions reduced their dependence on Russian supplies.

Global oil demand saw a rebound, particularly from China. Data from China showed that crude imports rose to 11 million barrels per day in August, exceeding expectations as demand recovered post-summer. China is seeking to build reserves ahead of winter, adding upward pressure on prices.

Gold prices surpassed $2,600 per ounce on Sept 20, 2024, boosted by expectations of further Fed rate cuts and rising geopolitical tensions in the Middle East. Spot gold ended the session at $2,593.80 per ounce, while gold futures rose to $2,646.30 per ounce. Safe-haven demand from investors continued to push gold prices higher amid ongoing geopolitical risks.

Silver:Demand from industries, especially renewable energy technology, kept silver prices high. However, abundant supply from major producers such as Mexico and Peru tempered a significant price rise. December 2024 silver futures settled at over $31.5 per troy ounce, up nearly 1.4% for the week.

Platinum:Platinum prices faced pressure from stable supply, but demand from the automotive industry, particularly for catalytic converters, continued to grow. Interest in platinum from electric vehicle producers also helped maintain its high prices. However, platinum prices dropped by nearly 2.5% last week, with October 2024 futures closing at $981.9 per troy ounce.

Copper prices saw gains last week, supported by a weaker U.S. dollar following the Fed’s rate cut. Despite this, rising copper inventories—up 2.5% globally—added pressure on prices. Demand from China, the world's largest copper consumer, has weakened due to a slowdown in manufacturing and construction sectors.

Agricultural Markets

Corn prices dropped significantly last week, with December futures ending the week at 401.75 cents per bushel, down nearly 2.8% compared to the previous week.

Soybean prices held firm, supported by demand from China and lower production due to adverse weather conditions in South America. The supply disparity between North and South America drove soybean prices up throughout the week. November 2024 soybean futures closed at 1,012 cents per bushel, up 0.6% from the previous week.

Despite supply disruptions in the Black Sea region due to geopolitical tensions, global wheat reserves remain sufficient to meet short-term demand.

USDA Weekly Export Sales Report (for Corn, Soybeans, and Wheat)

• Corn: The USDA reported U.S. corn exports of 0.9 million tons, slightly up from the previous week due to demand from Asian countries.

• Soybeans: Export sales reached 1.4 million tons, with China accounting for nearly 70% of purchases driven by feed production demand.

• Wheat: Wheat exports totaled 0.6 million tons, facing stiff competition from other exporters like Canada and Russia.

  
  

Weather Outlook

• United States: Drought conditions are expected to continue in the U.S. Midwest, affecting corn and soybean yields and putting upward pressure on prices.

• Brazil: Dry weather in Brazil’s soybean-growing regions, particularly in the south, is expected to reduce production.

• Argentina: Severe drought in Argentina’s wheat-producing regions has sharply reduced yields, adding pressure to global supply.

China continues to increase soybean imports from the U.S., forecasted to reach 10 million tons in September 2024, as feed production demand remains high. For corn, China is expected to increase imports due to insufficient domestic production.

Read the full report at: