According to the Mercantile Exchange Of VietNam (MXV), during the trading week of June 3 - 7, the global raw material markets experienced overwhelming selling pressure. The MXV-Index saw a significant decline of 1.56%, closing at 2,279 points. This drop reflects strong negative trends across various commodities, with notable volatility observed, particularly in metal and agricultural product markets.

Metal Prices Drop Sharply Amidst Fed Rate Hike Concerns

During the trading week of June 3 - 7, all 10 commodities saw significant declines, with metals leading the market's downward trend. Platinum prices fell sharply by 6.8%, closing at $971.10 per ounce, marking the steepest weekly drop since November of the previous year. Silver also extended its losing streak to the third consecutive week, decreasing by 3.19% to $29.44 per ounce.

Early in the week, both silver and platinum prices fluctuated within a narrow range. However, by the end of the week, both metals experienced substantial declines following the release of stronger-than-expected U.S. payroll data.

According to the U.S. Labor Department, 272,000 non-farm jobs were added in May, significantly surpassing market expectations of 185,000 and a revised 165,000 for April. Wage growth also exceeded forecasts, indicating a robust labor market.

These positive economic indicators diminished the likelihood of an early Fed rate cut. The CME Group's FedWatch tool showed the probability of a rate cut in September dropped to about 53%, down from 70% before the data release. Subsequently, the U.S. dollar surged, lifting the Dollar Index to a one-week high. Increased investment costs and the risk of the Fed maintaining high rates longer pressured precious metal prices.

For basic metals, the increase in macroeconomic pressures led to significant declines in base metal prices during the week. Nickel on the London Metal Exchange (LME) experienced the largest drop, falling 8.52% to $18,031 per tonne. This decline was exacerbated by concerns over weak demand in China and a more optimistic outlook on supply. Norilsk Nickel, the world's largest nickel producer, forecasts a global surplus of 100,000 tonnes for this year and the next, an increase from the 80,000-tonne surplus of 2023.

Iron ore prices also decreased nearly 6% to $108.70 per tonne, marking the second consecutive week of declines. The primary pressure on iron ore prices comes from weak consumption prospects in China, which is entering a low-demand season. Citigroup projects that iron ore prices will continue to trend downwards, potentially falling to $95 per tonne in the next three months.

Attention this week will be on the Federal Reserve's meeting scheduled for June 12. If the Fed maintains a cautious stance on inflation control, metal prices could continue to face downward pressure. A recovery in precious metal prices may be delayed until mid-Q3 this year.

Wheat Prices Decline

Wheat prices saw a dramatic decline of 7.52% over the week, marking the largest weekly drop since late June 2023. The decrease was driven by a more favorable global supply outlook, reduced concerns about supply disruptions from Russia, and positive crop conditions in the U.S.

According to the USDA’s Crop Progress report, about 49% of U.S. winter wheat is rated good-to-excellent, up from 48% the previous week and 36% a year ago. Additionally, around 6% of winter wheat acreage has been harvested, exceeding market expectations of 3%. Spring wheat conditions are also promising, with 74% rated good-to-excellent, surpassing both analyst predictions and last year's 64%. These positive developments in U.S. wheat crops have alleviated global supply concerns, exerting significant downward pressure on wheat prices.

In contrast, corn prices showed mixed movements. Although prices weakened on 4 out of 5 trading days, they still ended the week with a slight increase of 0.56%. U.S. supply information had a mixed impact on prices.

According to the Export Sales report from last week, the USDA reported that the U.S. sold 1.18 million tonnes of corn for the 2023-2024 season during the week of May 24-30, an increase of nearly 46% compared to the previous week. This figure is close to the high end of analysts' estimates of 0.6 - 1.2 million tonnes. Additionally, the USDA's Daily Export Sales report released on June 6 indicated that U.S. exporters sold 152,000 tonnes of corn for the 2023-2024 season to an unnamed country. These data points suggest strong international demand for U.S. corn, providing support for prices.

Conversely, the favorable start to the U.S. corn growing season has put significant pressure on prices. The USDA's Crop Progress report from last week showed that 75% of U.S. corn acreage was rated good-to-excellent as of the week ending June 2, surpassing market expectations of 70% and last year's 64%.

This week, the agriculture sector will attract significant market attention as the USDA is set to release the June World Agricultural Supply and Demand Estimates (WASDE) report at 11 PM on Wednesday. This will be the first report in which the U.S. Department of Agriculture provides forecasts for the new crop season's supply outlook, potentially causing strong market fluctuations immediately following the release. Investors should pay close attention to margin levels and ensure adequate margin supplementation if they wish to maintain positions through the report.

Source: MXV