Short Commodities is now Consensus // Olive Oil Prices to the Moon
The Commodity Report #104
Olive Oil Prices to the Moon
A lack of rain in Spain has pushed prices for olive oil to record levels. Olive oil prices have surged to roughly €6,0 per kilogram, on the back of a severe drought in Europe that last year ruined olive crops across the continent, similar to the orange crop disaster in Florida.
Spain, the largest olive oil producer, was hit particularly hard. The country’s farmers typically produce half of the world’s olive oil, though annual supplies have roughly halved to about 780,000 tonnes in the past 12 months.
The prolonged drought conditions in Spain are casting doubt about a production rebound this year. Spain recorded its second warmest March this century and the second-driest, according to the country’s meteorological agency. April was now the driest on record.
And the near future isn’t looking any better for olive oil consumers. Olive oil is harvested in the Mediterranean area between October and February, meaning that if it does not rain very soon, Spain is going to have a poor crop again.
In other news Russia and Ukraine have agreed to extend the Black Sea grain deal for two more months, Turkish President Recep Tayyip Erdogan said in a tweet last week.
"With the efforts of our country, the support of our Russian friends and the contributions of our Ukrainian friends, it was decided to extend the Black Sea Grain Corridor Agreement for another 2 months," Erdogan said.
The Black Sea grain deal was set to expire on May 18, with Russia having said it would pull out of the arrangement unless some of its demands, such as removing obstacles to its own grain and fertilizer exports, were met.
Also, the IEA increased its oil demand forecast due to rising China mobility data. The agency now expects global oil demand to grow by 2.2 million b/d year on year in 2023, some 200,000 b/d higher than last month's report, to 102 million b/d, it said in its latest monthly oil market report.
No more coffee stocks data
The United States Green Coffee Association (GCA) said on Monday it will no longer publicly release its assessments about the level of green coffee stocks in the country, the world's largest consumer of the beverage.
The monthly U.S. green coffee stocks report provides key information for the global coffee market, as it reveals how much of the commodity is still available at warehouses in the main U.S. ports.
"The GCA has decided that the monthly warehouse stock reports will no longer be published," Doreen Madigan, GCA's corporate secretary, said in an email to Reuters.
So say goodbye to the coffee price/Green Coffee stocks correlation.
Whole Stock Market Driven by 5 Stocks
While we don’t like equities from a trading standpoint at the moment, I would like to share some insights about the market breadth.
So far this year the top five stocks contributed more than 80% of the S&P 500 gains. The broad market strength remains therefore very weak.
Here is a great visualization but for the Nasdaq where the story is pretty much the same. Large-Cap Tech Stocks drive the current stock market rally - nothing else.
We continue to believe that this ongoing Credit Crunch is far from resolved. S&P Global highlighted a big jump in corporate defaults this week.
In Q1 2023, defaults rose sharply—up 38% compared with the previous quarter, led by a 150% rise in U.S. defaults.
With yields staying near the recent highs - many businesses will continue to follow and build the fundament of the 2023 recession.
Currently, the market is long-tech and short commodities, according to the latest Bofa survey.
By the way- if you worry about the debt ceiling debate, keep in mind this chart and you can sleep much better at night. There always will be found a solution as long as the US has the global reserve currency. A default of the US government would be the end of the world as we know it.
This week look out for the following:
Flash Manufacturing and Service PMI, New Home Sales as well as Richmond Manufacturing Index on Tuesday
Treasury Sec Yellen Speaks on Wednesday and the FOMC Meeting Minutes will be released
Prelim GDP data as well as Pending Home Sales on Thursday
Core PCE Price Index and Durable Goods Orders on Friday
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Till next Monday, Lukas
If you have any questions in the meantime, please feel free to contact me via Twitter or Mail.