JPM: Excessive decline in agricultural prices puts pressure on the value of the global open commodity market

The estimated value of open interest in global commodity markets declined slightly to around $1.43 trillion during the week, with price-related declines in agricultural markets outweighing gains in the energy and metals sectors as of June 21, JPM Commodities Research said.

Capital outflows continued worldwide Commodity markets recorded inflows for the fourth consecutive week, largely concentrated in the crude oil (-$6.8 billion), base metals (-$4.6 billion) and agricultural products (-$4.5 billion) markets, while precious metals and natural gas recorded modest inflows during the week, the brokerage added.

Estimated open interest in the agricultural market fell to a seven-week low of around $297 billion in the week ended June 21, according to the data, largely due to price pressures in the grain and cocoa markets.

Given the recent sell-off, agricultural commodities such as sugar, wheat and corn are moving to the top of our list of preferred long positions, JPM added.

Investors and traders will now be closely watching the USDA’s June 1 acreage and quarterly grain stocks reports on Friday, June 28.

In addition, the brokerage said, the short-term momentum trading signal for ICE Brent and ICE Gasoil has changed from “sell” to “buy” positive, while the short-term recaps on CBOT Corn, Kansas Wheat and ICE NY Cocoa have changed from negative to a “sell” signal; and the short-term recap on NYMEX Gasoline is approaching a “buy” signal change, it added.

Elsewhere, COMEX gold recorded its highest delivery volume in nearly two years, with more than 30,000 contracts pending delivery. With massive delivery volume in gold and silver looming, it seems more people are taking delivery of physical metal despite higher prices, SchiffGold said in an article.