What to Watch in Commodities: Trump Vs Iran, Glencore, USDA, BHP

LAGOS (Capital Markets in Africa) – The temperature’s rising and events this week will help investors figure out how to profit, not get burned. On top of tensions with China, Donald Trump will turn up the heat on Iran as some sanctions snap back into place as a prelude to oil curbs. Get ready for an on-air riposte from counterpart Hassan Rouhani, who plans an address later Monday. These guys have prior on Twitter, so it’ll be a signal of how they handle the optics.

In agriculture, the hottest topic will be how the USDA’s new data-release system works after lock-ups ended, just as chunks of the globe bake, including Europe. Also in the mix, there are earnings from Glencore Plc, and rounding it off, we have that hottest of prospects — demand for battery materials — among the topics as miners including BHP Billiton Ltd. gather in Australia.

The U.S.-China trade tensions are only getting worse and, separately, Venezuela’s been hit by fresh instability. As last week ended, Beijing said it plans tariffs on $60 billion worth of American goods — including LNG, metals and lumber — and President Trump responded by saying that playing hardball is “my thing.” In Venezuela, President Nicolas Maduro just dodged a drone-borne hit-job, adding yet more uncertainty in the struggling oil producer.

Pressure Point
Iran will be center stage for investors this week as Washington starts to re-impose sanctions after pulling out of the 2015 nuclear agreement. Slated to come into effect on Monday, the initial targets prevent the government from trading gold and other precious metals, and block the nation from selling or acquiring various industrial metals. A second round of curbs targeting oil comes into effect in November, potentially tightening global supply and adding to pressures as other producers struggle, especially Venezuela.

Adding to the uncertainty in the crude market is the fate of the cargoes passing through the Persian Gulf. An official in Tehran has warned cargoes will be stopped from the Strait of Hormuz, the world’s most important oil chokepoint, if the U.S. succeeds in halting crude sales from the Persian Gulf nation. On Tuesday, Energy Information Administration’s monthly short-term outlook on supply may help provide some clarity.

Arms Race
The U.S. Department of Agriculture will directly post its World Agricultural Supply and Demand Estimates on the web on Friday, ending a system that gave advance access to accredited media. That’s seen ushering a technological arms race among traders and investors seeking a first crack at market-sensitive data to immediately adjust bets and maximize gains from bigger price swings.

USDA’s first survey-based forecasts for U.S. corn and soybean production will also be key for the market. China risks running short of soybeans in the fourth quarter as its trade spat with the U.S. makes crushers reluctant to buy American cargoes.

Grain Pain
Wheat’s really feeling the heat amid mounting concerns that hot and dry weather is damaging crops from the European Union to Australia, with futures in Chicago reaching a three-year high last week. The EU’s top grower France will publish its latest production outlook on Wednesday, and a report the following day from consultant Strategie Grains could provide more details on how bad things are looking.

German grains trader BayWa AG could also give some insight into the impact that the scorching heat is having when it reports earnings Thursday, at a time when markets are dealing with an escalating trade spat between the U.S. and China.

Trading Giant
Glencore is set to report first-half earnings Wednesday. It’s been a tumultuous six months for the world’s biggest commodity trader with challenges from the Democratic Republic of Congo, and it’s now facing a U.S. Department of Justice corruption probe spanning three countries and more than a decade.

Despite all these problems, the company is forecast to report its highest ever first-half profit. There are also some expectations that Glencore could increase its recently started buyback program in an effort to counter a share slide that’s seen it significantly underperform its biggest rivals.

Hot Topic
The mining industry’s rush to meet demand for battery raw materials is in focus as cobalt-to-lithium suppliers jostle for attention with stalwarts of precious metals and iron ore at the three-day Diggers and Dealers forum that opens Monday in the Western Australian city of Kalgoorlie, the heartland of the region’s late 19th century gold rush.

Executives from BHP, AngloGold Ashanti Ltd. and Fortescue Metals Group Ltd. will address about 2,100 delegates, alongside companies chasing the electric-vehicle boom. Nickel and cobalt-focused Independence Group NL and lithium supplier Pilbara Minerals Ltd. are among producers scheduled to discuss their prospects in Bloomberg Television interviews.

Bulls Versus Bears
Just when you thought sugar was set to break below 10 cents for the first since 2008, the sweetener made a stunning comeback, thanks to dry weather in Brazil and fears of below-normal monsoon rains in India. Even before the rebound, traders and analysts surveyed by Bloomberg were already the most bullish in six weeks.

Traders and analysts are bullish on sugar as dry weather threaten crops

Sentiment was also positive for corn, wheat and natural gas. In the copper market, traders and analysts were also bullish for a second straight week. Terminal subscribers can see the commodity survey results here.

Source: Bloomberg Business News