A miss in natural gas storage

On the surface it appeared to be a huge miss in natural gas storage last night, when we saw a build of 96 BCF vs expectations of only 77 BCF.

However, the EIA reclassified its base gas as it normally does about once a year. The 96 BCF injection would have been a 82 BCF build prior to the reclassification.

As a result we saw natural gas initially sell-off quite heavily only to rebound.

Our spread also sold off but settled effectively unchanged.

Often times when we see a bearish number (albeit less so than first impressions) that doesn't follow through, it's a sign of a potential reversal.

I'm very tempted to take of half our position here - I certainly would if the injection came in at 96 BCF.

However given the state of the market, which is certrainly trending lower and the benign weather we seem to be having, I think the best course of action is to tighten the stop into 37 even and let this one ride.

We still have three weeks remaining in the seasonal window (2nd September) and given the current trend I think it's worth it letting play out. I am 50/50 here in should be noted.

The action is in cattle...

Last night we saw Tyson Foods decide to stop buying cattle fed with a Zilmax, which promotes weight gain, after finding animals at some of its beef plants that had difficulty walking.

This led to concerns that the move would reduce already tight supplies.

China and Russia have already  sought to restrict meat imports with Optaflexx (a brand of ractopamine), which is an alternative to Zilmax.

As a result our live cattle/lean hog spread gained after being on the verge of being stopped out only days earlier.

With underlying live and feeder cattle both hitting limit highs throughout the course of the day, there is some chance we'll get some follow through buying when pits open on Friday.

For the moment I'm tightening the stop to 40 even as this one hasn't been overly strong prior to yesterday's events.

The Chinese love their copper

Overnight we saw the release of a range of import and export data out of China, which overall was much more posiitve than had been widely expected.

Shipments to China of unwrought copper and copper products rose to 410,680 metric tons in July, the highest since May 2012, customs agency data showed today.

Chinese trade data showed exports rising 5.1% from a year earlier, up from June’s 3.1% fall.

Imports, which had dropped 0.7% in June, showed a 10.9% leap for July.

As a result our stop got tagged and we are forced to take a small loss on the trade. I'm still bearish overall on copper and China but unfortunately stops are there for a reason.

Weather Outlook

The latest NOAA six to ten day and eight to fourteen day forecasts are still showing a large area of the US expecting below normal temperatures through the third week of August.

With below normal temperatures expected in the major grain and oilseed growing regions, price remain bearish, with the only fear being the potential for an early frost.

In terms of energy demand for natural gas, the benign conditions will likely keep a bearish tone in the already down-trending price.

Lean hogs COT report

As we have two positions that currently include being short lean hogs it's interesting to note where we stand with the most recent COT report.

We can see from the chart above that we are right at an extreme level in terms of managed money being net long.

With grain prices continuing to fall and that being an added incentive for farmers to increase numbers, ideally we might get some longs covering their positions.

Watchlist

Heating Oil / Crude

Looks a little dangerous as we've really seen this one trending hard.

Kansas Wheat / Chicago Wheat

I like the look of this one on a pullback.

Coffee

We can work a good price here.

Cotton

This one rarely trades below parity it seems and even less below -2.

Live Cattle / Feeder Cattle

Always a danger one in my book. We are getting to a reasonable looking level however.

Wheat

A nice seasonal window and a good trend developing.

Updates

Natural Gas

With the bulk of the US experience reasonably benign weather for this time of year, we've seen a large sell-off in natural gas over the last few weeks.

With nothing major for the bulls to excited about I'm looking for more of the same.

This week we should see an injection into inventories which will help keep our spread headed our way.

I'm going to tighten my stop right up into 35 as to lock in a nice profit.

Live Cattle / Lean Hogs

This one had been traveling quite nicely until this week, where we have seen a bit of strengh come into the hog market.

I have the stop at breakeven as we got into this one quite early and got a good price.

However we're trading quite close to that level so we might be seeing an exit in the next couple of sessions.

Lean Hogs

Almost immediately after entering, this one started rocketing our way.

However similar to our cattle/hogs, recent hog strength has hurt us a little.

We're still marginally in the money and happy to let it play out as it looks a nice longer term seasonal window.

Copper

This was a sneaky little one that had good fundamentals underpinning a seasonal window nearing its close.

We've seen some ups and downs in this one based on mixed economic data out of both the US and China.

With some Fed speakers mentioning the possibility of a tapering of QE in the coming months I would have hoped to see this one headed our way. Unfortunately the opposite if anything appears to be true.

Seasonals often see a pop on the back of covering as we near the (very well known) end of the optimal window.

The plan was always to hold onto this one as a more fundamental play, so hopefully we don't get stopped out before that's able to play out.

I only have the minimum allocation regardless.