Commodity Corner

Good morning,


DXZ0  92.880  -0.180                   GCZ0  1977.4  +13.7                       ESZ0  3402.50  +30.25                   CLV0  37.74  +0.48


Equities continue the recovery march back up, following the corrective washout observed last week.  Today begins the 2 day Federal Reserve meeting, where accommodative policy is expected to remain in place well into 2022, at this point.  There has been talk that the Fed may reveal it’s “dot plot” for 2023 following this meeting tomorrow, so the market will be dialed in for that possibility.  The market will also be looking to see if Chairman Powell has any fresh insight on the economy amidst the ongoing pandemic, different from his comments a few weeks ago at Jackson Hole.  Another important meeting taking place this week is OPEC+’s Joint Ministerial Meeting, where the task will be monitoring and making any necessary production adjustments to attempt to keep supply and demand in balance.  With summer ending and many parts of the world still deeply inflicted with  the virus, there is growing concern about a supply build again, as demand declines and production was recently increased. Oil prices finally broke through the $40 support barrier last week on these concerns, and have been basically in a trading range of $37 to $39 for the past few sessions.  The OPEC+ news could be the catalyst to get  the market to break out of this range.


Gold prices are trading higher today, as the dollar index is softer.  The expected soft tone from the Fed should keep a lid on interest rates, which increases the value of gold.  Concerns about mounting inflation pressures are also contributing to the support for gold.  Gold is also being viewed as a possible portfolio hedge into the US election. 


The grain market is still digesting last Friday’s WASDE report, which really didn’t bring many surprises.  Yields were revised lower, and some corn acres were taken away, reducing production and inventory numbers.  A common response, with prices near the highs heading into the report and with data basically in line, would be to see a sell off.  Wheat prices did decline on the increase to global inventories.  Corn and soybeans however, shook off the report and maintained its bullish tone.  The aggressive buying out of China continues in both corn and soybeans, which explains part of the underlying bid.  Another explanation for the continued bid is the funds remaining very concerned about future inflationary pressure to prices.  As shown in last Friday’s COT report from the CFTC, funds are now carrying a sizable long position in soybeans, and have closed out (and even flipped to small long) the short position in corn.  November soybeans have taken out the $10 resistance level in beans, and look to continue grind higher.  The US is controlling the trade with China right now, but Brazil is expecting a very big crop for the upcoming season, so the US producers should be looking to get inventory placed ahead of that.  Corn prices continue to grind higher as well.  Corn producers will also be  looking to make some sales, as the December futures contract continues the trek towards $4.  Yesterday afternoon’s crop conditions and progress reports showed a small decline in conditions from the prior week, which was not surprising as the bad news from the Derecho and hot and dry August has already been reflected in the prior reports.  On the progress side, this season’s crop is ahead of the 5 year averages.  Export movements, from China in particular and harvest progress will be the 2 keys for the grain markets.  Of course, any surprising developments from the Fed, which can swing the dollar, could impact many commodity prices as well. 


Coffee prices have done an about face, and had the largest move down in the past 5 months.  Beneficial weather in Brazil is being credited for the move down.  However, this news may have prompted the fund community, which had built up a long position to the highest level in several years, to unwind the position.  Over a week ago, coffee prices took out a key resistance price point of $130.  This brought fresh buying into the contract.  Failure of prices to really mount a large price extension beyond this, coupled with the favorable weather news, provided the rationale to get out.  Cotton prices had a sharp rally, following trading higher on Friday as the WASDE showed an expected decline in production.  Hurricane Sally is thought to cause some damage to the cotton crop that is already expected to be smaller.  Lean Hog futures posted a couple of limit up days last week, and remain firm as new concerns about ASF developed.  Germany reported a case of it, and China closed off hog imports from Germany as a result.  This created an opportunity for the US to continue with the strong business pipeline to China observed so far this year.         


Technical Moving Averages:

Product               50 day                100 day               200 day

SX0                       912.25                   887.00                   901.50

CZ0                      342.50                   340.25                   361.25

WZ0                     531.75                   525.25                   543.00

KWZ0                   455.25                   465.25                   482.00

MWZ0                 527.50                   532.75                   550.00

SMZ0                  301.0                      298.0                     303.7

BOZ0                   31.26                     29.65                     30.48

CLV0                    41.36                     37.94                     42.40

GCZ0                    1936.0                   1844.5                   1721.2

LHZ0                    54.115                   53.745                   58.370

LCZ0                     110.080                 106.720                 109.515

KCZ0                    116.65                   111.10                   116.95

CCZ0                    2395                       2352                       2420

CTZ0                    63.61                     61.19                     63.01

SBV0                    12.30                     11.79                     12.44

JOX0                    121.60                   122.40                   116.50

HGZ0                   294.45                   272.80                   265.70

HOV0                   123.82                   117.73                   138.53

XBV0                    117.05                   107.54                   118.88

NGV0                   2.245                     2.171                     2.187




Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC