Commodity Corner

Good morning,


DXZ0  92.735  -0.229                 GCZ0  1914.2  +9.6                         ESZ0  3461.50  +12.25                   CLZ0  40.83  +0.19


Today is options expiration for many products at the CBOT.  Check the open interest in strikes close to the current price of the underlying, in any products you trade here.  A large, unbalance call or put position, just out of the money, can have a magnet effect on prices, as short option positions could potentially get squeezed. 


The corn and soybean markets continue to grind higher, and funds keep piling on.  Yesterday’s bullish input was the weekly export sales report.   Prices remain very close to the highs for the move.  This afternoon, the CFTC will release the  COT report, showing how much  speculative length exists in these products.  The wheat market also holds a spec long position.  Rains moving the across the parched production areas in Russia and the US Plains gave hope to some reprieve for the expected stress from the very dry conditions this season in both areas.  While the amount of moisture expected isn’t enough to completely cure things, any little bit helps.  Funds took advantage of this news to book some profits on existing long positions.  Wheat prices traded at a 6 year high earlier this week. 


Oil had some interesting news yesterday.  Russian President Putin came out yesterday, following the recent OPEC+ discussions on production and oil price balance, and said Russia doesn’t rule out delaying the scheduled production hikes by the OPEC+ alliance.  Concerns about the pandemic lingering on is behind his comment.  He did say he doesn’t feel there is any need for a change now, but the entire situation needs to be closely paid attention to.  Most promising for oil markets is that Russia and Saudi Arabia, appear to be in unison with the need to work together to keep order to prices of oil.  Last January, the 2 countries got involved in a rather ugly production/price war, which began the sharp drop to oil prices, later exacerbated (and then some) by no demand hailing from the pandemic. 


In the softs, sugar prices are on track to have their 6th consecutive monthly gain.  This would be the longest rally in 11 years.  Some adverse weather is moving into Brazil, which is thought to pose problems for the crops there.  Thus, the notion of less supply than had been previously expected, allowed the funds, which are already carrying a strong long position, to take prices higher.  Cocoa prices continue to push higher as well.  Yesterday afternoon’s release of cocoa stocks held at warehouses showed another decline, and have been dropping all week.  These are the deliverable supplies, used to delivery in futures contracts.  The same report in coffee showed an increase in available supply, as it has been on the rise all week.  The rise in coffee stocks can be attributed, almost exclusively, to Brazil. 


An interesting story in the cocoa market.  London cocoa has become very cheap, compared to New York cooca.  In an uncharacteristic move, some cocoa stored in warehouses in London are being shipped to the US, to be used against delivery of New York futures contracts.  These cocoa beans originally were sourced from Cameroon to Europe.   Many European processors can’t use the beans from Cameroon, as they produce a reddish powder.  The traders involved with these transactions are benefitting from the large price gap between the 2 markets.  They also stand to make an additional sum of money ($80 of premium), when these beans are used for delivery.  Only a small amount of activity like this is taking place right now, but if more of the trade attempts to capture this significant price disparity, then the wide spread between the 2 markets should converge.      


Technical Moving Averages:

Product               50 day                100 day               200 day

SX0                      993.25                   938.25                   912.50

CZ0                      370.50                   354.00                   359.25

WZ0                     563.00                   540.75                   546.00

KWZ0                    493.25                   474.25                   485.75          

MWZ0                 539.00                   534.75                   546.00

SMZ0                   332.2                     314.0                     309.1

BOZ0                   33.02                     31.29                     30.38

CLZ0                     41.12                     40.95                     40.62

GCZ0                    1932.0                   1891.8                   1775.6

LHZ0                    61.665                   56.900                   57.820

LCZ0                     110.545                 108.765                 108.215

KCZ0                    116.80                   111.45                   113.40

CCZ0                    2514                       2399                       2425

CTZ0                    66.15                     63.87                     62.77

SBH1                    13.50                     13.10                     12.93

JOF1                    117.80                   122.30                   118.70

HGZ0                   301.95                   290.70                   269.10

HOX0                   118.32                   122.19                   129.10

XBX0                    117.54                   114.75                   111.39

NGX0                   2.778                     2.584                     2.474





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC