Commodity Corner: Morning Comment

Good morning,


DXM0  99.735  +0.091               GCM0  1710.0  -3.4                                          ESM0  2906.00  -35.00                  CLM0  16.70  +1.64


Today is month end.  After the past 6 weeks, I’m not even sure which month it is anymore, but judging on how I have been drenched walking to my commuter train all week (yes, it is empty), I will guess it is April.  Positive news on a potential drug to combat COVID-19 has certainly put some ”pep” into the markets, leading to hopes that the global economy can begin to get itself back on track.


Yesterday afternoon, the Fed left monetary policy unchanged, no surprise following all of the moves that have already taken place trying to support the economy during this pandemic.  It announced that it foresees interest rates to remain low for a substantial amount of time, as the economy takes a lot of time to recover.  It will also keep the quantitative easing program in place for as long as is deemed necessary.  In similar fashion, the ECB just left its monetary policy unchanged, following the recent pandemic driven moves.  The press conference will take place at 7:30 AM CDT.  Also at 7:30, the next installment of weekly jobless claims will be released.  Jobless claims are expected to be 3.5m from last week, vs 4.427m the previous week.  Equally as important, and about to probably become more important, will be the continuing claims data.  Continuing claims from last week are expected to print 19.476m, compared with 15.976m prior.  This number will show the amount of time the workforce remains receiving the unemployment benefit, as the economy starts to recover.


**Post ECB press conference, markets have rotated lower, as ECB President sheds a realistic perspective to how big of a global economic hit the world could face from this pandemic** 


Oil prices are showing signs of life, having a grinding higher trade over the course of this week, having essentially tested the $10 level (CLM0) on Monday.  While storage concerns remain, a re-opening economy should increase the amount of oil and gas used, hence helping with the storage issue.  The DOE yesterday reported another build to crude inventories from last week, but less than the market was expecting.  Production was lower again.  Worth paying attention to, on May 5th, the Texas Railroad Commission, which oversees the Texas oil industry, will hold a meeting trying to discuss and figure out the possibility of enforcing production restrictions.  This could potentially help with the supply glut as well.


Sticking with the energy theme, ethanol weekly production fell last week.  Inventories also fell for the first time in 5 weeks.  In order to confirm a real increase in demand for ethanol, a decline in stocks over 2 consecutive weeks, is usually required.  Corn prices are up a touch today, with the trade earlier this week down to $3 still looking like a short term bottom may be in place.   Heavy rains that have swept across the corn belt over the past few days have brought some delays to planting of corn and soybeans, which had been off to a good start.  The 6 to 10 day forecast offers a good window for planting, and ultimately leading to the thoughts of big crops expected in corn and beans.  Soybean prices are up today, supported by the positive economy vibe.   The thought is that China will become more aggressive with its US bean purchases, although Brazil still can offer beans much cheaper.  The slight recovery in the real helps a little, but the US remains behind.  Soymeal remains in focus, with the closures and disruptions to meat packing plants.  With the euthanizing of hogs, feed demand falls off.  Wheat prices are lower today, having been hit yesterday as well.  Weather is the main story here.  Rain moving into Europe and portions of the Black Sea are thought to help the stressed.  US HRW is currently cheaper than Russian wheat, but Egypt hasn’t conducted a purchase tender in the past week, to test the waters and see if the US can win any business.  Russia is thought to be capped out on exports for the remainder of this season (although there has been some debate on this).  This morning’s grain export sales data in the US came in stronger than expected, also assisting with the improved demand story.       


The improving oil story, and the recovery of the South American currencies helped sugar futures recover from the lows for the move with the biggest jump in 14 months.  This in spite of data released out of Brazil that millers were producing more sugar than ethanol.  If oil and energy markets are forming a bottom, a production shift the other way could be in order.  Likewise, the currency pop disincentives producers from selling the crops, as they are denominated in dollars. 


The meat futures markets also continue to have a story, as the already mentioned meat packing plant closures initially led to a down trade in prices, but since there has been a recovery, as a short term supply scarcity becomes a concern.  Following a rally over the past few sessions, prices retreated a touch in yesterday’s trade.  Assuming domestic demand for meat returns in the second half of this year, the reduced supply could become an issue as packing plants slowly get back to running at full capacity, and some of the herds having been culled.  The amount of available livestock could also become an issue if China ramps up US imports of hogs as part of the trade deal, and if AFS continues to grow, impacting China’s domestic herd.


With today being month end, there could be some profit taking or window dressing impacting the price action.  Europe will be on a partial holiday tomorrow, celebrating May Day and Japan celebrates Golden Week next week.  So, not that we this doesn’t already exist, but there could be even less liquidity during parts of the next few trading sessions.  Headlines pertaining to the virus, in particular to progress on drugs to cure or prevent will hold the market’s attention.  Everyone thinks markets will be shot out of a cannon once the world overcomes this pandemic, however the timing of it all is what remains to be seen.               


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      871.50                   907.25                   924.50

CN0                      351.75                   373.50                   390.75

WN0                    536.50                   546.25                   529.25

KWN0                  475.50                   480.75                   466.25

MWN0                531.75                   544.75                   550.25

SMN0                  303.8                     305.6                     310.2

BON0                   27.51                     30.44                     30.62

CLM0                   31.25                     43.80                     48.87

GCM0                  1650.2                   1599.3                   1553.6

LHM0                   64.440                   74.895                   81.910

LCM0                   92.415                   104.325                 108.065

KCN0                   115.00                   118.15                   114.10

CCN0                   2436                       2551                       2494

CTN0                    57.65                     63.97                     64.35

SBN0                   11.57                     12.79                     12.79

JON0                    106.80                   105.65                   108.50

HGN0                  236.95                   255.50                   260.45

HOM0                 114.38                   149.13                   166.60

XBM0                  96.32                     137.75                   155.55

NGM0                 1.881                     2.014                     2.176






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC