Commodity Corner: Morning Comments

Good morning,


DXZ9  98.485  -0.055                     GCZ9  1513.2  -0.6                                      ESZ9  2901.25  -10.50                  CLX9  52.71  +0.26


Payrolls Friday is upon us, and given the economic data to this point for the week, markets are on the defensive ahead of the release.  Equities are lower, oil basically unchanged and gold a touch higher.  Grains are a touch lower, but most of the other soft commodities are higher, in part due to the softer dollar.  The manufacturing data has been below estimates this week, and the employment index on Wednesday was also softer.  The markets have moved back to thinking the Fed will need to get back on the accommodative path, and lower short term interest rates to help keep economic growth positive.  Estimates for today’s non-farm payrolls number is +145k vs +130k last month.  The Unemployment Rate is expected to remain at 3.7%.  These numbers should, for the most part, dictate the flow of the trade today for most markets.  Volumes have been relatively light overnight ahead of this release.


Some other quick bullet points:


A bit of a cold front sweeps across the Midwest this morning, giving a subtle reminder to the grain markets that it is October, and there is still work to be done with harvest.  As we move through the calendar, the risks to the unharvested crops grow.


Soybeans have seen large purchases announced to China almost every day for the past couple of weeks, since the Chinese government waived the tariffs imposed on private companies from purchasing US beans.  Interestingly, part of the reason for the trade lower in beans yesterday was a disappointing reading on the export sales data.


Global wheat prices have been supported of late by weather issues.  It has been hot and dry in Australia and the wheat growing areas in South America.  There has been rain and snow across the norther Plains and southern Canada, disrupting harvest.   


Corn futures are poised to have their biggest weekly gain since June, as Monday’s inventories report projects less available supplies.  The cooler temperatures moving in, with corn behind the pace for harvest, keeps concerns about the health of the ear stalks.


Cotton futures have had a decent rally over the past few sessions, as recent strong rain systems across the southwest raise concerns of damage to the cotton crops.  Hopes for trade talk progress also supports cotton.


Sugar prices continue to trade up, in a short covering rally, as the market is projecting a supply shortfall next season.  A record spec short position, as of a few weeks ago, has been getting pared back on the rally.


Cocoa futures are also trading higher, as supplies from the Ivory Coast are expected to be lower than previously thought, due to hot and dry growing conditions.  Funds have been piling on to the long trade, pushing prices through some key resistance points. 


Coffee futures traded mixed throughout the session, only to see a late push through the 200 day moving average trigger buying into the close.  The settle above this average is being viewed by some as an opportunity for some extension to the upside.  The recovery in the South American currencies vs the dollar also kept the local producers from aggressively pricing in the market.


Copper futures continue to trade down, as much of the data, not only in the US but globally, signals an economy moving in the wrong direction.  Slower economic growth equates to less demand for the industrial metals. 


Gold, is the safe haven.  Today’s trade will be impacted by the data.  If the world’s coming to an end, gold should explode up.  Likewise, if all is viewed as good in the economic world, gold should correct down.  The lows earlier this week in gold were well below $1500, so it could be a decent sized correction down, if that occurs. 


The oil market continues to get drug down with the same economic concerns impacting many markets.  The low for the year is just below $51, so if the market continues to work its way down, a re-test of the old low can be expected.  Any trade below $50 probably quickly finds support initially, just from the psychological impact of seeing a “4” handle on prices.  The oil market is facing a bit of a supply glut at the moment, as the US stocks data has shown increases, and the Saudi production plant is now back on board. OPEC+ probably isn’t pleased with where prices are right now, but the next scheduled meeting isn’t until December.  Reactions to this move down in prices from this group will be monitored.


The next Federal Reserve meeting is October 30-31, and Brexit is on Oct 31.  So there could be a lot of gyrations in the markets over the course of this month.  The data so far this week has certainly set up a tone for some concerns out there.  Today’s data can either enhance that, or calm some of the newly developed fears.    


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      881.25                   891.00                   911.00

CZ9                      382.25                   409.50                   402.00

WZ9                     482.75                   502.25                   506.25

KWZ9                   412.50                   445.25                   473.00

MWZ9                 521.00                   541.25                   559.25

SMZ9                   299.9                     309.4                     314.1

BOZ9                   29.05                     28.71                     29.38

CLX9                    55.69                     56.44                     57.16

GCZ9                    1505.9                   1439.7                   1380.3

LHZ9                    66.185                   70.990                   71.005

LCZ9                    107.120                 109.360                 113.995

KCZ9                    99.55                     102.95                   105.40

CCZ9                    2330                       2401                       2370

CTZ9                    60.20                     63.01                     68.70

SBH0                    12.50                     12.90                     13.37

JOX9                    101.80                   104.55                   113.60

HGZ9                   260.70                   265.10                   274.35






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC