Commodity Corner: Morning Comments

Good morning,


DXZ9  98.745  -0.077                     GCZ9  1507.1  +3.2                                               ESZ9  2917.00  +24.50                  CLX9  53.05  +0.42


Optimism for the trade talks, beginning tomorrow captures the markets in the early European trade.  Tough talk has been coming from both sides, but headlines earlier today from China, that it is looking to make some real progress in these talks puts a bid into prices.  One headline said China is open to a partial US  deal, despite the tech blacklist.  Another headline said China offers to buy 10m tons more of US soybeans, and agrees in principle with every USDA demand concerning beef, pork and lamb.  The catalyst for this apparent tone change is the recent trade deal struck between the US and Japan, and China is looking for agreements along those lines. 


Equities, which were actually a touch lower coming out of the Asian session, caught a bid on these headlines and are showing a decent gain at the moment (6 AM CDT).  Oil has caught a bid on the positive sentiment, and gold, while still in positive territory, has rotated about $10 off the overnight highs.  Fixed income markets are moving lower, in part due to the thought that as the trade talks carry on, the drag on the economy grows, creating a need for additional easing of monetary policy.  Interestingly, the dollar index is lower this morning.   Commodity prices are bid for the most part, based on trade hopes and the softer dollar.


The grain markets have the most interesting stories taking place at the moment, a day before the next look at the supply/demand scene in the WASDE report from the USDA.  The story of the possibly additional soybean purchases from China has given beans a bid (but they are not screaming higher, as these headlines don’t always play out as thought) and also giving some positive sentiment to the other markets.  Also supporting prices is the cold front and snow storm that will be sweeping across the Midwest, Plains and into Canada over the next few days.  Very cold temperatures across the Corn Belt and up to a foot of snow in the Plains threatens unharvested crops and delays wheat plantings.  It also can be harmful to the newly planted wheat crops.  Weather related issues are also impacting wheat crops globally, causing reductions to expectations for global wheat production.  For tomorrow’s data, downward revisions to domestic production and stocks is expected for corn and soybeans.  In spite of all of the bullish undertones in grains at the moment, the funds still carry reduced short positions.  Yesterday, futures open interest had a sharp rise in corn (almost 23k) and was up over 7k in soybeans and 5k in wheat.  This could be interpreted as adding to the short base, although the fundamental backdrop wouldn’t necessarily support that. 


Cotton futures are bid today, primarily driven by the soybean announcement on the hope that a demand pick-up occurs here too.   Some modest declines are expected for the cotton production and inventory numbers as well, which also helps prices.  Hog futures, which recovered from a limit down move on Monday to close over $3 higher yesterday ($3 was the downward limit on Monday), should have a bid today, along with cattle futures, on the China news.  Prospects of China not needing to come to the US to replenish its domestic hog supply cut almost in half by ASF, has been pushing US prices down.  Coffee futures traded lower yesterday, as rains systems in the South American growing areas bodes well for the crops.  The dollar was stronger against these currencies as well, incentivizing producers to make some sales.  Funds also got back in to the short sale trade, as key technical support levels kept being violated.  Sugar prices resumed the grind back up, both yesterday and this morning, as concerns remain about future shortages.


The oil market, which has been hit hard over the past few sessions, on global economic growth concerns, caught a bid on this mornings trade news.  This, in spite of the API report yesterday afternoon projecting crude inventories to have risen by 4.1m barrels last week, where the market is expecting a build of 1.9m barrels.  Oil did trade down a bit on this release, but never managed to dip back below the $52 area it did breach in yesterday’s trade.  The DOE releases the production and inventory data later this morning. 


As for gold, what can one say?  It is going to remain the safe haven, and draw interest whenever the clouds turn dark gray.  Trade talks, Middle East tensions, Brexit, Impeachment, Hong Kong, global economic growth, global monetary policies, and last but probably first and foremost on many minds, a very jittery stock market…pick your poison, there is enough uncertainty out there to keep underlying support in place for gold.        


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      882.25                   892.75                   910.75

CZ9                      380.00                   409.50                   401.75

WZ9                     481.75                   502.75                   505.25

KWZ9                   409.50                   444.25                   470.50

MWZ9                 521.00                   541.25                   558.25

SMZ9                   299.5                     309.3                     313.8

BOZ9                   29.11                     28.76                     29.38

CLX9                    55.46                     56.15                     57.21

GCZ9                    1510.5                   1445.6                   1383.6

LHZ9                    65.545                   70.540                   71.070

LCZ9                    106.925                 109.350                 113.910

KCZ9                    99.15                     102.95                   105.15

CCZ9                    2330                       2405                       2372

CTZ9                    60.04                     62.85                     68.48

SBH0                    12.47                     12.88                     13.36

JOX9                    101.55                   104.30                   113.05

HGZ9                   259.85                   264.55                   274.15





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC