Commodity Corner: Morning Comments

Good morning,


DXZ9  98.445  -0.370                     GCZ9  1512.2  -0.6                                                 ESZ9  2915.00  -4.00                     CLX9  53.08  +0.49


The trade talks with China resume later today, and the markets, as usual, carry a very cautious optimism to them.  Equities are a touch lower, gold is hovering around unchanged, and oil just shot back above $53 following the OPEC data showing less production in September.  Grains are slightly higher, ahead of today’s WASDE report and the snowstorm moving across the upper Midwest and Plains.  The dollar index is down a decent amount today, helping to support the other soft commodities.  Aside from the trade talks, the markets face continues tensions between Turkey and Syria, Senator Biden, in what appears to be some defensive posturing, ramps up the impeachment rant.  There is also some important economic data coming out today, with CPI for September and the latest WASDE. 


The Turkish attacks on Syria took control of the oil market yesterday, after the data released from the DOE showed another build in inventories and ramped up production figures.  Prices were leaking lower, on the increased supply concerns and overall concerns about the global economy.  The Turkey/Syria tension certainly poses a risk to production disruptions, and brings support to oil.  OPEC+ Secretary General Mohammad Barkindo is on the tape today, saying OPEC and its allies will do whatever it takes to prevent another oil slump as the global economy weakens.  He cites the ongoing US/China trade dispute as casting a shadow over oil demand, and failure to reach a deal would be catastrophic.  So, trade headlines during these resumed talks will certainly influence oil prices.  Barkindo also says he sees economic headwinds, but no global recession and that OPEC expects oil demand to rise by 1 million barrels a day in 2020.  Barkindo also says all options are on the table at the next OPEC+ meeting in December, including deeper cuts to production. 


Gold is basically unchanged, after having a $14 range overnight.  The trade discussions, positive or negative, will dictate economic expectations and hence monetary policies and FX markets.  Overall, and as stated here numerous times, gold should continue to have an underlying bid, given all of the factors facing the markets these days.  Copper prices are trading higher today, also from the trade talks.  Copper has been under pressure of late, as global economic conditions and prospects have been called into question lately.  Positive news on trade should translate to improved demand for the industrial metals, and copper is having a bit of a corrective bounce here. 


The grain markets are a touch higher, ahead of today’s WASDE report (estimates on current data attachment), where downward revisions to production and inventories are expected.  Also supporting prices today are the softer dollar, the cold and snowy weather facing the Midwest and Plains, impacting the unharvested corn and soybean crops, along with wheat plantings and early development stages.  The trade talks, and hopes that more purchasing comes from China, not only in beans and pork, but also for other products such as wheat and corn.  Cotton also benefits from a trade deal getting done, and its production numbers are expected to have a slight downtick in today’s data as well.    


Sugar has resumed its short covering trade higher, again on the premise of diminished supplies next year.  White sugar has traded at a 7 month high, as European producers cut production.  A drought over the summer created lower yields, thus leading to the lower production figures.  Orange juice futures were down sharply yesterday, as the market braces for today’s crop data from the USDA.  The market expects to see an increase in production of 2.9m boxes from last season, with some analysts calling for even larger increases, due to the good growing season, and hardly any exposure this year to detrimental storms.  Coffee had a range bound trade yesterday, ultimately finishing a touch lower on beneficial rains remaining in the forecast, along with South American currencies being lower again yesterday.  Coffee is up a touch at the moment, in part dollar related and from trade optimism which would improve the overall economy. 


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      882.50                   893.50                   910.50

CZ9                      379.50                   409.50                   401.75

WZ9                     481.75                   503.00                   505.00

KWZ9                   408.75                   444.00                   469.75

MWZ9                 521.00                   541.00                   558.00

SMZ9                    299.5                     309.4                     313.8              

BOZ9                   29.13                     28.78                     29.38

CLX9                    55.35                     56.05                     57.24

GCZ9                    1511.9                   1447.8                   1384.7

LHZ9                    65.470                   70.415                   71.110

LCZ9                    106.880                 109.330                 113.880

KCZ9                    99.00                     103.00                   105.05

CCZ9                    2330                       2405                       2373

CTZ9                    60.01                     62.81                     68.42

SBH0                    12.46                     12.88                     13.35

JOX9                     101.45                   104.25                   112.90         

HGZ9                   259.60                   264.35                   274.05






Michael Clifford


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