Commodity Corner: Morning Comments

Good morning,


DXZ9  98.045  -0.361                     GCZ9  1488.0  -12.9                                                ESZ9  2970.00  +29.00                  CLX9  54.35  +0.80


Trade optimism continues to run rampant thru the markets in the overnight trade, keeping the push higher in equities alive and allowing for the correction down in gold.  Oil, which also had a bid from this, received an additional boost from the news that an Iranian oil tanker was attacked by missiles near a port in Saudi Arabia.   This is what caused the additional spike to oil prices overnight.  The rise would have been greater, but the US continues to keep cranking on the production front, and the inventory build that was seen from this week’s data keeps severe supply shortage concerns at bay.  Nonetheless this just reinforces the fact that geo-political risks remain high in this region.  The dollar index is coming off sharply today, supporting commodity prices.  The grain markets, receiving mixed news from yesterday’s WASDE report, are higher today on the anticipation of the trade deal.  The same is true for cotton and other commodities.  The theme form the trade today, ahead of a partial US holiday this weekend, will be trade headline watching, as President Trump is to meet with Vice Premier Liu He today.


For commodities, yesterday’s WASDE report was the main event.  The data showed a slight increase to corn yields, a higher corn production number than expected, and increased inventories.  Reductions to export expectations for both corn and wheat led to the higher ending stocks numbers for both.  Thus, corn nose dived on the report, with funds jumping back in to the spec short positioning.  Wheat dropped as well, but not nearly as much.  Soybeans received friendly news on the report, with a drop to the anticipated yield and production numbers less than what the market was expecting.  Ending stocks were also lowered for soybeans, in part due to the lowering of beginning stocks based upon the Sep 30 stocks report.  Soybeans shot higher, but were unable to hold the gains and ended up with a small decline on the day.  So, as the supply and demand information is digested in the market, the attention turns back to trade (where almost all the attention is today) and on the cold front ands snowstorm sweeping across the Midwest and Plains. 


Cotton had a similar story from the WASDE report, with lower production and inventory numbers than what the market was expecting.  This reduction to supply, coupled with hopeful increased demand from a deal with China allowed for cotton to trade higher early yesterday, but it was unable to hold the gains.  It is taking another stab at trading higher today.  Coffee had a huge break yesterday, as the fund community drove prices through numerous support levels, triggering sell stops and algo sell signals, enhancing the move.  Prices are bouncing a bit today, in a corrective manner following yesterday’s wipeout.  Sugar futures took a breather yesterday, but overall have been mired in a short covering rally on concerns about a supply deficit next year.  They are up small today.  Cocoa futures were up yesterday on the hopes of increased demand and on the hot and dry growing conditions in the Ivory Coast.  The lower dollar is helping cocoa continue to trade up today, along with some of the other commodities.  Us orange production was estimated to be a touch lower for 2019-20 than it was for 2018-19 by the USDA yesterday.  However, the overall production level remains high, and in a market where consumer demands are shifting away, keeps concerns of a supply overhang in place.  Prices traded down yesterday.   


Copper prices had a strong move higher yesterday, as positive economic sentiment from the trade deal flew into the industrial metals sector.  This market will continue to ebb and flow on the trade talks.  Gold prices, as already mentioned, are experiencing a pretty strong downward correction today, as “risk on” sentiment prevails throughout the markets.  The low from a few weeks ago is approximately $20 away, and should prove to be some support, if the swoon continues.  I still contend, that once this liquidation is over, all of the risks the markets face are still in place for the most part, so prices should remain within spitting distance of $1500.  Keep in mind that the markets have been caught up in trade deal head fakes numerous times over the past 16 months, so another disappointing result from this meeting can never be ruled out.          


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      883.50                   894.00                   910.50

CZ9                      379.00                   409.25                   401.75

WZ9                     481.75                   503.00                   504.50

KWZ9                   408.00                   443.25                   469.00

MWZ9                 521.00                   540.75                   557.75

SMZ9                   299.6                     309.4                     313.7

BOZ9                   29.16                     28.80                     29.39

CLX9                    55.24                     55.95                     57.28

GCZ9                    1513.2                   1449.8                   1385.7  

LHZ9                    65.435                   70.275                   71.140

LCZ9                    106.865                 109.310                 113.855

KCZ9                    98.80                     102.95                   104.95

CCZ9                    2331                       2406                       2373

CTZ9                    59.96                     62.75                     68.36

SBH0                    12.44                     12.87                     13.35

JOX9                    101.25                   104.15                   112.75

HGZ9                   259.50                   264.25                   274.05






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC