Commodity Corner: Morning Comments

Good morning,


DXZ9  98.085  +0.082                     GCZ9  1483.0  -0.5                               ESZ9  2992.75  -5.00                      CLX9  53.11  +0.30


The market’s have had some movement so far this week, as the results of the trade meetings between the US and China are digested.  It still remains to be seen what actually will come of what was agreed upon at the meetings.  Equities kept the positive momentum from last week alive, pushing higher over the past couple of sessions.  There is a minor correction lower this morning, which can be expected after the strong rally. 


Gold prices have come off a decent amount since the end of last week, pushing well below the $1500 area, as the apparent trade progress reduces some of the need for a safe haven.  Gold is approximately $25 above the low observed a few weeks ago, and a retest of that area would not be a surprise. If a new low is made, the next area of support could be found in the 100 day moving average for GCZ9, 1455.7. 


Oil futures  are up a touch this morning, following yesterday’s decline in relatively modest volumes.  Forward demand, based upon overall global economic prospects was one of the reasons attributed to the sell off.  US production remains strong, and is able to mitigate supply disruption concerns that arise from geo-political tensions.  OPEC leaders have expressed concerns with the dropping price of oil, and the market is keeping a watchful eye on anything that may create a pop to prices.


The agricultural products received a boost late last week from the improved trade prospects, and expected increase to demand.  However, there remain obstacles in the form of tariffs on other products which need to be dealt with before the market can truly have confidence in additional Chinese purchases.  Cotton, had a large washout of prices on Monday, on such concerns, only to recover in yesterday’s trade.  Weather concerns for the cotton crop also proved to be supportive.  Soybeans and corn came off yesterday, as the market appears to have priced in the good news, now is waiting to see it actually develop.  There have been large purchases of soybeans announced almost every day by the Chinese, however due to the history of the Chinese cancelling these purchases, the market remains on edge.  Egypt is coming to market with another wheat purchase tender today, again expected to be dominated by Russia and France, although at higher prices than the last tender.  Yesterday afternoon the USDA released the updated report on crop conditions and progress.  Corn and soybean harvests remain behind the averages, as does spring wheat.  The winter storm that swept across the Midwest and Plains last week didn’t  help any.  A decent window should be opening for good harvest progress, before temperatures drop again and more rains move in.  The weather will remain a focal point for the “ags”.  Also, how the crops that are being harvested are looking.  There has been some discussion of ear weights for corn being on the low side.  The market remains suspicious of the USDA’s projections for the size of this year’s corn crop, so talk of this nature grabs attention. 


Coffee futures continue to sink lower, as beneficial growing weather and softer domestic currency values weigh on prices.  Sugar futures, which had been caught in a fairly strong short covering rally, are coming back off as the market reevaluates future economic prospects.  Cocoa futures were up yesterday, as the market remains concerned about the growing conditions in the Ivory Coast.  It is trading down a bit today, as data showing a slowing of processing in Europe is applying some pressure.  Orange juice prices recovered some yesterday, following a big drop on Monday also driven by demand concerns, not only form questions about any trade agreements, but from shifting consumption habits. 


On the horizon are a couple of critical events for the markets.  The end of the month brings the next monetary policy meeting from the Federal Reserve.  There remains great debate over where the Fed actually stands on policy, so markets are in a bit of a wait and see mode, regarding that.  The other big event is the October 31 deadline for Brexit.  Both of these events, if the results delivered are not what the markets are expecting to see, can create additional price volatility to numerous assets.  The markets may find themselves in a bit of a range trade into the end of the month.        


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      887.75                   896.75                   910.50

CZ9                      378.25                   408.75                   401.75

WZ9                     483.00                   503.25                   504.00

KWZ9                   407.00                   442.00                   467.25

MWZ9                 522.00                   540.50                   557.25

SMZ9                   300.1                     309.5                     313.5

BOZ9                   29.26                     28.87                     29.40

CLX9                    55.18                     55.74                     57.37

GCZ9                    1515.3                   1455.7                   1388.4

LHZ9                    65.815                   69.935                   71.270

LCZ9                    106.915                 109.325                 113.790

KCZ9                    98.45                     102.85                   104.65

CCZ9                    2339                       2408                       2374

CTZ9                    60.15                     62.64                     68.21

SBH0                    12.41                     12.85                     13.34    

JOX9                    101.00                   103.95                   112.25

HGZ9                   259.65                   264.00                   273.95






Michael Clifford


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