Commodity Corner: Morning Comments

Good morning,


DXZ9  97.425  -0.298                     GCZ9  1493.6  -0.4                                                      ESZ9  2997.00  +5.50                    CLX9  53.07  -0.29


Talk of improved chances for a Brexit deal, and increasing optimism on a trade deal with China has created a bit of a “risk on” appetite this morning.  Equities are trading higher, gold is coming off, the dollar has come under pressure and commodities are higher.  The contrarian is oil, which is trading down, as API projected a much larger stock build than what the market was expecting (+10.5m barrels vs +3m).  There remains a lot of time between now and the end of the month, the actual Brexit deadline, so many things can still happen and headline risk is still out there. 


The softer dollar has put a bid in the commodity space today, as it allows products priced in dollars to be more competitive in the export arena.  Improved trade prospects also helps the demand scenario for commodities, along the likelihood of an upbeat economic outlook.  The softer dollar is also helping to support the gold market, which would likely be lower with this “risk on” tone.  Gold has found itself in a bit of a range trade of late as stalling out when it pops above $1500, but unable to test the recent lows around $1460. 


Wheat futures are leading the “ags”  complex higher today, gaining a bid in response to the firming of prices in France and Russia.  In Egypt’s wheat purchase tender yesterday, of which they bought 405k mt from Russia, France and Ukraine, prices were higher than the previous tender and France is very competitive in this arena.  There has been talk of weather causing some issues with the next Russian wheat crop, possible creating more opportunities for France and maybe even the US to gain some market share.  Australia has had some weather related issues with its wheat crop as well.  Corn and soybeans are higher, following wheat but also on the improving trade prospects.  An announced sale of corn to Mexico came across the export wire yesterday.  The US weather appears to allow for some decent progress to be made for harvest, which will be key as cooler temperatures return to the extended forecast. 


Cotton futures had another strong move higher yesterday, as the recent rainy and cold weather systems, coupled with trade provided the bid to prices.  It is up a little more today with the dollar weakness.  Coffee futures were lower yesterday, as beneficial rains in South America improves the outlook for what was already expected to be a healthy crop.  The potential for an over supplied market weighs on prices.  Sugar prices were hit yesterday, following a fairly strong short covering rally over the past few weeks.  All the covering has brought the overall positioning of the market a little more in balance, but it still is carrying a decent sized short. 


The oil market, which has swung 30 cents to either side of $53 in the overnight trade, will be looking for confirmation of the API inventory build projection this morning with the production and stocks figures from last week from the DOE.  The US is not the only non OPEC country to have ramped up production of late, keeping pressure on prices.  Much to the chagrin of OPEC+, as current prices are not where they would like to see them at.  It remains to be seen what response comes from OPEC in the future.  For the meantime, any supply concerns caused by geo-political events in the Middle East are mitigated some by the increased production elsewhere around the globe.  Brexit and a US/China trade deal should provide some support to oil prices, as these resolutions would be interpreted as good for the global economy, and hence oil demand. 


As mentioned yesterday, stay tuned to any headline news regarding Brexit, a trade deal and what the next move is from the Federal Reserve at the next meeting at month’s end.  These appear to be the next big events for the markets.      


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      889.00                   897.50                   910.50

CZ9                      377.75                   408.50                   401.75

WZ9                     483.50                   503.25                   503.75

KWZ9                  407.00                   441.50                   466.75

MWZ9                 522.25                   540.25                   557.00

SMZ9                   300.2                     309.5                     313.4

BOZ9                   29.31                     28.89                     29.41

CLX9                    55.18                     55.69                     57.39

GCZ9                    1515.5                   1457.6                   1389.3

LHZ9                    66.010                   69.855                   71.310

LCZ9                    106.975                 109.340                 113.775

KCZ9                    98.30                     102.80                   104.55

CCZ9                    2343                       2409                       2374

CTZ9                    60.27                     62.61                     68.17

SBH0                    12.40                     12.85                     13.33

JOX9                    100.90                   103.85                   112.10

HGZ9                   259.65                   263.90                   273.90






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC