Commodity Corner: Morning Comments

Good morning,


DXZ9  97.435  -0.034                GCZ9  1495.2  +4.5                                          ESZ9  3036.00  +0.25                CLX9  55.20  -0.34


The Federal Reserve decision comes this afternoon, where the market is expecting a reduction to short term interest rates of 25 basis points.  Probably as interesting will be the press conference after the announcement, as there has been a lot of speculation lately that the Fed may decide to pause the easing cycle, and see how what has already been done transpires throughout the economy.  Numerous markets are likely to observe a responsive trade, following this event.  Equities remain perched near the highs, as the expected stimulus from the rate cut, coupled with the positive rhetoric that keeps coming from the trade talks keeps popping up stocks.  Oil futures are a touch lower today, shrugging off the report last evening from API saying crude inventories fell by 1.7m barrels last week.  The market is expecting data from the DOE today to show a build of 2.5m barrels to crude inventory.  Gold futures have had a quiet overnight trade, with prices near the highs at the moment, and just a shade below $1500.  Gold should have some price volatility today, as the various markets interpret the Fed’s decision and comments.  Being the safe haven asset, flows could come into gold or get moved out, depending on the circumstances. 


Grain prices are basically steady in corn and soybeans, as the harvest keeps trying to come to a close.  Recent colder temperatures and some snow systems sweeping across the Corn Belt and Palins are certainly creating an obstacle for completion.  The risk of damage to the remaining crops grows as the calendar turns to November.  Pressure on prices could be coming from South America, where producers may be looking to move old crops ahead of new legislation that could be put in place by the government.  This fact was heightened with the weekend election in Argentina, where the socialist party came out ass the winner.  The wheat market was softer yesterday, and is leaking lower again today.  The rain and snowy conditions provide beneficial moisture for the newly planted winter wheat crops.  In addition, yesterday’s purchase tender from Egypt saw winning bids coming from the Black Sea and Europe, with the US nowhere to be found.  The market continues to be optimistic that, poor weather conditions in other parts of the world, which are having an impact on wheat production there (and hence lower available supplies) will translate into more export business for the US.


Cotton futures are up today, and poised to have the largest monthly rally in almost a year and a half.  Optimism for an official trade deal with China, leading to a large increase in Chinese purchases is the largest driver of the rally.  The recent weakness in the dollar, with the expected cut to US rates, is also helping commodity prices, including cotton.  Coffee futures are recovering today, after getting hit yesterday, in a bout of spec profit taking.  Prices made a higher high in the early trade yesterday, but were unable to hold those levels succumbed to the spec longs closing out positions.  With first notice day for futures contracts very close by, more pressure could come in to prices in the short term. 


Tomorrow is month end, which could lead to a profit taking/position squaring, or window dressing, type of trade today and tomorrow.  Following today’s Fed result, the market will also be focusing on the latest picture on the US employment situation, with this Friday’s nonfarm payrolls and unemployment rate report.  For nonfarm payrolls, and increase of 85k is expected, compared to adding 136k last month.  The unemployment rate is expected to uptick to 3.6% from 3.5%.  As a precursor to the payrolls report, the ADP employment index just came out, showing an increase of 125k, compared to being up 135k last month and market expectations of +110k.  This may ramp up forecast for Friday’s number a touch, but probably not much.         


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      898.00                   900.00                   909.50

CZ9                      377.25                   403.75                   401.00

WZ9                     490.00                   503.00                   502.50

KWZ9                  408.50                   435.00                   460.75

MWZ9                 525.25                   536.50                   554.25

SMZ9                   301.2                     307.6                     312.4

BOZ9                   29.55                     29.12                     29.47

CLZ9                    55.17                     55.55                     57.36

GCZ9                    1511.4                   1472.7                   1397.2

LHZ9                    66.455                   68.765                   71.455

LCZ9                    108.420                 109.785                 113.650

KCZ9                    98.10                     101.85                   103.75

CCZ9                    2387                       2412                       2375

CTZ9                    61.27                     62.39                     67.77

SBH0                    12.34                     12.75                     13.27

JOF0                    102.90                   105.45                   113.30

HGZ9                   260.60                   263.85                   273.90






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC