Good morning,
DXZ9 97.670 -0.135 GCZ9 1486.4 +2.7 ESZ9 3074.50 +2.50 CLZ9 56.96 -0.27
Equity markets are chopping around unchanged territory this morning, with the dollar index lower today. The softer dollar is assisting with a light bid in the commodity space. For the grains, position squaring will be the nature of the trade, ahead of Friday’s WASDE report. Other commodities are facing concerns about future supply deficits, firming up prices. Gold, having experienced a huge, liquidating, meltdown yesterday, had the classic dead cat bounce overnight, only to now be pulling back towards yesterday’s settle. Oil, rallying yesterday on the positive US economic data and on trade hopes had a slight setback after API projected crude stocks last week increased by 4.26m barrels, where the market was looking for an increase of only 2m barrels. However, the setback was only minor, and oil remains above $57, well positioned to re-test the $58 area that marked the high earlier in the week. Oil gets more production and inventory news today from the DOE.
As mentioned, grains should face a position squaring trade for the next couple of sessions, ahead of Friday’s WASDE report, where decreases to production and inventories are expected. There has been much debate this season about how big the crops would be, given all of the weather related obstacles faced throughout the season, and the USDA has consistently surprised the market with how upbeat it has been in its projections. As the season is winding down, and harvest still remains lagging, the debate continues. Estimates for the reports can be found on the attachment. The global wheat market is a touch stronger today as well, as slight reductions to stocks, both domestically and globally are expected. In addition, Egypt conducted another purchase tender yesterday, buying 175k m tons, with sales coming from France and the Black Sea.
The coffee and sugar markets are both facing supply deficit projections for the coming year, which is firming up prices on available forward supply concerns. This fact is forcing the spec short positioning by the funds to do some covering, all leading to higher prices. The size of the short in sugar was reported at over 200k in the most recent COT report, and future supply concerns could keep the funds sitting on bids, in an attempt to cover some of the exposure. The cotton market is also trading higher, as the WASDE report on Friday is also expected to show a reduction to projected production and inventories domestically. Cotton is also benefitting from the continued trade optimism. Lean hogs touched limit bid yesterday, again as thoughts of a trade deal brings Chinese demand back to the US. China is facing a shortfall of its own domestic supply, following the ASF epidemic it has faced all year.
The extended weather forecast has a cold front sweeping across the Midwest and Plains over the next 10 days or so. There will be some snow systems in the mix, which can pose a risk to unharvested crops and to the wheat crops yet to reach dormancy. Oil is beginning to show characteristics of having a slow grind up into the next OPEC+ meeting, which is scheduled for December, where production quotas for next year are almost certain to be discussed. If gold continues the liquidating trade down, the recent old low comes in around $1465.
Technical Moving Averages:
Product 50 day 100 day 200 day
SF0 917.50 914.25 920.75
CZ9 379.00 400.75 400.75
WZ9 494.00 501.50 501.50
KWZ9 410.50 431.25 457.50
MWZ9 526.25 533.75 552.50
SMZ9 301.7 306.4 311.9
BOZ9 29.79 29.27 29.50
CLZ9 55.31 55.69 57.39
GCZ9 1509.5 1480.4 1401.8
LHZ9 66.815 68.230 71.515
LCZ9 109.780 110.165 113.690
KCZ9 98.75 101.80 103.40
CCZ9 2411 2409 2377
CTZ9 61.82 62.32 67.52
SBH0 12.34 12.69 13.23
JOF0 102.65 104.85 112.60
HGZ9 261.65 263.90 273.80
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404