Commodity Corner: Morning Comments

Good morning,


DXZ9  97.410  +0.039              GCG0  1481.3  -1.8                                             ESZ9  3123.25  +5.50                CLF0  58.08  -0.35


OPEC+ agreed in principle to an additional cut to the production quotas for its members of 500k barrels/day, and that the cuts would be better distributed across all members on pressure from Saudi Arabia, which had been carrying a majority of the burden of the cuts to this point.  This takes the cut in oil production to 1.7m barrels a day, for the quotas which were first put in place in October 2018.  Oil prices are actually trading lower on this news, because in reality the producing members, primarily Saudi Arabia had reduced production by more than the agreed upon 1.2m barrels/day quota levels agreed upon in the original deal.  So not much more oil is being withheld from the market than what is currently being produced. 


Equity prices continue the grind back up towards the highs, as the market awaits todays Non-Farm Payrolls report (+183k expected vs +128k last) and Unemployment Rate (expected 3.6%, unchanged from last).  This will be the last piece of relevant economic data ahead of next week’s Federal Reserve monetary policy meeting on Tuesday and Wednesday.  No change in rates is expected, but with the Fed having stated it is paying close attention to all inputs, numbers far from expectations can cause some nervousness in the trade.  In addition, the Fed has stated numerous times that it views delays to the trade deal as a continues major drag on the economy, so the on again / off again trade deal headlines keep thoughts swaying about potential changes to policy. 


The current trade winds are suggesting phase 1 to the trade deal may not be that far off, but it still remains to be seen how the tariffs set to be implemented on Dec 15 are handled.  This also has been supporting the equity trade yesterday and today.  Gold prices, which traded in a fairly tight range yesterday, are off a touch this morning, as the positive equity market continues to allow for safe haven unwinds. 


The dollar was under pressure yesterday, which, coupled with the positive trade talk, gave a solid boost to commodity prices.  Coffee exploded up to new highs, following the past couple of sessions which saw a correction to the downside.   Cocoa and sugar are also trading up towards their highs.  Supply shortfalls for next year in these products is also pushing prices higher, both from spec funds getting long and end users seeking forward coverage.  Orange juice futures were also higher yesterday.  Cotton also got a boost from trade and went up. 


Grain prices were higher, even export sales coming in below expectations.  Trade, the dollar and a seasonal bias towards pricing rallying coming out of harvest all had a hand in the move.  Grains are waiting for the next supply and demand report to come from the USDA on Tuesday.   No major changes are really expected on this report (estimates can be found on the Current Data attachment).


So the market will be dialed in to the US employment data, any comments made regrading the OPEC+ additional quotas and (of course) trade headlines.   


Technical Moving Averages:

Product               50 day                100 day               200 day

SF0                       921.50                   908.25                   914.00

CH0                      391.50                   395.50                   408.25

WH0                    516.25                   504.25                   508.50

KWH0                  432.50                   433.25                   462.25

MWH0                 538.75                   536.75                   556.75

SMF0                   304.9                     304.0                     311.1

BOF0                   30.68                     29.93                     29.66

CLF0                     55.56                     55.47                     57.29

GCG0                   1492.8                   1498.6                   1421.1

LHG0                   73.145                   73.180                   76.045

LCG0                    121.760                 117.215                 118.005

KCH0                    107.40                   105.75                   106.70

CCH0                    2534                       2440                       2413

CTH0                    64.68                     62.97                     67.35

SBH0                    12.60                     12.55                     13.09

JOF0                    100.25                   102.70                   109.60

HGH0                  264.50                   264.00                   273.00





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC