Commodity Corner: Morning Comments

Good morning,


DXH0  96.900  +0.198               GCG0  1574.0  -0.3                                     ESH0  3242.00  +6.75                CLG0  61.72  -0.98


Well, in case you were cut off from all forms of media communication last evening, you would never know from looking at the present markets about the Iranian attack of the Iraqi air base hosting US troops, and the comments/response from both Iran and the US over the course of the night.  E-mini’s dropped just almost 55 points (3181.00), oil shot solidly through $65 (65.65) and gold ripped through $1600 (1613.3).   As you can see, from the price references above, things have returned to normal.   Obviously very good volumes overnight, and certainly justified being long gamma, as long as you got your delta hedging done!  President Trump is to address the nation this morning and clearly any Middle East developments will be the focal point for numerous markets. 


So, checking the back burners, here are some quick tidbits on a few of the markets:


-)  Yesterday afternoon, before the Iranian missiles were fired, the API projected domestic crude inventories fell by 5.95m barrels last week.  The market is expecting a draw of 3.25m.  The DOE releases production and inventory data today.


-)  Grain markets are waiting for the release of Friday’s WASDE report from the USDA (estimates on the Current Data attachment).   Downward revisions to production and inventories, both domestically and globally are expected.  Out of Brazil this morning, CONAB released it’s latest look at soybean and corn production.   The production figures for both were higher than last month’s  but lower than expectations, given the favorable weather observed.  Specific to wheat, Egypt conducted a purchase tender overnight, with the best offers coming from the Black Sea and 1 from France.  Russia had the lowest offer, but the offer price continues to inch higher.  There are reports that dry weather conditions may have an impact on the wheat harvest in the Black Sea and Europe.


-)  Coffee finally managed to post a higher settle yesterday, following a large move down, driven by improved weather for growing, future demand concerns if the global economy stalls and specs pressing prices to support its short position.  The technicals were showing a market that was very oversold, so yesterday’s bounce may have just been corrective in nature.  Prices find themselves down over $1 again this morning, perhaps pressured by the stronger dollar index. 


-)  Sugar prices are trading near the highest level in 14 months, as the Middle East tensions drive oil prices up, which incentivizes cane millers to produce ethanol instead of sugar.


-)  In spite of the primary focus on the Middle East, this is a very big week in the US for economic data.  Yesterday’s non-manufacturing index came in above expectations.  Today brings the precursor to Friday’s Non-Farm Payrolls and Unemployment Rate reports, with the ADP Employment Index.  The market is expecting ADP to print +160k, vs +67k last month.  Forecasts for Friday’s data are NFP +160k vs +266k, with the Unemployment Rate unchanged at 3.5%. 


Needless to say, the attention of most market participants will be on the Middle East.  The US/China signing of Phase 1 of the trade deal comes in to play if the geo-political landscape escalates to a point where one side decides to back away.  At this time, that doesn’t appear to be an issue.  But, there has been great disappointment when it comes to these negotiations for almost 2 years now, so you never know…..       


Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      929.00                   925.00                   921.50

CH0                      385.00                   386.75                   406.00

WH0                    530.00                   512.00                   513.00

KWH0                    445.75                   433.75                   458.50

MWH0                531.50                   534.75                   551.25

SMH0                  304.8                     305.4                     311.3

BOH0                   32.35                     31.15                     30.20

CLG0                    58.44                     56.44                     57.24

GCG0                   1490.9                   1505.1                   1438.5

LHG0                    70.425                   72.045                   75.925

LCG0                    125.140                 119.340                 118.500

KCH0                    119.60                   110.55                   108.70

CCH0                    2542                       2463                       2438

CTH0                    66.52                     64.09                     66.61

SBH0                    12.99                     12.67                     13.04

JOH0                    101.30                   103.45                   109.30

HGH0                   272.45                   266.80                   271.55





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC