Commodity Corner: Morning Comments

Good morning,


DXH0  97.190  +0.028               GCG0  1549.9  -4.4                                ESH0  3283.00  +7.00                CLG0  59.57  +0.01


Equities post another new high overnight, while oil and gold markets appear to have stabilized, although at prices much lower than observed on Tuesday evening.  The markets get a return to focusing on economic data today, with the December Non-Farm Payrolls and Unemployment Rate.  The expectations are for an increase of 160k (although some have raised it to +185k following Wednesday’s ADP report) vs +266k, while the Unemployment Rate is expected to remain at 3.5%.  The grain markets also receives a plethora of data today from the USDA to survey, with the January WASDE, the Quarterly Stocks report and the 2020 Winter Wheat Seedings report.  Production and inventories, both domestic and global are expected to be lowered in the WASDE.  Winter wheat planted is expected to be less than last year.  Looking to next week, US data includes a look at inflation with the CPI and PPI, December Retail Sales, which may be a gauge of how the holiday shopping season went and the expected signing of Phase 1 of the trade deal with China.  The Middle East tensions, while they appear to be simmering a bit, are not just going to disappear either.


If oil and gold continue to correct lower, if tensions continue to abate or if some poorly positioned longs from the other evening’s spike are unwound, there are some key moving average levels below, that could become in striking distance and serve as support.  In oil (CLG0), the 50 day MA is 58.57.  Yesterday’s low was 58.66.  In gold (GCG0), the 100 day MA comes in at 1505.6.  While this is still over $35 away from Wednesday’s low (1541.0), keep in mind prices quickly dropped almost $75 from Tuesday night into Wednesday morning. 


Wheat has been the lead dog in the “ags” complex this week.  Expected lower plantings; weather impacting the development of the crops in the Black Sea, Europe and Australia;  global prices ratcheting higher, as evidenced with the Egyptian purchase tender mid-week; prospects of more wheat trading with China following Phase 1; all have played a role in pushing prices higher.  Also aiding the wheat complex is the talk that index rebalancing in Kansas City Wheat will bring fresh buying into the market.  The rebalancing was thought to have begun on Wednesday, and takes place, usually on the close, through next Tuesday.  Corn and Soybeans have been holding in, partially in sympathy with the wheat strength and partially ahead of today’s WASDE, which is expected to be somewhat friendly. 


Aside from oil and gold, the most interesting (and volatile) commodity trading these days is the coffee market.  After seeing a very sharp rise into the end of 2019, prices have been on a steady decline, from the very end of ’19 and into 2020.  Yesterday’s resumption of the selling was caused by the projection that Brazil will produce 70m bags of coffee this year, vs producing 58 last year.  Weather related supply deficit issues were the major reason for the rally at the end of last year.  Also, allowing for prices to sag is the fact that during the rally, a very large percentage of forward coverage purchases were made, which now results in few natural buyers below with resting bids to support the market.   Sugar prices continue to trade to new highs for the move, touching the highest price level since October 2018.  The same story of supply deficit concerns, as Brazilian millers opt to use cane for ethanol production instead of sugar.


This afternoon will bring an updated look at fund positioning from the CFTC with the COT reports.  Good luck on all the numbers today!       


Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      928.75                   926.00                   921.50

CH0                      384.50                   386.75                   405.75

WH0                    531.25                   513.50                   513.50

KWH0                  447.75                   435.00                   458.25

MWH0                531.50                   535.25                   550.75

SMH0                  304.4                     305.4                     311.1

BOH0                   32.48                     31.24                     30.24

CLG0                    58.57                     56.57                     57.24

GCG0                   1492.9                   1505.6                   1440.6

LHG0                   70.200                   72.020                   75.810

LCG0                    125.345                 119.685                 118.530

KCH0                   120.20                   110.90                   108.80

CCH0                   2544                       2470                       2441

CTH0                   66.70                     64.29                     66.54

SBH0                    13.04                     12.69                     13.03

JOH0                    101.10                   103.30                   108.95

HGH0                  272.95                   267.15                   271.45





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC