Commodity Corner: Morning Comments

Good morning,


DXH0  97.290  -0.004                 GCG0  1555.7  -2.2                  ESH0  3333.00  +13.50                CLH0  57.84  -0.54


The US equity market has shaken off the coronavirus concerns for the time being and has resumed the march to higher highs.  China came out and said it believes it has contained the spread of the virus, bringing in some ease.  Many analysts are attempting to project the potential impact of this epidemic compared to the outbreak of SARS in 2003.  Back then, commodity prices declined about 10%. Goldman is saying if this virus is not contained, approximately 260k barrels of oil per day in demand could be lost.  This could result in a drop of around $3 to oil prices. 


While it is a relatively light economic calendar week in the US, the markets’ attention has moved over to Davos, where the world economic forum is taking place.  As an added bonus, President Trump is attending, having made a keynote address yesterday, and today speaking optimistically about US growth prospects, via trade and with companies relocating back to the US.


Gold prices are slightly lower this morning, having traded in approximately a $10 range overnight.  The immediate need for safe haven investments appears to have diminished for now, but the geo-political risks remain, so gold prices should have some underlying support. 


Oil prices, receiving the most impact from the China virus, are down approximately 40 cents today, sitting just below $58.  The overnight range is just over 50 cents, as this market is also waiting for the next piece of news to hit.  The weekly production and inventory data for the US will hit the markets, beginning this afternoon with the API stocks projection.


Grain prices, and cotton, were hit yesterday, with wheat the exception, as demand concerns from China hit prices.  South American crops are moving through harvest, and with the domestic currencies there under pressure, producers are able to aggressively price crops, which is also pushing prices down.  Wheat prices are getting a boost from the notion of tighter global supplies.  Global prices have been on the rise, as evidenced in the Egyptian purchase tenders.  Funds are adding to long positions, receiving fresh “buy” signals as key resistance points are breached.  US wheat prices traded at the highest level since November of 2018 yesterday. 


The weak South American currencies, in particular in Brazilian real and Columbian peso, have also kept continued pressure on coffee prices.  Similar to the grains, the weaker currency allows producers to more aggressively price the crops.  Coffee futures are also coming under some pressure as First Notice Day approaches for the March contracts, where any long positions need to be liquidated or rolled to avoid a delivery notice.  Sugar prices continue to march upwards, trading at a 3 year high.  The well-advertised potential for a supply deficit, due to poor growing conditions in Thailand and Brazilian millers producing ethanol instead of sugar.  This rally in sugar has led some producers to rethink the production strategy, and return to focusing on sugar production.  If this develops, it could quickly bring a cap to sugar prices.  Cocoa prices also continue to rally, as supply concerns there, from weather related growing issues in the Ivory Coast and Ghana lower the prospects for the size of the harvest.  An increase in demand, both in Asian and Europe, is also contributing to the supply worries.          


Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      927.00                   928.75                   921.00

CH0                      383.25                   387.00                   405.00

WH0                    538.50                   519.75                   515.75

KWH0                  456.00                   440.25                   458.25

MWH0                533.75                   537.25                   549.75

SMH0                  303.4                     305.3                     310.4

BOH0                   32.73                     31.54                     30.35

CLH0                    58.71                     56.61                     56.89

GCG0                   1499.5                   1507.2                   1448.7

LHJ0                     76.050                   78.245                   80.055

LCJ0                     126.585                 122.480                 120.375

KCH0                   121.25                   111.85                   109.05

CCH0                   2572                       2502                       2454

CTH0                    67.40                     65.07                     66.35

SBH0                    13.30                     12.82                     13.05

JOH0                    100.25                   102.75                   107.80

HGH0                   275.20                   269.00                   271.15





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

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