Commodity Corner: Morning Comments

Good morning,


DXH0  97.975  +0.140                GCJ0  1574.5  -1.3                                             ESH0  3290.00  +11.75                CLH0  54.10  +0.62


Today is day 2 of the Federal Reserve monetary policy meeting.  The decision on short term rates will be released at 1 PM CST (no change is expected), along with the text accompanying the decision.  There is a chance to see some changes in the rhetoric, given the recent geo-political events both in the Middle East and with the Chinese virus.  Fed Chairman Powell will then hold a press conference at 1:30 PM CST.  Of course, any changes to policy or rhetoric can have a big impact on numerous markets, so it could be a relatively quiet trade ahead of this and a reactionary trade following. 


Equities continue to grind back up, in spite of more coronavirus cases being reported and reports that the Republicans may not have the votes to block the allowance of witnesses at the impeachment hearings.  Gold prices have firmed back up to unchanged levels in the European trade, having continued the safe haven unwind in the Asian hours.  Oil prices, mounting a rally yesterday driven by concerns about Libyan production, further production cuts form OPEC+ driven by even lower demand caused by the impacts of the virus and the “risk on” tone being generated in equities.  Citi’s Ed Morse, a very well respected research economist in the energy sector,  was on the tapes suggesting OPEC would need to be more aggressive in production cuts from the likely reduction in demand.   Oil then received a further push into the overnight trade from the API projection of US crude stocks dropping by 4.27m barrels last week, where the market is expecting a build of 1.29m barrels.


Commodity prices, for the most part, took it on the chin yesterday from virus related demand concerns, especially in the early hours.  There were a few exceptions out there.  Corn had a decent day higher, driven by another reported export sale to Mexico, marking the 6th such sale in the span of a week. Cotton also was firm, as hopes for US demand was bolstered by the reported news that India was halting cotton sales to China, due to the virus.  Lean hogs closed the session higher, having been locked limit down the prior day.  Live cattle, which was also limit down on Monday, still finished a touch weaker yesterday.  Sugar prices also got back on track moving higher, as the bounce in oil prices brings back the expectation of Brazilian millers focusing on ethanol production from cane as opposed to sugar, thus adding to the potential of a sugar supply deficit next year. 


As mentioned, many commodities were under pressure yesterday, not surprising given the expected demand hit from China.  Coffee prices, having been hit hard on Monday, were down over $1.50 again yesterday.  This puts the price of coffee down close to 40 cents from the highs made in mid-December.  Soybeans were down, but bounced off the lows, on China.  Wheat prices were also lower, as the global rally in wheat, coupled with the continued strength in the dollar, makes US wheat prices uncompetitive in the export arena.  Copper prices have been also been hit hard on the China news, with a big impact on industrial usage expected.  Cocoa futures also took a hit, in part on the demand scenario, but also more of a corrective nature, as cocoa prices have been undertaking a big rally of late, due to weather related production issues and price convergence between futures and cash prices. 


Friday marks month end, which could bring in some additional price volatility to the trade, as profit taking or position squaring can drive prices.  The recent decline across many asset classes may be causing some to re-evaluate how they want to be positioned, moving into next month.  This can become more of a factor after the market sees how the Fed thinks about things.         


Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      923.75                   929.00                   920.00

CH0                      383.50                   387.50                   404.75

WH0                    544.50                   525.00                   517.50

KWH0                  461.50                   444.25                   458.25

MWH0                535.25                   539.25                   549.25

SMH0                  302.3                     305.1                     309.8

BOH0                   32.77                     31.68                     30.39

CLH0                    58.51                     56.64                     56.71

GCJ0                    1515.4                   1513.6                   1460.0

LHJ0                     75.250                   78.010                   79.820

LCJ0                     126.295                 123.070                 120.340

KCH0                   121.05                   112.35                   109.15

CCH0                   2592                       2527                       2462

CTH0                    67.79                     65.61                     66.16

SBH0                    13.49                     12.93                     13.06

JOH0                    99.60                     102.10                   107.05

HGH0                  275.10                   269.50                   270.45






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC