Commodity Corner: Morning Comments

Good morning,


DXH0  97.560  -0.146                GCJ0  1584.8  -4.4                                     ESH0  3276.25  -13.50                CLH0  52.38  +0.24


An event filled month comes to a close today, with equities sharply off the highs posted earlier in the month, but still in positive territory for the month.  Oil finds itself sharply lower for the month, down approximately 14%, as concerns about the health of the global economy, driven by the coronavirus which could lead to a big drop in demand.  Adding to this is the continued strong production and inventory data coming out of the US.  Oil prices are up about $1 off the lows put in yesterday, and the potential for a severe global supply/demand imbalance keeps a lid on prices at the moment.  Gold prices, while also about $30 off the highs posted towards the beginning of the month, are still substantially higher than where they were at the end of December.  The safe haven status of gold certainly came back into play this month.


Many commodities have observed big moves over the month.  Coffee has been in a massive decline, as a strong production recovery, coupled with spec funds aggressively adding to short positions, drives prices lower.   Coffee prices find themselves down a fair amount again today.  Supply is also a story for sugar and cocoa, but the opposite way, as concerns about a deficit in the coming year has led to a sharp rally in both of these, taking prices to multi year highs.  Weather related growing issues, coupled with production shifts and strong demand have led to this supply shortage talk.  Spec funds have been piling into long positions on this move as well.


Taking a look at a few products on more of a short term view, the coronavirus has had a big impact on cotton, lean hogs, copper and soybeans, 3 markets that rely heavily on trade with China.  The uncertainties about the extent of the virus across China have led to declines in soybeans and cotton this week.  Lean hogs have observed a steep drop to prices, with the trade being locked limit down 3 times already this week.  Copper has been lower for 13 consecutive sessions, down almost 10% for the month, again on a presumed reduction of industrial usage.


While lower demand has had an impact on numerous markets, there has been some hope for the corn and wheat markets this week.  Mexico has made many purchases of US corn over the past 10 days, helping support prices.  For wheat, in Egypt’s purchase tender yesterday, France won the trade over its Black Sea counterparts, providing a glimmer of hope for US wheat producers to possibly have a chance a gaining some export market share.  Adding to this hope is Australia reporting a large reduction to it’s wheat production this year, due to severe droughts.


The declining dollar may provide some support to commodity prices at some point, but the more immediate global demand story is taking precedence at the moment.    


There is some potential for some event laden volatility to creep into the markets.  More reports on the coronavirus, the status of the US impeachment proceedings, the official start of Brexit and China, along with many Asian markets, returning from the new year holiday, can certainly bring some havoc to the trade.            


Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      921.75                   929.00                   919.50

CH0                      383.50                   387.75                   404.50

WH0                    546.50                   526.75                   518.00

KWH0                  463.25                   445.50                   458.25

MWH0                535.75                   539.75                   549.00

SMH0                  301.7                     305.0                     309.5

BOH0                   32.77                     31.72                     30.39

CLH0                    58.34                     56.60                     56.62

GCJ0                    1519.3                   1514.6                   1462.6

LHJ0                     74.760                   77.800                   79.635

LCJ0                     126.060                 123.245                 120.285

KCH0                   120.70                   112.40                   109.15

CCH0                   2595                       2537                       2466

CTH0                    67.91                     65.81                     66.09

SBH0                    13.56                     12.98                     13.07

JOH0                    99.35                     101.85                   106.80

HGH0                  274.70                   269.30                   270.05






Michael Clifford


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