Commodity Corner: Morning Comments

Good morning,


DXH0  97.530  +0.317                GCJ0  1582.5  -5.4                                     ESH0  3244.50  +20.50                CLH0  51.57  +0.01


As expected, Chinese markets return from the extended new year holiday to lower prices, European and US markets are actually trading higher, following sharp sell-offs during Friday’s session.  While it will take some time too realize the full extent of the impact from the coronavirus on China, markets that were open last week, and priced in virus expectations, are in a bit of recovery mode.


Oil prices dipped to new lows in the Asian trade, as it was reported that Chinese demand will decline by approximately 20% (3m barrels) due to the virus.  However, prices recovered back towards unchanged, as the oil market find itself in a technically very oversold state, and many OPEC members are discussing ideas to bring some support to oil prices.  On Friday, Russia agreed to an emergency meeting for OPEC+ in February, where it is likely that further reductions to the production quotas agreed upon in December will be discussed. 


Gold prices, following last week’s strong safe haven rally, took another leg higher in the Asian trade last night, failing just shy of the $1600 level.  In similar fashion, prices rotated lower in Europe and now moving to the US, as much of the market reaction in China had been anticipated.  Gold could continue to rotate lower some, but underlying support should come from the unknown of just how big of an impact the virus will have in China and then for the rest of the global economy. 


Commodity prices are lower for the most part today, extending the declines posted to end last month.  January saw most prices reach the lowest levels in numerous months, and sectors posted double digit percentage losses for the month.  Once again, coffee has the biggest move lower today.  The dollar firming back up, following several lower sessions last week, allows for coffee producers to resume aggressively selling product, to take advantage of the depreciating domestic currency.  Friday’s COT report from the CFTC again showed continued liquidation of spec long positions.  A current season crop which is being estimated to be larger than what had been thought previously, is leading to the continued move down.  The COT report showed continued increases in the spec long positioning in sugar and cocoa, as supply deficit concerns continues to bring in spec buyers, pushing prices up. 


Grain prices are slightly lower today, also on uncertainty over how much demand there will be out of China for US “ags” products.  Cotton prices are a touch higher today, but this is corrective as cotton faced major selling pressure on the China demand story last week.  Also weighing on “ag” prices are expectations for a decent sized crop to come out of South America this season, and uncertainty over how much demand will be found in Asia.  This is putting a drag on  global pricing.


It is a busy week on the US economic calendar, with manufacturing index reports coming throughout the week and the employment report due on Friday.  While the market will be more focused on economic developments derived from the impact of the coronavirus, this data can always create some price volatility.          


Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      920.75                   929.00                   919.00

CH0                      383.50                   387.75                   404.25

WH0                    547.50                   527.50                   518.50

KWH0                  464.00                   446.00                   458.00

MWH0                536.00                   539.75                   548.75

SMH0                  301.4                     305.0                     309.4

BOH0                   32.75                     31.73                     30.39

CLH0                    58.24                     56.55                     56.56

GCJ0                    1521.4                   1515.2                   1464.0

LHJ0                     74.465                   77.665                   79.495

LCJ0                     125.925                 123.330                 120.250

KCH0                   120.60                   112.40                   109.15

CCH0                   2598                       2542                       2468

CTH0                   67.94                     65.89                     66.04

SBH0                    13.60                     13.01                     13.07

JOH0                    99.25                     101.75                   106.70

HGH0                   274.45                   269.15                   269.80





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC