Commodity Corner: Morning Comments

Good morning,


DXH0  97.730  +0.105               GCJ0  1570.7  -11.7                        ESH0  3286.50  +41.00                CLH0  51.25  +1.14


The Iowa caucus has not determined a winner yet, due to problems with counting the votes from a new app being used in the process.  President Trump makes his State of the Union speech this evening, the night before the vote on his impeachment in the Senate.  The UK and EU are currently at odds over trade issues evolving out of the Brexit split. 


While China, and the rest of the world, continues to work on containment of the coronavirus, the markets appear to be breathing a bit easier.  Equities have resumed the march back up, aided by the Chinese government injecting capital to support the yuan and mandating Chinese insurance companies and investment arms to purchase Chinese equities. 


Gold is giving up more of the safe haven bid it gained of late and oil, having made another new low below $50 overnight (49.66), is attempting to bounce as well.  The support to oil prices is coming from Russia agreeing with Saudi Arabia that there needs to be an emergency OPEC+ discussion on oil, due to the coronavirus impact.  The market is anticipating the results of this discussion will be a further cutback to production, even if temporary.  China projects oil demand may decline by 20% due to the virus.


Commodity prices, having been hit hard over the past week on the demand concerns stemming from the virus, have mounted a nice bounce overnight, as tensions ease.  Grain prices were mixed yesterday, but are much firmer today, as the hopes for no disruptions to phase 1 of the trade deal grow.  The same holds true for cotton, which has seen a steep drop to prices on the epidemic.  Coffee prices fell to the lowest level in over 3 months, as funds continue to pile into the spec short trade.  Demand concerns, in part driven by Starbucks announcement of major declines to business in China, coupled with growing expectations for the size of the coming crop, keep the funds selling.  Coffee prices, following the rest of the commodity complex, are higher today, partially due to a much needed corrective bounce to prices.    


Sugar has remained relatively unscathed from the drubbings taken by the other commodities, as the fundamentals of diminished supply, coupled with very sharp bullish technical signals allows prices to continue to drive higher.  Sugar producing countries have faced weather related issues for the crops this growing season, leading to the supply deficit story.  India reported sugar output declined by 24% for the period from October thru the end of January. 


It’s a relatively light US economic calendar today, but there will be plenty of data to mull over throughout the rest of the week.  More reports on manufacturing, trade and employment are due.  While any data that is far off of market expectations can create some volatility in the price action, many feel that the coronavirus story over the past few weeks, coupled with the next Fed meeting not coming until mid-March, takes away some of the significance of this data.       


Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      919.75                   928.25                   918.75

CH0                      383.50                   388.00                   404.25

WH0                    548.25                   528.25                   518.75

KWH0                  464.50                   446.50                   458.00

MWH0                536.50                   540.00                   548.50

SMH0                  301.0                     304.8                     309.3

BOH0                   32.73                     31.74                     30.39

CLH0                    58.14                     56.49                     56.50

GCJ0                    1523.3                   1515.9                   1465.4

LHJ0                     74.205                   77.535                   79.360

LCJ0                     125.820                 123.410                 120.220

KCH0                   120.40                   112.30                   109.15

CCH0                   2599                       2546                       2469

CTH0                    67.97                     65.96                     65.99

SBH0                    13.64                     13.04                     13.08

JOH0                    99.10                     101.60                   106.55

HGH0                  274.10                   269.05                   269.55





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC