Commodity Corner: Morning Comments

Good morning,


DXH0  98.175  +0.017              GCJ0  1568.1  +5.3                  ESH0  3343.00  +8.00                CLH0  50.55  -0.20


China announces it will cut in half tariffs on about $75B of US goods later this month, reciprocating US cuts.  Equity prices moved higher on the news, and have settled into a nice little range, in the green, over the past couple of hours.


Oil prices spiked to new highs off the lows in the overnight trade.  OPEC+ enters day 3 of talks regarding how to deal with a demand shortfall from the coronavirus.  Saudi Arabia and Russia remain at odds on this.  Russia is fine with extending the production quotas made in December further into the year (were expected to only last thru March).  However, Saudi Arabia is calling for further cuts to the quotas, which is where the problem lies, as Russia is not yet on board with further cuts.  With no resolution yet in these talks, oil is leaking lower.  As talks continue, watch for headlines on any fresh agreements to production terms. 


The safety bid has somewhat returned to gold today, as stories regarding the severity of the coronavirus, and the continued spread, remain.  The market still suspects some impact to global economic growth from all of this, and gold once again is benefitting.  Copper continues to track the equity markets, as it is believed that the strong expectations for economic growth will translate into strong demand for industrial metals such as copper. 


Commodity prices are mostly higher this morning, with the grains being the laggard.   While the tariff cuts from China should help with prices, questions about how much demand for products will be there.  South American crops continue to look abundant, and it was reported that China soymeal producers made purchases of Brazilian beans.  This is applying some pressure to USD grain prices.  The USDA releases the next look at supply and demand with the WASDE report this coming Tuesday.   


For many commodity markets, yesterday was a relatively quiet session, with sugar continuing to stay firm, cocoa keeps pushing higher and coffee, after a one day slight correction up, softened back up a touch.  Cotton prices traded higher on the renewed optimism of the virus being contained and demand returning for cotton.  Looking at the markets today, cotton is higher, again on better demand.  Coffee is having another correction up.  Sugar is steady, but nestled up near the highs.


The markets will be on the lookout today for more news out of the OPEC+ talks, news surrounding the coronavirus, while waiting for tomorrow’s release of the January Non-Farm Payrolls reports.  The market expects to see an increase to payrolls of 163k, vs +145k last time.  The market may be expecting a slightly stronger number, following yesterday’s much stronger than expected ADP Employment Index (+291k).  The Unemployment Rate is expected to remain at 3.5% and average hourly earning are expected to increase to +0.3% vs +0.1% last.


Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      918.25                   928.25                   918.25

CH0                      383.75                   388.00                   404.00

WH0                    550.00                   529.75                   519.50

KWH0                  466.25                   447.50                   458.00

MWH0                537.25                   540.25                   548.25

SMH0                  300.3                     304.5                     309.0

BOH0                   32.71                     31.77                     30.40

CLH0                    57.85                     56.41                     56.38

GCJ0                    1526.4                   1516.8                   1467.9

LHJ0                     73.745                   77.270                   79.080

LCJ0                     125.575                 123.515                 120.155

KCH0                   119.80                   112.15                   109.10

CCH0                   2605                       2555                       2473

CTH0                    68.10                     66.08                     65.89

SBH0                    13.72                     13.10                     13.08

JOH0                    98.80                     101.30                   106.25

HGH0                  273.75                   268.85                   269.20





Michael Clifford


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