Good morning,

 

DXH0  98.520  -0.051               GCJ0  1576.2  +2.8                      ESH0  3323.00  -2.50                CLH0  50.22  -0.10

 

The markets are attempting to stabilize, even with the death toll from the coronavirus now exceeds the number from the SARS epidemic back in 2003.  The PBOC in China announced a big injection of funds to help control the virus.  Equity markets, along with oil, traded lower to start the week in Asia.  Gold popped higher, but all markets appear to have stabilized, with equities and oil having moved back towards unchanged, but still slightly lower on the day.  Gold also rotated back towards settlement, and is up slightly at the moment.  Commodity prices are higher, in part aided by the softer dollar this morning.

 

Oil prices did trade well below $50 in the early trade last night, but failing to get to last week’s low of 49.31.  The low was 49.56, and if prices, which currently have popped back above $50, make another rotation down through this level, a re-test of the overnight  and last week’s low prices seems likely.  In addition to virus news which will impact demand, the market is still waiting for Russia to give its response to OPEC on the increased production cuts proposed last week in the face of diminishing demand. 

 

The sense of stability regarding the virus is also supporting some commodities which came under some pressure on diminished demand concerns.  Coffee, cocoa and cotton markets are working higher.  Copper is also up on the efforts made by the Chinese government to contain the virus.  Sugar continues to surge to new highs, as major exporter Thailand is experiencing its worst drought in decades.  Weather is also a potential detriment for cocoa, as intense heat in Ghana is threatening the crops there. 

 

Lean hogs, having been limit bid on Friday, are called higher again today.  High CPI numbers out of China, coupled with reports that hogs prices in China have skyrocketed since the virus outbreak, are creating the bid to prices.  Huge demand since the outbreak, coupled with the supply story stemming back to ASF from last season, is behind the price spike.  Pork prices are up 116% from a year ago.  China’s CPI rose by the fastest pace in 8 years last month, and food prices are the highest since 2008.

 

Grain prices are mixed this morning, ahead of tomorrow’s latest update on supply and demand in the WASDE report from the USDA.  Both domestic and global inventories are expected have slight reductions, with the exception being the global soybean inventory, which is expected to increase.  A strong soybean season out of South America, coupled with questions about global demand from the soymeal processors with the hog shortage and China virus lead to the increased number for global stocks.  Estimates for the data can be found on the current data attachment. 

 

Friday, afternoon, the CFTC released the updated COT report, showing fund positioning.  Corn, soybeans and its products all showed big selling for the week, with corn, beans and meal now carrying a decent sized short position, while bean oil had a decent reduction in the long positioning there.  Looking at the softs, cocoa showed another increase to the existing long position, while surprisingly sugar, which is showing no signs that the current rally may be over, actually had a decline in the open interest.  Perhaps that can be attributed to long profit taking into month end, since this data is collected as of Tuesday. 

 

The market likely takes its clues for today’s trade from any updates on the virus.  Tomorrow brings the semi-annual testimony to Congress from Fed Chairman Powell, where the market will be looking for anything different from the precursor notes which were released to the market last Friday.  In addition to the WASDE report tomorrow, US inflation and retail sales data will be released.               

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      917.25                   927.25                   918.00

CH0                      383.75                   388.00                   404.00

WH0                    551.25                   531.00                   520.00

KWH0                  467.50                   448.75                   458.00

MWH0                558.25                   540.50                   548.00

SMH0                  299.7                     304.2                     308.8

BOH0                   32.71                     31.79                     30.42

CLH0                    57.58                     56.30                     56.25

GCJ0                    1530.4                   1517.9                   1470.6

LHJ0                     73.420                   76.960                   78.835

LCJ0                     125.380                 123.615                 120.105

KCH0                   119.05                   111.95                   109.05

CCH0                   2615                       2566                       2479

CTH0                   68.20                     66.18                     65.80

SBH0                    13.80                     13.15                     13.09

JOH0                    98.50                     101.05                   106.05

HGH0                  273.40                   268.65                   268.80

 

Thanks,

Mike

 

Michael Clifford

 

141 W Jackson Boulevard                             

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