Commodity Corner: Morning Comments

Good morning,


DXH0  98.790  +0.076                GCJ0  1576.7  -2.8                       ESH0  3363.00  +10.00                CLH0  50.46  +0.89


The markets are carrying a “risk on” tone this morning, as equities surge to new highs, oil is bouncing off an attempt at getting back to the lows and gold is shedding more of its safe haven value.  It is a very busy event day on the calendar, with Fed Chairman Powell giving his semi-annual address to Congress, the USDA gives the latest updates on supply and demand in the WASDE report, the New Hampshire primary, a potential response from Russia on OPEC production cuts and updates on the coronavirus. 


As any significant new news on the coronavirus remains the predominant story which can move markets, here is a quick look at some other news that can drive particular products.   


Keep in mind that Fed Chairman Powell’s testimony, and any interpreted changes to where the market feels how the Fed is thinking regarding monetary policy, can carry an impact on numerous asset classes.  The text of the testimony will be released (8:30 AM EST) before I manage to get this sent, but the Chairman appears to 10 AM EST.  His Q&A session will be monitored closely.    


The grain markets get the monthly WASDE report today, where the market is expecting to see decreases to inventory projections, both domestically and globally.  The exception to this is global soybean inventories, where an increase is expected.  This expectation has already received some support this morning from Brazil, where CONAB projected an increase to soybean production this season.  Corn production was also increased. (however, both numbers were lower than what the market was expecting to see).   Another factor for global beans is the demand coming out of China.   Not only from the current virus, but from last years ASF, which took out roughly 50% of the hog population in China.  After this report, the next big hurdle for grains, besides South American production and distribution, will be US planting intentions, and the great debate on how much corn and soybeans will get planted this season.  US wheat prices are lower this morning, as Egypt conducts another purchase tender, with Romania and Russia providing the lowest offers.  US wheat remains uncompetitive in the export arena. 


Oil remains an interesting trade, as the coronavirus casts a great unknown on the demand for oil.  The market is still awaiting word from Russia, responding to the additional 600k barrels/day cuts to production, due to the expected diminished demand.  Russia has been reluctant to agree to this, but did say today that they are still looking the proposal over.  The notion of Russia considering the additional cuts is supporting oil prices today.   Oil also has a 1 cent gap on the intraday charts, with today’s low being a penny above yesterday’s settle.  The low for the move is 49.31.


Sugar continues its impressive move higher, as the worst drought in decades in Thailand is providing plenty of ammunition for funds to keep pressing prices higher.  Sugar prices are at the highest levels in 2 years, with futures prices up 12% ytd.  Sugar output in Thailand is expected to be down 30% from last year.  This, coupled with Brazilian millers choosing to produce more ethanol over sugar adds to the expected size of the expected supply deficit.


Orange juice futures are higher this morning, as Brazil lowered its estimate for the size of this season’s orange crop to 384.87m boxes from 385.3m boxes.  Orange juice futures had been under pressure of late from diminished demand out of the US, due to shifts in consumer preferences.


Copper prices are also trading higher, following the lead of the equity market.  Prices are lagging a touch, as it is still believed there will be a downtick to demand out of China, in the short run, as companies pull back operations in China.  Better housing numbers in the US is also providing support for copper, along with lumber futures. 


The release of the Fed Chairman’s speech was very similar to what was released last Friday, so not much of an impact on markets.   As already mentioned, the Q&A could be interesting.  Also watch for coronavirus stories.                  


Technical Moving Averages:

Product               50 day                100 day               200 day

SH0                      917.00                   927.00                   917.75

CH0                      383.75                   388.00                   404.00

WH0                    551.75                   531.50                   520.50

KWH0                  468.00                   449.25                   458.00

MWH0                 538.75                   540.75                   548.00   

SMH0                  299.6                     304.1                     308.7

BOH0                   32.71                     31.79                     30.42

CLH0                    57.41                     56.23                     56.18

GCJ0                    1532.5                   1518.4                   1471.9

LHJ0                     73.235                   76.815                   78.725

LCJ0                     125.230                 123.650                 120.085

KCH0                   118.70                   111.90                   109.00

CCH0                   2621                       2571                       2482

CTH0                    68.25                     66.24                     65.76

SBH0                    13.85                     13.18                     13.10

JOH0                    98.45                     100.95                   105.95

HGH0                   273.10                   268.55                   268.65






Michael Clifford


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