Commodity Corner: Morning Comments

Good morning,


DXH0  99.185  -0.099                 GCJ0  1653.7  -22.9                                         ESH0  3239.00  +12.75                CLJ0  51.48  +0.05


The markets are trying to recover, following yesterday’s pummeling in equities and across most asset classes, as the coronavirus continues to spread into more countries.  The reality of what the impact may be on the global economy drove the massive risk off trade.   Gold and fixed income markets exploded higher yesterday on the flight to safety.  Fixed income also benefitted on the market pricing in expected easing to global monetary policy to offset the expected decline to the economy, as the effects of the virus to the economy work their way thru the system. 


The oil market was pushed lower yesterday, on the impact to global demand, declining over $2 and trading back below the $51 level for CLJ0.  The low for this move, from Feb 10, is $49.78.  If oil continues to correct back lower, and can get close to $50, a re-test of the old low is not out of the question.  OPEC+ still faces the issue of further production cuts to the quotas established at the December meeting.  OPEC+ meets again next Thursday and Friday, so the market will be waiting for clues on what may come from this.  Weekly production and inventory data in the US begins this afternoon with the API projection.  Last week, the API showed a stronger than expected build in the projection, while the DOE data showed supplies lower than expectations. 


Grain prices, given the expected lower demand out of China, were hit hard yesterday.  Soybeans and wheat led the move down, while corn also traded to the lows for the year.  Cotton prices were limit down at one point, and live cattle settled limit down as well.  Lean hogs closed just off limit down.  Coffee, sugar, cocoa and copper also were hit hard, as expected.  These markets remain under pressure this morning, again as it is expected that there will be a lasting demand impact, as the effects of the virus work through the economy.  For some of these markets, this move down delivers a much needed corrective balance to markets that have been rapidly moving higher, on expectations of supply shortages.  While these markets still face production concerns, an example being Ecuador (world’s 3rd largest cocoa supplier) saying persistent rains, at inappropriate times, is hitting the expected supply.  Exporters are cutting back its shipments outlook for the year.  West Africa and Ghana are also experiencing expected hits to the cocoa crop sizes, due to the weather.  The sugar story is well known now, with Thailand experiencing its worst drought in several decades. 


Clearly, any news on the virus, negative or positive, will have an impact across all asset classes.  As can be observed with today’s prices, with equities trying to bounce, while most commodities are still lower, the recovery period for some markets may take longer than for others. 


Friday is month end, which can bring some profit taking or window dressing positioning into the trade.  With many markets now showing a lower return for the month, decisions could be made to abandon what had been profitable long positioning in January. 


Friday, Feb 28, is also First Notice Day for March futures contracts.  All LONG positions are subject to receiving a delivery notice.  To avoid the possibility of being stopped for delivery, any open LONG position in March futures, should be liquidated or rolled to another contract month by the close of business this Thursday, Feb 27.   


Technical Moving Averages:

Product               50 day                100 day               200 day

SK0                      928.50                   936.75                   928.75

CK0                      390.00                   393.25                   408.75

WK0                     556.75                   539.50                   527.75

KWK0                  481.50                   461.50                   468.75

MWK0                 550.75                   548.25                   556.00

SMK0                   302.4                     307.1                     311.3

BOK0                   32.93                     32.16                     30.82

CLJ0                     56.36                     55.72                     55.54

GCJ0                    1555.9                   1525.8                   1485.2

LHJ0                     71.720                   75.335                   77.780

LCJ0                     123.955                 123.800                 120.070

KCK0                    117.45                   114.30                   111.45

CCK0                    2683                       2616                       2510

CTK0                    69.67                     67.77                     66.34

SBK0                    14.16                     13.45                     13.23

JOK0                    101.25                   103.40                   108.30

HGK0                   272.30                   269.20                   268.20






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC