Commodity Corner: Morning Comments

Good morning,


DXH0  95.680  +0.810               GCJ0  1662.7 -13.0                                           ESH0  2829.75  +81.00                CLJ0  33.56  +2.43


A bit of a relief rally moves across the markets today, following President Trump’s announcement of the major steps the government will be taking surrounding coronavirus containment and economic aid due to the global impact of the virus.  Equity futures have touched limit bid in the very early US trade, oil continues to bounce off the very depressed levels it sunk to in yesterday’s trade and most commodity prices are recovering from the major sell-offs observed as well.  The safe havens, are also acting accordingly, with gold (which tended to stall out yesterday after spiking above $1700 on Sunday night) and US Treasuries (along with global fixed income assets) correcting lower (higher yields).  The dollar index is also in a correcting bounce. 


While it may be premature to declare the coronavirus an event in the past, the market is attempting to look beyond.  However, as most understand, the economic impacts are still developing, and could carry through the economy for a good portion of 2020.  So numerous risks remain and will most likely contain any strong momentum on price bounces.  Likewise, there should be underlying support for the safe havens. 


A couple of commodity markets managed to withstand the global meltdown and finish the day higher.  Chicago wheat prices traded higher, as traders viewed the recent COT data showing a sharp decline in spec longs provided some rational for traders to take advantage of the price back-up towards $5 and buy the market.  The US is expecting to see an increase in wheat purchases in the export market, once the virus issues subside, and traders are positioning as such.  The recent sharp declines in the dollar also helps US wheat be more competitive in the global arena.  Coffee prices also withstood the early selling and staged a turn around in the second half of the session.  Talk that short covering came in near the lows to create the bounce.  The market was also supported by continued concerns about dwindling available supplies of high end coffees, keeping commercials looking for coverage. 


Today brings the monthly WASDE report from the USDA.  This report wasn’t expected to bring too many surprises, with some modest adjustments (mixed) to domestic inventories and some slight increases to the global inventory projections.  South America harvest projections will be monitored closely, as large crops are expected there.  As a precursor, Brazil’s CONAB just released its production estimates, showing a  slightly smaller soybean and corn crop than what the market was expecting.  It is still a very large crop, however.  Estimates for the WASDE data can be found on the current data attachment.  Once the dust settles from the WADE, and if the market is able to focus on the direct grain inputs through the virus smoke, the extended weather forecast contains many rain events, which may keep the fields very saturated and possible lead to some planting delays.    


As already mentioned, most commodity markets are bouncing today, in what can be viewed as corrective in nature.  Many markets reached technically oversold conditions on the recent declines, capped off with yesterday’s steep moves down.  The cotton market also gets an updated look at production and inventory levels from the USDA.  Not much change is expected for the domestic projections, and slight increases for both global production and inventories are forecast.  Sugar, while up slightly today, continues to be in the midst of a major liquidating sell-off, as funds got long on the prospects of low sugar supplies.  Part of this is driven by a potential switch from Brazilian millers, turning back to more sugar production form ethanol, with the recent drop in oil prices. 


For most markets, the major inputs, in the short run, will be anything virus related, ranging from health, to economic effects and fiscal stimulus, to oil and the continuing production battle with Saudi Arabia, Russia and the US.  Volatile markets should be with us for a while.          


Technical Moving Averages:

Product               50 day                100 day               200 day

SK0                      918.00                   930.50                   929.50

CK0                      386.75                   390.25                   407.00

WK0                     553.00                   541.00                   529.00

KWK0                  479.75                   463.50                   467.25

MWK0                 547.75                   544.75                   553.75

SMK0                   301.8                     305.8                     311.1

BOK0                   31.99                     32.01                     30.83

CLJ0                     53.42                     54.99                     54.76

GCJ0                    1586.3                   1538.3                   1501.5

LHJ0                     69.160                   73.555                   76.705

LCJ0                     120.405                 122.770                 119.640

KCK0                    113.10                   115.20                   111.95

CCK0                    2713                       2634                       2525

CTK0                    68.64                     67.76                     66.05

SBK0                    14.21                     13.55                     13.26

JOK0                    99.75                     102.30                   107.40

HGK0                   267.30                   268.85                   267.25

HOJ0                    172.74                   181.38                   184.06

XBJ0                     172.02                   176.42                   174.59

NGJ0                    1.947                     2.107                     2.241





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC