Commodity Corner: Morning Comments

Good morning,


DXM0  101.630  -0.587               GCJ0  1627.6  -33.2                                      ESM0  2414.50  -23.50                  CLK0  23.53  -0.48


Apparently $2T in stimulus doesn’t quite get one what it used to, as equity prices swing back and forth across the neutral line throughout the night, only to make a fairly decisive move below the Mason-Dixon line in Europe.  At the moment, e mini’s are approaching the overnight lows, as the stimulus package still needs to be voted on in Congress.  There is a lot of discussion about a major asset re-allocation about to take place for quarter end, with assets moving in to equities.  Given most asset classes are down, with the exception of fixed income and gold, fixed income appears to be the likely candidate to have investments pulled from. 


Gold continues to be on a very volatile roller coaster of its own.  Prices shot up to a new high for this recent spike, but still falling just short of $1700.  One of the main reasons for the explosion higher in gold futures is that the global pandemic is causing delivery disruptions for the physical gold.  This panic concern has driven the spread between futures and physical to the widest levels seen in 40 years.  To emphasize this concern, for the expiring GCJ0 contract, open interest is over 195k contracts, which is the equivalent to 19.5+m ounces.  Total deliverable stocks in COMEX warehouses is 8.7m oz.  Thus the concerns.  Then factor in the return to safe haven status of gold, now that gold is no longer the asset to sell to raise cash with the Fed liquidity injection the other day.


Oil prices are back to following the tone set from equities, trading lower at the moment.  Prices did shoot up early in the overnight session, trading above $25, as the API weekly US crude inventory projection came in at 1.25m barrels lower, versus the market expecting a stock build of 3m barrels.  With an apparent stalemate in the production talks between Saudi Arabia and Russia, and no further talks scheduled at this time, the oil market will look to US production and inventory data today and general economic health signs for clues.


Looking at other commodities, the meats, cattle and hogs remain very well bid, with cattle locking up limit bid for the 2nd consecutive and hogs up sharply as well.  The panic buying and stocking up of meat products for all the shelter in place citizens has put a short term squeeze on meat and hence bidding up prices.  Wheat prices retracted some of the gains from Monday, as Russia pulled back on the export restrictions it had placed the prior day.  Corn prices were up a touch yesterday, with ethanol following the bid to oil prices.  There was also talk of corn/wheat spread profit taking, selling wheat and buying back corn.  Soybeans were up a touch yesterday, as shipping disruptions in South America are believed to be creating an export opportunity for US beans.  Orange juice prices were up smartly again yesterday, trading at an 11 month high.  Weather related production concerns and increased demand from health concerns are supporting OJ prices.  Coffee also continues to trade higher.  The availability of deliverable stocks is also troubling this market, along with the increased demand from the stay at home community.  Coffee prices have now experienced a large correction off the lows which took place following an expected strong crop out of Brazil and the general bashing of commodity prices from the pandemic.  At the end of 2019, futures prices got into the upper 130’s, on supply deficit concerns.  If this coffee rally were to continue, that area would have to be a target.  Sugar prices are also correcting higher, following the bid in oil.  It is believed that if oil prices continue to correct, cane millers will look to produce more ethanol than sugar, as margins improve. 


For the short run today, the market’s attention figures to be on the Congressional vote on the stimulus package.  It does feel like the tone in equities may be turning, and more are contemplating dipping a toe or 2 back into these turbulent waters.           


Technical Moving Averages:

Product               50 day                100 day               200 day

SK0                       894.75                   918.50                   926.00

CK0                      378.25                   384.50                   401.75

WK0                     545.00                   540.50                   528.25

KWK0                  471.25                   464.00                   463.00

MWK0                 537.75                   539.50                   549.50

SMK0                   302.5                     305.1                     310.3

BOK0                   30.00                     31.42                     30.68

CLK0                    46.22                     51.93                     53.06

GCJ0                    1587.3                   1543.6                   1513.6

LHM0                  79.440                   83.915                   86.340

LCM0                   106.545                 112.285                 111.555

KCK0                    109.80                   116.30                   112.00

CCK0                    2679                       2618                       2522

CTK0                    65.66                     66.79                     65.41

SBK0                    13.70                     13.43                     13.15

JOK0                    99.30                     101.65                   106.45

HGK0                   256.15                   265.05                   265.20

HOK0                   152.71                   172.12                   178.81

XBK0                    147.18                   165.53                   169.59

NGK0                   1.910                     2.079                     2.203






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

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