Commodity Corner: Morning Comments

Good morning,


DXM0  100.215  +0.462              GCM0  1623.2  +31.8                                  ESM0  2431.50  -16.50                  CLK0  21.99  +1.68


Equities are staging a corrective bounce today, following yesterday’s trade lower.  All of the global economic manufacturing indices, while coming in better than feared, were all below the 50 threshold, suggesting a slowing or recessionary economy.  Not really surprising, given what has occurred in the world.  The market now awaits today’s Jobless Claims report in the US, where a number of +3.7m is expected, following last week’s +3.283m.  While bad news is expected in most of the data that will be reported, numbers worse than expected have the potential to be market movers.  Regarding claims, there is some thought in the market that today’s number could be in the 5 to 6m range, so a print like that may not be a big shocker.  Similar story has taken place with the data in oil this week.  Between the API report Tuesday evening and yesterday’s production and inventory data from the DOE, which showed much larger stock builds than what was expected, but oil prices didn’t really tank.  The were 2 trips below $20 yesterday, only to bounce off the levels.


**Initial Jobless Claims rose by 6.648m last week, vs an expected rise of 3.7m.  Stocks come off a bit on this, fixed income markets turn bid (but don’t explode higher) and gold firms.**


Oil prices are up over $2 this morning, as China announces it plans to build up its domestic oil reserves.  This coupled with hope in the market that Presidents Trump and Putin might be able to hold some positive talks on oil price stability.  Yesterday was the first day where the oil production quotas from the OPEC+ agreement were lifted, but Russia reported it did not increase its daily production totals.  Oil producers, in addition to facing the 18 year low prices in oil are also facing exploding storage costs, as storage facilities are near capacity.  An example is what used to be a $20k charge for storage has now moved up to between $200k to $300k for storage.  This should act as a deterrent to any aggressive production increases. 


Gold prices are firming back up today, moving back above the $1600 level.  As the virus story grows worse in the US, while the rest of the world is also suffering, just continues to raise the awareness of how serious this is.  It continues to be believed that this will carry deep negative economic undertones, and global governments will have to take drastic measures to attempt to rebuild economies when this finally passes.  This keeps the safe haven status of gold alive and kicking. 


Grain prices were hit hard yesterday.  Soybeans and wheat led the move down, following the overall assault on most commodities.  Soybeans were hit hard, driven down by a couple of factors including a strong quarterly stocks number on Tuesday, the Brazilian real trading at a new low, making Brazilian beans even cheaper in the export market, and a growing belief that the decimation of the ethanol market, with crude prices cascading lower, still leaves the possibility of seeing a switch to soybeans acres from the very large corn sowing acreage number reported on Tuesday.  Wheat prices were hit as the panic buying of staples from the pandemic leaves consumers well supplied in the short run.  In addition, favorable weather forecasts should benefit the winter wheat crops that have now come out of dormancy.  Corn, which has already been hit hard from the ethanol market and the above expectations acreage projection from the USDA, was down, but not crushed yesterday.  With corn prices trading near the lows, many traders are contemplating a move to test the $3 area.  There has been a lot of option activity involving the $2.70 put, which also signals part of the market’s mindset. 


Coffee prices fell yesterday, pushed down with most commodities, but also with the depreciation of the real.  With the pandemic supply scramble subsiding, a renewed focus on longer term declining demand also came into focus.  Coffee prices are recovering this morning, as a government lockdown in Vietnam could lead to some supply disruptions.  Sugar prices were also hit, on demand concerns but also from the decline in oil.  Lower oil prices encourages millers to produce sugar rather than ethanol with the cane.  Lumber prices, not surprisingly, have been in a downfall on the dim global economic prospects.  Live cattle and lean hogs also traded a limit down levels again yesterday.


There are certainly more stories out there for many of the markets, unfortunately, with our reduced staffing with the shelter in place rules, I need to cut this off here, as I am multi-tasking.  Stay well and be safe!                     


Technical Moving Averages:

Product               50 day                100 day               200 day

SK0                       887.00                   913.75                   924.25

CK0                      372.25                   381.00                   398.25

WK0                     544.50                   543.25                   528.50

KWK0                  469.50                   466.75                   461.75

MWK0                 534.00                   538.50                   547.50

SMK0                   304.4                     305.7                     310.0

BOK0                   29.15                     31.09                     30.60

CLK0                    41.85                     49.94                     52.14

GCM0                  1600.1                   1555.3                   1526.3

LHM0                  76.675                   82.285                   85.584

LCM0                   103.189                 110.721                 110.587

KCK0                    110.45                   116.95                   112.35

CCK0                    2622                       2604                       2514

CTK0                    63.22                     65.86                     64.93

SBK0                    13.28                     13.32                     13.06

JOK0                    101.70                   102.55                   106.55

HGK0                   248.10                   262.10                   263.75

HOK0                   142.62                   167.17                   176.44

XBK0                    132.19                   158.39                   166.36

NGK0                   1.855                     2.037                     2.179





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC