Commodity Corner: Morning Comments

Good morning,


DXM0  100.003  +0.194               GCM0  1703.1  +4.3                                    ESM0  2820.00  -50.00                  CLM0  22.16  -2.87


Equity prices are correcting lower to begin the week, following a strong rally over most of last week.  Oil prices are grabbing the market’s primary attention today, and the May contract plummets below $12 a barrel.  It needs to be understood that the May futures contract expires tomorrow, and this futures contract is converging to cash prices, which are around $10-11 a barrel.  June futures prices are trading in the mid-22’s, in part being pressed down by the spread (May is at approx. over a $10 discount to June) and just on the demand issue most likely carrying on for some time to come.  So, the flailing demand for oil is a story, but maybe not as dramatic as what the May contract is portraying (unless you are caught up in the May trade). 


Corn prices continue to sag, being drug down by the plight of the energy markets, and the likely diminishing demand for gasoline (hence ethanol) into the summer as shelter in place is likely to go on for a while.  There is continued talk of big acres of corn plantings  (USDA projected 97m), which also weighs on the price of corn.  Corn is working its way down to the low price from 2016 of 3.12.  Soybean prices are also sagging, on a combination of the possibility of some of those corn acres getting switched to beans, along with the sluggish pace of exports.  Brazil continues to dominate the trade with China, as it is offering beans at a much lower price.  In addition, another round of AFS is getting much more talk in China, which brings another hit to demand.  Wheat prices are exploding higher today, with a few inputs helping drive the prices up.  The US has been very close to offerings from Russia and France in the most recent Egyptian purchase tenders, and with Egypt needing to purchase more, the thought is the US could break through there.  Russia getting very close to its export capacity limit is also improving the chances for the US to gain market share.  Weather is also playing a factor, as dry weather in the Black Sea brings crop risk, and now reports of dry weather in France is driving up French prices.  The US is also dealing with some weather related stress, following last week’s colder temperatures observed across the Plains. 


Other commodities are also coming under pressure from the demand story, and economies are likely to remain stagnant for an extended amount of time, to ensure recovery from the pandemic.  This clearly will have a deep impact on consumption needs into the 2nd and 3rd quarters.  Coffee prices have broken down through the 17.00 support level, that had been marking the lower end of the recent trading range.  Sugar prices are under pressure in sympathy with oil and gas prices.  Cocoa has resumed its move lower as well, following a rally last week, the largest since late 2018, on data out of Asia showing processing of cocoa had not declined by near the levels expected by the market.  The resiliency of cocoa consumption drove prices up last week. 


Gold prices sagged early in the overnight session, but quickly found support as equities came under some pressure and from the negative vibe being given from the oil markets.  A two way trade in oil can be expected, but ultimately, gold should be well supported at lower levels, until a better idea on the true impacts from the virus, in every aspect of the global economy, is better understood. 


Again, apologies for the brevity of this, but with reduced staffing we are facing, the task of wearing many hats when I sit down at the desk here, pulls me away from spending as much time as is required to cover all the commodity happenings properly.


Oil is the headline story today, just be aware that last trading day and delivery risks are a very big part of the story there.       


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      883.25                   914.00                   928.75

CN0                      363.00                   379.25                   396.25

WN0                    539.00                   546.00                   529.50

KWN0                  474.50                   478.00                   466.75

MWN0                528.25                   537.00                   544.25

SMN0                  305.4                     306.8                     311.6

BON0                   28.42                     30.89                     30.77

CLM0                   37.13                     47.07                     50.56

GCM0                  1625.6                   1577.9                   1540.8

LHM0                  69.160                   77.630                   83.345

LCM0                   96.715                   106.975                 109.205

KCN0                   114.50                   119.30                   114.50

CCN0                   2521                       2572                       2501

CTN0                   59.90                     64.91                     64.82

SBN0                   12.33                     13.04                     12.94

JON0                    105.85                   105.40                   108.80

HGK0                   240.75                   257.70                   261.30

HOM0                 128.53                   157.89                   171.20

XBM0                   112.29                   146.59                   160.11

NGM0                  1.886                     2.040                     2.196





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC