Good morning,

 

DXM0  99.965  -0.469                  GCM0  1736.9  +1.3                                        ESM0  2855.50  +26.00                  CLM0  12.65  -4.29

 

Once again the week begins with oil taking center stage.  The front contracts are under heavy pressure again today, as positions are attempting to move further out the curve, to avoid getting caught in the storage issue, which will impact futures prices throughout the summer.  The futures’ calendar spreads have again come under sharp pressure in the overnight trade.  This is dragging the entire complex down, but the front contracts are down much more than the deferred contracts.  This selling pressure is taking place when the agreed upon additional production cuts out of OPEC+ are set to begin.  Unlike last week, when the much lower prices depressed all of the commodity space, today many commodities find themselves trading higher.  The positive momentum from the equities appears to be driving sentiment in these for these markets today.  Today is also options expiration for Brent Crude June contracts.  The $20 put carries a large open interest, and could be part of the pressure on front oil contracts in general as well. 

 

Markets tied closely to the ethanol market are getting hit today.  Corn and sugar are both lower today.  COT data released from the CFTC on Friday afternoon showed spec shorts increasing their positioning in these 2 commodities.  The corn short position now sits at over 200k.  The sugar spec short position is around 60k.  Soybeans, soybean meal and oil and lean hogs also saw decent sized increases in the spec short position there as well.  There has been a negative vibe in the hog market, even though one would think the news should be viewed as bullish.  The continuing closure of hog processing plants, due to the virus, along with a reported resurgence of AFS in China is pressuring these markets.

 

Weather is playing a role in the prices for numerous commodity markets.  Lack of rain in South America is beginning to pose a problem for coffee and the corn markets.  The lack of rainfall is creating some stress for the crops.  In addition, the lack of rain has many river levels low, which creates transportation issues trying to get the crops to the ocean ports.  For the wheat markets, Europe has been dealing with dry conditions, but there is some rain in the forecast which should bring some relief to stressed crops.  The Black Sea also has been dealing with hot and dry conditions, and there doesn’t appear to be any relief in sight there.  In addition, continued talk of export restraints for the Black Sea, to protect domestic needs, has been providing some support for US wheat.  Speaking of US wheat, some rain last week is thought to have relieved some of the stress the wheat crops endured during the prior week’s cold than normal temperatures.  Better temperatures this week will allow for determination of how much damage may have occurred a couple of weeks ago.  This afternoon brings an updated look at winter wheat crop conditions, along with planting progress reports for corn, soybeans and spring wheat.  The weather over the past few days, and over most of this week, should allow for decent planting progress to take place.

 

Gold prices are oscillating around unchanged levels today.  Gold remains the same story, supported on the safe haven premise.  Watching the front oil futures contracts continuing to implode down, the biggest risk for gold could very well be that gold becomes the asset of choice to sell, in an effort to raise cash for margin calls, etc.

 

Keep your eyes peeled to the oil market today.  It is setting up to be the main story.

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      876.25                   909.75                   926.25

CN0                      356.25                   375.75                   393.00

WN0                    538.25                   546.50                   529.75

KWN0                  475.75                   480.00                   466.75

MWN0                534.00                   545.25                   551.50

SMN0                  304.6                     306.1                     310.8

BON0                   27.85                     30.60                     30.68

CLM0                   33.60                     45.06                     49.54

GCM0                  1642.7                   1592.4                   1549.4

LHM0                  65.965                   75.805                   82.385

LCM0                   94.050                   105.320                 108.500

KCN0                   115.30                   118.80                   114.30

CCN0                   2467                       2558                       2496

CTN0                    58.46                     64.29                     64.50

SBN0                    11.87                     12.90                     12.85

JON0                    106.25                   105.40                   108.55

HGN0                  238.55                   256.45                   261.05

HOM0                 120.07                   152.49                   168.43

XBM0                  102.32                   140.89                   157.25

NGM0                 1.886                     2.024                     2.185

 

Thanks,

Mike

 

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              

312-604-6404