Commodity Corner: Morning Comments

Good morning,


DXM0  99.425  +0.325                 GCM0  1707.7  +6.1                                       ESM0  2804.25  -17.50                  CLM0  19.55  -0.23


The equity market has picked up where it left off on Friday, trading lower, as some of the fairly well known realities of a global economy taking a serious header are receiving reminder notices in the form of the purchasing manager indices worldwide.  Volumes have been moderate overnight, with Japan out until Thursday, with its Golden Week celebration.  Europe is returning from its long holiday weekend, celebrating May Day (or Labor Day).  Non-manufacturing purchasing managers data will be released early this week, so this, like most economic releases for the foreseeable future, will be not so subtle reminders of the global economic climate.  This Friday, in the US, the Non-Farm Payroll report and Unemployment Rate for May will be released.  Given approximately 30m have filed for initial jobless claims in the month of May, expectations are for the Unemployment Rate to jump up to 16% from a 4.4% reading last month.  Non-Farm payrolls are expected to print a decline of 21.3m, versus being down 700k last month.  President Trump threatening to re-introduce tariffs on China, in response to accusing China of not giving full disclosure about COVID-19, also weighs on equities, as it brings the Phase 1 trade agreement into question.     


Crude oil spent the majority of last week recovering from the lows put in last Monday, as the market continued to deal with delivery/storage concerns and ETF’s moving further out the futures curve.  Oil began to creep back up as more countries and states discussed gradual re-opening of economies, which would give a much needed boost to demand.  In addition, the newly agreed upon OPEC+ production cuts were officially to begin last Friday, although some cuts had already begun earlier in the week.  Even with the agreement, there was still some concern about complete compliance amongst all the members.  Iraq, in particular, was being labeled as being questionable about the cuts.  The US is also going through a lower production period, just out of necessity as demand is paltry and production margins move even more negative.  Even with these new lower production levels, it still the market’s view that there is a supply glut out there, and as economies take very gradual measures to get back on their feet, demand will be slow moving as well.


The grain markets are lower today, following a lower trade last Friday.  A possible renewal of the trade war with China weighs on the “ags” complex.  Strong progress is being made on the domestic planting front, putting some pressure on prices as well.  An updated look at planting progress is released this afternoon.  Corn is still battling with the concept of what the proper value should be.  With the ethanol demand story, and the expected large corn crop, the upside would appear very limited.  Winter wheat is lower, as the China issue is thought to hurt the prospects of trade there, as was being discussed in the market.  Winter wheat prices also find themselves uncompetitive against Europe.  However, wheat could find some support in the conditions report this afternoon, as the recent heat is thought to bring even more stress to the wheat that endured the freezing temperatures from a few weeks ago.


Looking at a couple of other markets, live cattle and live hogs have bene supported by short term supply concerns.  Closures of packing plants, and euthanizing of hogs has raised availability issues.  In addition, while the potential for renewed trade tensions with China puts concern in all commodity markets, the hogs market is thought to be somewhat exempt from  this.  China needs US hogs, as has been displayed in the recent export reports.  China is still attempting to recover form last season’s ASF, which wiped out almost 50% of the domestic hog herd.  As talk of AFS returning this season grows, the need for outside avenues to source hogs is essential for China.  Sugar prices had the biggest weekly increase since last January, following the recovery in oil prices.  In addition, reports of the largest delivery on record in the May futures contract last week gives a signal to the market that there were no better prices available in the cash market.  Cotton prices were hit hard on Friday, and remain under sharp pressure today.  The trade deal with China was presumed to be of great benefit for the US cotton market demand.  Bringing the agreement back into question, brings back the demand concerns for cotton. 


As already mentioned, it is a very heavy economic calendar week in the US, to the extent that economic data is relevant these days.  If nothing else, it provides a reminder of the depths the economy has fallen to.  As more talk about countries and states attempt to begin the re-opening / rebuilding of economies, this could create as much positive or negative sentiment as the data can.                   


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      869.00                   905.75                   923.50

CN0                      349.00                   372.25                   389.25

WN0                    535.00                   546.00                   529.00

KWN0                  475.25                   481.50                   466.00

MWN0                530.00                   544.25                   549.75

SMN0                  303.4                     305.3                     309.9

BON0                   27.34                     30.34                     30.59

CLM0                   29.86                     43.04                     48.51

GCM0                  1653.2                   1603.6                   1556.2

LHM0                  63.570                   74.440                   81.625

LCM0                   91.415                   103.720                 107.805

KCN0                   114.90                   117.95                   114.05

CCN0                   2417                       2547                       2493

CTN0                   57.10                     63.77                     64.26

SBN0                    11.40                     12.74                     12.76

JON0                    107.10                   105.80                   108.45

HGN0                  236.40                   255.15                   260.30

HOM0                 110.86                   146.97                   165.54

XBM0                  92.38                     135.67                   154.53

NGM0                 1.876                     2.007                     2.171






Michael Clifford


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Ste 1065                                                              

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