Commodity Corner: Morning Comments

Good morning,


DXM0  99.825  +0.258                 GCM0  1705.5  -7.8                                        ESM0  2863.00  +37.75                  CLM0  23.19  +2.80


Optimism appears to be driving the markets higher today, as the first steps are being taken in portions of the US and Europe to get the economy re-opened.  Oil prices again are in the spotlight, only now in a more positive fashion, as prices are up approximately $2 overnight, after yesterday being the 5th consecutive day posting a higher settle.  Reports of increased demand in other parts of the world, leads the demand driven rally.  India reported oil consumption increased in May compared to April.  In addition, an expected increase to demand is expected as the US attempts to get rolling.  Major US oil firms are planning to cut output by as much as 660k barrels a day by the end of June, in spite of a Texas regulator attempting to mandate production cuts which isn’t really going anywhere.  Gold prices took a dip below the $1700 mark overnight, but have recovered back above the level.  Gold will remain the safe haven asset, pretty much until the world is viewed as back to a state of normalcy. 


The “ags” complex, having endured yesterday’s trade down on renewed concerns about the trade with China, finds itself trading lower again today.  Corn is the exception, receiving a little support from the oil rally.  Yesterday afternoon, the weekly update on crop conditions and progress was released.  Winter wheat, in a bit of a surprise, showed a slight increase to its good and excellent condition (55% vs 54%).  It had been feared that the colder temperatures of a few weeks ago, coupled with the warmer and dry conditions last week, may have added to crop stress.  This has pushed wheat prices down.  Another factor weighing on wheat are calls for more rain in Europe and the Black Sea, where both areas have been running at a moisture deficit.  Also, US wheat prices have rallied recently to a point where they are not competitive to Europe (the Black Sea available supply is currently low, due to export restrictions).  This pullback in price may aid that.  As mentioned, corn prices are higher today, but the planting percentage was very strong from last week, jumping to 51% planted, compared to 27% last week and the 5 year average being 39% (we know about all the planting delays from last year, where the number stood at 21%).  Soybeans are now around unchanged levels, having been lower overnight, on its planting progress being 23% vs the 5 yr avg of 11%.  Beans were hit hard yesterday, not only on the concerns with the Chinese trade, but on concerns for soymeal demand, as the recent meat packing closures have led to hog euthanizing, hurting meal demand.  Next Tuesday brings the next WASDE report from the USDA, where the market will be looking for some confirmation of the expected large crop sizes it projected in March.  In addition, how the demand part of the equation on the balance sheets gets treated will be equally of importance. 


Most of the other commodities are bouncing today, in conjunction with the oil and equity trade.  If the initial re-opening of the economy is thought to be positive for equity markets, then it should also be supplying a demand boost to the commodities which have seen prices hit hard on crushed demand.  First the economic impact from the virus, and now from renewed concerns about getting back into the trade tiff with China.  While commodity prices have a big hill to climb, to recover what was lost in the pandemic meltdown, it needs to be remembered that the economic recovery is believed to be a long time project, and not an immediate fix job. 


While the economic data in the US will be taken with a grain of salt for some time to come, given the expected negative data, the actual headlines of the numbers may cause some price volatility, just in a shock type of response to the news.  The trade balance data came out this morning, in line with expectations.  Tomorrow through Friday will bring various sets of numbers, providing a look at the employment situation.  Very bad news is basically in the price here.  One piece of information, that may be worth storing in the background.  United Airlines came out yesterday, saying that it will need to have a major employee reduction, given the devastation to the airline industry.  Worth noting, these cuts will not be announced to employees until July or so, and won’t take effect until October 1.  United received $5B in stimulative payroll relief from the government, contingent upon keeping all staff on the payroll through September.  This is most likely the case for all businesses having received this benefit.  Thus, once the 4th quarter hits, and the economy is hopefully in the midst of recovering, a fresh round of aggressive job cuts could be lurking out there, which could choke off the recovery.          


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      867.75                   904.75                   923.00

CN0                      347.75                   371.50                   388.75

WN0                    534.25                   545.75                   529.00

KWN0                  475.50                   482.00                   466.00

MWN0                529.25                   544.00                   549.50

SMN0                  303.2                     305.1                     309.7

BON0                   27.23                     30.27                     30.57

CLM0                   29.20                     42.67                     48.34

GCM0                  1654.4                   1606.0                   1557.4

LHM0                   63.245                   74.200                   81.505

LCM0                   90.970                   103.425                 107.690

KCN0                   114.80                   117.45                   113.90

CCN0                   2408                       2545                       2493

CTN0                   56.79                     63.64                     64.20

SBN0                   11.31                     12.71                     12.75

JON0                    107.35                   105.90                   108.45

HGN0                  235.20                   254.25                   259.85

HOM0                 109.12                   145.87                   165.02

XBM0                  90.56                     134.66                   154.07

NGM0                 1.876                     2.005                     2.169






Michael Clifford


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Ste 1065                                                              

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