Commodity Corner: Morning Comments

Good morning,


DXM0  100.045  +0.283                GCM0  1700.0  -10.6                                   ESM0  2870.25  +12.00                  CLM0  22.95  -1.61


Equities and oil continue to move higher.  Equities gaining support on the US efforts to begin re-opening the economy in some locations.  The equity market appears to be disregarding the horrible employment news that will be released over the next 3 days.  Today brings the ADP Employment Index, where a decline of 21m is expected.  Thursday is Initial Jobless Claims, with another 3m expected to be reported as filing.  The Continuing Claims number is expected to approach 20m.  Friday is Non-Farm Payrolls, with analysts also calling for a decline of 21m, and the Unemployment Rate soaring to 16%.  Clearly the optimism and hope that the economy will get rolling into the 2nd half of the year, so the trade is willing to look past the current data.


**ADP April Employment Index -20.236m vs -149k (revised).  Expected -21.0m.** 


Oil prices continue march back up, as the combination of continued production cut efforts globally and an expected increase to demand as civilization comes out of quarantine is driving prices higher.  With many funds now having shifted positioning to the deferred oil futures contracts, the big delivery scare/squeeze observed on  the May contract should be mitigated to a large degree.  Yesterday afternoon’s API weekly crude inventory projection came in at 8.44m barrels, compared to estimates of 8m barrels.  This morning, the DOE releases the production and inventory data for crude from last week.  Production has been on a steady decline of late, given the dramatic drop in usage.  The Texas commission was attempting to find a way to regulate the amount of production taking place from the oil companies, but market forces have tended to dictate that already.


**Over the course of the past 2 hours while I have been compiling all of this, oil prices have done an about face and have moved from being up over $1.50 (26.08) to now down over $1.50 (overnight low 22.58).   The main piece of news over this time, has been the ADP report**


The grain markets continue to go back and forth, as inputs effecting both supply and demand continue to sway the price action.  On the supply side, strong planting progress, coupled with a very good planting window over the next week should allow for much work to be done.  Given the acreage projections released by the USDA at the end of March, large crops can be expected.  A fresh look of this will come next Tuesday, with the WASDE report.  The demand side of the balance sheet is still dealing with issues such as the economic standstill crushing commodity demand and the renewed arguing with China about the origination of the virus brings into question the possibility of additional tariffs from the US and less trade with China.  The US has stated that if China holds to its agreement from Phase 1 of the trade deal, then there would not be any additional tariffs put in place.  Wheat prices have been under pressure, as beneficial rains in Europe and portions of the Black Sea are bringing needed relief to the crops there.  The US is also receiving some moisture which should help the winter wheat crop.  There was concern that the colder temperatures of a few weeks ago, followed by some warmer and drier conditions would have done some damage to the crops.  However, Monday afternoon’s crop conditions report for winter wheat showed a modest uptick to conditions.  The export arena is open to the US picking up some market share, with a vast majority of the Black Sea wheat facing export restrictions currently.  However, current US prices are too high, compared to Europe. 


Coffee prices are lower today, as the Brazilian real comes under some renewed pressure.  Coffee had been rallying, as hot and dry weather conditions in Vietnam and Thailand were once again raising concerns about supply deficits into next year.  In addition, the amount of Arabica stocks held at certified warehouses was reported at the lowest level since October of 2017.  Sugar prices have been an interesting trade over the course of this pandemic.  Prices were drilled down to decade lows, as the rout in oil reduced incentives for cane producers to make ethanol, thus building the expected sugar supply.  Since the recent oil rally, sugar prices have been in a recovery.   Today’s decline appears to be some profit taking from this bounce in prices.  Hog futures observed a bout of profit taking yesterday as well, following the strong rally over the past few sessions as more meat processing plants are closed and hog herd euthanizing continues.  There is a short term supply squeeze on processed meat, and futures prices have been reflecting this.  Some of the plants, such as Smithfield, are beginning to get back up on line, which may help alleviate the supply strain.          


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      866.50                   903.75                   922.50

CN0                      346.50                   370.75                   388.00

WN0                    534.00                   545.75                   529.00

KWN0                  475.75                   482.25                   466.00

MWN0                528.75                   543.75                   549.00

SMN0                  303.0                     304.9                     309.5

BON0                   27.15                     30.21                     30.56

CLM0                   28.66                     42.34                     48.19

GCM0                  1655.0                   1608.3                   1558.7

LHM0                  62.930                   73.980                   81.375

LCM0                   90.550                   103.115                 107.560

KCN0                   114.80                   117.20                   113.85

CCN0                   2399                       2543                       2492

CTN0                   56.49                     63.50                     64.14

SBN0                    11.23                     12.68                     12.74

JON0                    107.65                   106.00                   108.45

HGN0                  234.70                   253.80                   259.65

HOM0                 107.70                   144.85                   164.53

XBM0                  89.00                     133.74                   153.65

NGM0                 1.880                     2.004                     2.168





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC