Commodity Corner: Morning Comments

Good morning,


DXM0  98.895  -0.163                GCQ0  1735.8  +9.0                                            ESM0  3041.00  +5.50                  CLN0  32.43  -0.38


Today’s US Economic data released:

Initial Jobless Claims  2.123m vs 2.446m  (expected 2.1m)

Continuing Claims  21.052m vs 24.912m  (25.68m)

Q1 GDP q/q  -5.0% vs -4.8%   (-4.8%)

Q1 Personal Consumption  -6.8% vs -7.6%  (-7.5%)

Core PCE q/q  +1.6% vs +1.8%  (+1.8%)

Apr Durable Goods Orders  -17.2% vs -16.6%  (-19.1%)

Apr Durables ex Transportation  -7.4%  vs -1.7%  (-15.0%)


Equities remain with the resilient march upward into month end.  From the low on March 23, the S&P has now rallied 34%, and is only 7% away from being unchanged for the year.  Pretty astonishing, when your facing double digit unemployment rates for the majority of this year, along with expected negative double digit GDP figures for this and possibly the next quarter.  Yet, optimism prevails for now, and the market is convincing itself the US and the rest of the world will come out of this strong.  Of course, the risk headwinds sitting out there would be a potential second wave of the virus, stemming from re-opening to quickly and the ongoing tensions between China and the US over Hong Kong.


Oil prices came under pressure overnight, having traded at an 11 week high on Tuesday.  The China tensions creating a roadblock to economic growth progress, thus weakening the demand picture caused prices to fall off the highs in yesterday’s trade.  Then, in the afternoon, the API surprised the market by projecting WTI oil inventories rose by 8.73m barrels last week, when the market was expecting to see another draw down in stocks of 2.32m barrels.  The DOE releases production and inventory figures later this morning.  Part of the reason for the strong rally in oil of late was the belief that the supply / demand imbalance would be quickly corrected as economies begin the recovery phase.  Any economic roadblocks or unexpected increases to the supply side from accelerating production could prove to be a deterrent to the rally. 


Gold prices continue with the recovery that began yesterday, after being hit hard early in the week.  In futures, the August contract is now the lead, so even though the June contract traded well below the $1700 level, the August contract held ($1701.6 low).  Given the potential headwinds already mentioned facing equities, gold prices should continue to have underlying support, and $1700 appears to be the area for the moment.


Most commodity prices followed oil yesterday, and traded lower.  Aside from weather related impacts on various products, the recovery of the Brazilian real has proved to be supportive for products denominated in dollars.  The stronger local currency, hence lower dollar, cuts into to the profit margins for the producer.  Thus there typically aren’t as many offers out in the market, under this scenario. 


Grain prices face a similar story.  Questions about if China delivers on Phase 1 agreements, in the face of expected big domestic crops in the US keep prices off the recent lows, but within striking distance.  Fund positioning could also become a factor, especially with month end being tomorrow.  The funds carry large spec short positions in corn, and all 3 of the wheat contracts.  A fresh look at export sales data for this week is delayed until tomorrow, due to the holiday.           


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      852.50                   885.50                   915.75

CN0                      329.25                   358.75                   379.00

WN0                    530.75                   539.50                   528.50

KWN0                  477.25                   479.25                   464.50

MWN0                523.00                   537.00                   545.00

SMN0                  297.1                     301.4                     307.2

BON0                   26.59                     29.03                     30.32

CLN0                    27.45                     39.02                     46.73

GCQ0                   1690.3                   1645.9                   1582.3

LHQ0                   61.060                   71.455                   79.705

LCQ0                    92.870                   100.775                 105.840

KCN0                   112.95                   112.95                   113.55

CCN0                   2337                       2528                       2492

CTN0                   54.86                     61.65                     63.59

SBN0                    10.48                     12.23                     12.55

JON0                    114.55                   108.40                   108.85

HGN0                  230.15                   247.20                   257.40

HON0                  98.15                     131.44                   158.61

XBN0                   82.30                     121.42                   147.46

NGN0                  2.014                     2.059                     2.210






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC