Commodity Corner: Morning Comments

Good morning,


DXM0  98.195  -0.146                  GCQ0  1741.3  -10.4                                       ESM0  3031.50  -10.50                  CLN0  34.62  -0.87


Equities are oscillating around unchanged this morning, with the US coming out of a turbulent weekend and Germany on holiday today. 


Some quick points.


Oil prices have been chopping around, as OPEC+ is attempting to get the next meeting moved up to June 4.  It is expected that an extension of the current production cuts, put in place for May & June, and then getting scaled back beginning in July, will be extended.  President Trump wasn’t more aggressive with his tone towards China, which helps oil prices, which were concerned about an escalation of tensions being another obstacle for economies attempting to come out of dormancy.


Gold prices, which have been the star of the show throughout the first half of the year, have had some difficulties of its own.  In spite of being the safe haven asset, which is driving the prices up, the higher prices do hit some obstacles of their own.  When markets are under major attack, and cash is needed to be raised, gold is the asset of choice to sell to raise cash.  Also, getting the metal distributed has hit some difficulties, as moving it is hamstrung by the current lack of flights.    


Grain prices are lower, as China announced it would halt imports of soybeans and hogs, in response to the US sanctions placed upon China over Hong Kong.  China also announced it is prepared to halt the imports on additional US farm goods if further actions are taken.  It’s hard to gauge how serious this threat may be, as China still needs soybeans and hogs.   In addition, Friday’s COT report from the CFTC showed that funds are now carrying a record spec short in corn (312k).  Funds also increased the short in Kansas City wheat.  Soybeans and soymeal also saw adds to the short position.


As mentioned, hog prices should continue to trade under some pressure, as China targets hogs as part of the import ban.  Cattle prices have been grinding higher of late, which in part is being driven by the June futures contract moving towards its delivery period.  It is thought that delivery may be an option for producers who are finding it difficult to secure a bid from the packers.    


Coffee prices have been lower the past few sessions, as estimates remain strong for this season’s coffee crop.  Coffee finished lower on Friday, and posted the consecutive monthly losses for the first time since last August.  The USDA put out that it is expecting a record Brazilian coffee crop.  Vietnam is receiving needed rains, which is thought to alleviate some of the stress from the prior dry conditions.  This coupled with a demand structure greatly hampered by countries shutting down to defend against spread of the virus, weighs on prices.


Sugar prices continue to bounce off a 12 year low made in April.  The recovery in the energy sector, and the anticipation of an increase for gasoline usage, which will have producers revert back to ethanol production from sugar, is behind the rally.  The switch back to ethanol will put a dent into the large available supplies expected, which were expected to be very high as oil prices swooned down to the lows.


To the extent that economic data matters, it is a busy week on the US calendar.  Manufacturing indices come at the early part of the week, and employment data comes in the middle and end of the week.  Again, the data probably doesn’t carry a tremendous amount of weight, but if it comes in stronger than expected, that could be a bullish surprise.               


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      853.00                   883.00                   914.75

CN0                      328.50                   357.25                   378.25

WN0                    531.25                   538.75                   528.75

KWN0                  478.00                   478.75                   464.75

MWN0                523.25                   536.25                   544.75

SMN0                  296.5                     300.8                     306.9

BON0                   26.66                     28.87                     30.29

CLN0                    27.79                     38.49                     46.54

GCQ0                   1699.6                   1649.2                   1584.4

LHQ0                   60.445                   70.840                   79.420

LCQ0                    93.365                   100.460                 105.805

KCN0                   112.60                   112.30                   113.50

CCN0                   2343                       2526                       2493

CTN0                   54.85                     61.38                     63.55

SBN0                   10.49                     12.18                     12.53

JON0                    115.55                   108.80                   109.00

HGN0                  230.90                   246.40                   257.20

HON0                  98.01                     129.44                   157.81

XBN0                   83.56                     119.72                   146.85

NGN0                  2.012                     2.050                     2.205