Commodity Corner: Morning Comments

Good morning,


DXM0  96.765  +0.026               GCQ0  1748.5  +8.7                           ESM0  3063.00  +52.75                  CLN0  36.59  +0.25


Fears of a second wave of the coronavirus crushed an extremely overbought equity market yesterday, taking many commodity markets along for the ride.  Oil prices observed an over 10% decline yesterday, also on second waves concerns and from this week’s data showing US supplies building back up again, even as production is still being cut domestically.  And gold, as the song remains the same, is the safe haven benefactor.  Equity prices have a respectable bounce underway in the overnight trade.  Oil prices are exhibiting more of a dead cat bounce, and gold is doing what it tends to do in moments of uncertainty, holding firm and slowly grinding upwards.  With basically all of the week’s key events out of the way, the markets focus will most likely be on virus headlines.


Just announced, OPEC+ will meet again on June 18.  There is no stated mandate to decide on oil production policy going forward.  But, it is a safe bet the topic will come up.  Especially if more concerns of a second wave build between now and then, and oil prices keep correcting back down.  The last trading day for CLN0 is on June 22.  Open interest is currently over 176k.  While storage issues don’t appear to be a major deal at the moment, this can always pop up to create some unwanted price volatility as the contract’s days wind down.


The grain markets received the latest glance at the supply and demand outlook from the USDA in the WASDE report yesterday.  Here’s a quick peek at the highlights of the report:


Winter Wheat production was raised by 10m bushels, instead of cut by 15m, as was expected.  2020-21 ending stocks rose to 925m vs 909m (expected 897m).  Ukraine and Europe wheat production was cut by 1.5mmt and 1mmt respectively, but Australia production had 2mmt added.  Global inventories were bumped up by 6mmt, to 316.1mmt, when a lower number was expected.


Old crop corn production was cut by 45m bushels, and ethanol demand for the old crop was reduced by 50m bushels.  No changes were made to the new corn crop projections.  Brazil’s corn current season corn production was left unchanged at 101mmt, when a drop was expected.  Global corn inventories were lowered to 337.87mmt from 339.62mmt (expected 339.78mmt).


Old crop soybean crush was raised by 15m bushels, and old crop production was lowered by 5m bushels.  Exports were lowered by 25m bushels.  Crush for the new crop of soybeans was also raised by 15m bushels.   Brazil production was left unchanged, as the market expected a drop.  Ending stocks for US new crop beans was lowered to 395m bushels, primarily due to high export expectations of 2.05b bushels.


Not many surprises here.  The grain markets appear more focused on the Acreage report from the USDA on June 30.  Following this, there should be some adjustments to new crop production numbers for corn and soybeans in the July WASDE.


As mentioned, the second wave fears put pressure on numerous commodity markets yesterday.  Cocoa prices, which were already under pressure from lower chocolate consumption demand concerns, received another blow here from this 2nd wave development.  Sugar prices also were hit, as the 2nd wave smacking oil and gas assumptions, weighed on sugar, as the millers could return production focus to sugar from ethanol.  Coffee was also hit, as commercial demand gets hit when pandemic concerns and protective practices keep consumers from being in public.  The harvest also struggles, as workers are kept away in precautionary measures.  The return towards lower valuations of the Brazilian real also weighed on coffee prices.             


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      849.50                   873.75                   912.25

CN0                      324.50                   351.00                   375.00

WN0                    523.75                   533.75                   529.75

KWN0                  472.50                   474.50                   465.50

MWN0                519.75                   531.75                   543.50

SMN0                  290.9                     298.7                     305.8

BON0                   26.88                     28.26                     30.19

CLN0                    29.58                     36.67                     45.88

GCQ0                   1721.3                   1662.4                   1592.4

LHQ0                   58.035                   68.095                   78.135

LCQ0                    94.060                   98.670                   105.510

KCU0                   109.75                   111.75                   114.85

CCU0                   2351                       2486                       2482

CTN0                   56.30                     60.28                     63.48

SBV0                    10.82                     12.10                     12.65

JON0                    117.85                   110.90                   109.70

HGN0                  237.50                   243.65                   256.90

HON0                  98.39                     122.29                   154.69

XBN0                   91.97                     113.69                   144.65

NGN0                  1.988                     2.006                     2.181






Michael Clifford


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