Commodity Corner: Morning Comments

Good morning,


DXU0  97.090  -0.240                GCQ0  1715.6  -21.7                    ESU0  2967.50  -56.25                  CLN0  35.45  -0.81


While fears of a second wave of the coronavirus were beginning to make some traction with the markets last week, as several US states were reporting upticks in new cases and death tolls, China really gave markets a jolt by reporting 79 new cases over the weekend.  Equity prices spiraled lower in the overnight trade, but have recouped some of the losses as Europe began trading.  Gold prices, somewhat surprisingly, have been hit hard in the overnight.  Typically, increased virus risks concerns would have put a safe haven bid into gold.  On top of that, another round of racially motivated civic unrest, this time in Atlanta, should create a bid for gold.  The assumption here is that the selling pressure is coming from cash being raised.  Typically, in times of excessive volatility in the markets, margin levels quickly get raised, creating the need for cash.  Oil prices are also getting hit today.  Of course, a second wave of the virus would be a major impediment to any economic rebound, and oil is directly in the path of that, along with numerous commodities.  It was announced last Friday that the next OPEC+ meeting will be this Thursday, June 18.  While the topic of further extensions to the agreed upon production quotas hasn’t been directly mentioned as a topic, in all likelihood it will come up.


Grain prices are leaking lower today.  The weather over the weekend was beneficial for any planting which still needed to get finished, along with very good for crop development, following the rain events of last week from Cristobal.  This afternoon, the USDA brings the weekly report on crop conditions and progress, where good readings are expected.  Friday afternoon’s COT report from the CFTC showed spec shorts continued to add to the record position.  Pushing the  level above 332k.  Remember, this data is compiled as of Tuesday, so any short covering that took place in the latter half of the week is not reflected.  It is believed some short covering did occur, but the size of the overall spec short position is massive.  Given the production and inventory levels portrayed in the WASDE report on last Thursday, it would seem that, outside of a major weather event, the positioning may not feel too much pressure to cover.  Soybean prices are lower today.  While China has been a very active buyer of beans of late, and with the US beans cheaper than Brazil out past August, prices are sagging.  The COT report showed a decent amount of short covering has taken place in soybeans, where the overall size of the short wasn’t anything compared to that of corn.  Wheat prices are lower as well.  The overall size of the global supply of wheat overhangs the entire market.  Factor in that US wheat is still having a hard time of competing on the global export stage, and prices sag. 


As mentioned, numerous commodities are under pressure today, as heightened fears of a second wave of the virus sweep through the markets.  The hit to demand is pushing prices down.  In some of these commodities, there have been concerns about available supplies, given weather patterns in many growing areas.  However, another economic shutdown, or slowdown, would cause the demand decline to be greater than any supply declines. 


This week, Fed Chairman Powell delivers the semi annual monetary policy outlook to the Senate and the House on Tuesday and Wednesday.  Given the Fed just met last week, and the chairman held a press conference following the meeting, it’s not certain how much new information may be offered here.  Nonetheless, it will be a focal point for markets.  The OPEC+ meeting will also be in the limelight this week.  Several countries’ central banks hold monetary policy meetings this week, so there could be additional stimulus tossed around there.  But it appears the main attraction will be any news on COVID-19, and the increasing odds of the second wave happening.               


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      849.50                   873.00                   912.00

CN0                      324.25                   350.25                   374.75

WN0                    522.75                   533.00                   529.75

KWN0                  471.75                   474.00                   465.50

MWN0                519.25                   531.25                   543.25

SMN0                  290.4                     298.6                     305.7    

BON0                   26.90                     28.20                     30.18

CLN0                    29.78                     36.46                     45.80

GCQ0                   1724.2                   1664.0                   1593.3

LHQ0                   57.880                   67.775                   77.990

LCQ0                    94.185                   98.460                   105.470

KCU0                   109.30                   111.50                   114.80

CCU0                   2352                       2482                       2482

CTN0                   56.53                     60.16                     63.47

SBV0                    10.85                     12.08                     12.65

JON0                    117.95                   111.10                   109.75

HGN0                  238.35                   243.45                   256.90

HON0                  98.62                     121.55                   154.35

XBN0                   92.86                     113.00                   144.39

NGN0                  1.984                     2.002                     2.178






Michael Clifford


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