Commodity Corner: Morning Comments

Good morning,


DXU0  97.008  +0.147                GCQ0  1723.8  -12.7                     ESU0  3132.25  +14.00                  CLN0  37.71  -0.67


Equity markets continue the grind higher, in spite of some stern warnings from Fed Chairman Powell yesterday that the economic recovery will take a long time.  Equities also seemed to shake off even more concerns about the second wave growing, with Beijing closing all schools.  All this news did was create a buying opportunity, apparently.  The corporate bond buying stimulus from the Fed, and President Trump’s proposed infrastructure stimulus, along with another very strong economic report in yesterday’s retail sales are providing the fuel for the extension up.  Gold prices are rotating down as equities escalate, but remain comfortably above the $1700 area.  Oil prices are also rotating down, aided by yesterday afternoon’s inventory projection from API, showing a stock build of 3.86m barrels last week.  Oil had a strong day yesterday, getting back above $39, getting pulled up by the equity rally.  Today the DOE delivers its report on US production and inventories from last week.


OPEC delivers its monthly report for May later this morning.  It is expected to show that members were 87% compliant with the agreed upon production quotas.  Russian Oil Minister Novak is on the tapes, expressing concern about US protectionism, regarding oil production.  The US taking advantage of the OPEC+ production cuts and attempting to capture more market share has been a major concern of Russia, and a big reason why they are reluctant to continue to extend production cuts.    


Grain prices are lower today, as rain systems moving into the corn belt and plains area are thought to bring some needed relief to the crops.  Corn had a surprising decline of 4% on the conditions report on Monday afternoon, and there has been growing talk of a hot and dry climate dominating the forecast in the near term and throughout the summer.  There had been growing chatter of potential stress to the corn crops, and lower yields, which had been supporting the corn market which presently has a huge spec short position in it.  Given the initial large expectations on the amount of corn acres planted, and assuming trend yields, this would deliver a very large crop.  The current reduced demand for ethanol leaves the potential for a very large carryout.  Ethanol production has been improving, as margins improve, but it will still has a ways to go.  Gasoline futures hit 8 month highs yesterday, also boosting ethanol, hence corn.  The spec short probably won’t  hit the panic button too much in front of the June 30 planting acres report from the USDA, looking for some confirmation of the 97m acres expected to be planted.  Soybean prices were lower yesterday, and are lower again today.  There were no new reports of bean sales to China yesterday, and thoughts of the second wave spreading across China put the soybean and lean hogs trade on the defensive.  Hogs found themselves lower yesterday, having been rallying over the past few sessions.  Wheat prices were lower, from the seasonality of harvest season, coupled with Russia expecting another good crop and announcing it will not have an export quota in place from July to December.


Arabica coffee had its 6th straight losing session yesterday, pushed down by the growing concerns about wave 2, which would continue to depress demand.  US coffee stockpiles rose in May for the second straight month.  Brazil, which is expecting a very large coffee crop, has seen the pace of harvest increase with beneficial weather.  Coffee futures are down almost 30% from the highs in March, as shelter in place protocol has crushed demand from restaurants and cafes.  Arabica coffee tends to be used more for out of home consumption, and bears more of the burden of economic shutdown than does Robusta coffee.  The growing US supplies, coupled with the big harvest underway in Brazil, keeps the supply / demand balance out of sorts with demand still under pressure.  Cotton prices recovered yesterday, in spite of wave 2 fears.  The buoyancy of equities, and crop stress from hot and dry conditions in Texas supported cotton prices. 


Fed Chairman Powell gives round 2 of his semi annual monetary policy address today at 11 AM CDT, this time to the House of Representatives.  It can be expected the Chairman will continue to talk tough on the prospects of a quick economic recovery.  Surprising findings in the monthly OPEC report perhaps could stir the oil market, which could have a ripple effect into other areas.      


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      849.75                   871.75                   911.50

CN0                      324.00                   348.75                   374.25

WN0                    521.00                   531.50                   530.00

KWN0                  470.50                   472.75                   465.50

MWN0                518.50                   530.00                   543.00

SMN0                  289.7                     298.2                     305.5

BON0                   26.94                     28.09                     30.16

CLN0                    30.04                     36.10                     45.64

GCQ0                   1727.8                   1667.1                   1595.0

LHQ0                   57.975                   67.115                   77.675

LCQ0                    94.665                   98.090                   105.400

KCU0                   108.35                   111.05                   114.70

CCU0                   2352                       2472                       2483

CTN0                   56.90                     59.91                     63.46

SBV0                    10.92                     12.03                     12.64

JON0                    118.00                   111.40                   109.75

HGN0                  239.75                   243.05                   256.90

HON0                  98.90                     120.26                   153.69

XBN0                   94.44                     111.87                   143.89

NGN0                  1.975                     1.992                     2.170






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC