Commodity Corner: Morning Comments

Good morning,


DXU0  97.310  +0.166                GCQ0  1728.0  -7.6                     ESU0  3076.00  -31.00                  CLN0  37.98  +0.02


Equities were a touch lower this morning (pre 6 AM CDT; under more pressure now, post BOE), as the rally takes a pause.  Accusations pertaining to President Trump from John Bolton’s new book, and growing concerns about a second wave of the virus sweeping through Beijing have given the market reason to take a step back and take a good look.  On the heels of Fed Chairman Powell’s warnings to congress about a long term economic recovery expected, the market gets another look at the employment story with today’s weekly jobless claims data.  While the recent economic data has been much better than expected, the claims data is still a set of data to watch, as a more forward looking projection on the economic prospects going forward.  Continuing claims data still around 20m is really not that healthy.  As corporations come off the required time to keep employees on payrolls, from the PPP aid received, there could be some upticks, or, at least, a relatively constant reading, as companies now let employees go, and they file for jobless benefits.  As the Fed Chairman stated repeatedly, this battle is far from over. 


**Bank of England keeps short term rates unchanged at 0.10%, but increase bond buying program by GBP 100B.**


Oil prices are grinding back up today, shrugging off yesterday’s reported increase to US crude inventories reported from the DOE.  On the positive side, the build was less than API projected the prior afternoon and the production level saw a decent decline over the week.  The production decline is being attributed to Cristobal, so not necessarily indicative of more pullbacks to production.  A couple of more prominent oil trading firms are on the tapes overnight, saying they anticipate a dramatic increase in oil consumption coming soon.  The OPEC monthly report yesterday showed that member countries are close to being fully compliant with the agreed upon production quotas.  This also helps oil prices rally.  Oil will hit some headwinds however, as news/concerns about the second wave in Beijing, and with US cases creeping back up in a handful of states, oil demand/consumption may not return as quickly as some think. 


Gold prices are a touch lower today, having traded up during the Asia session.  Equities have softened a bit more following the BOE announcement, suggesting they weren’t as aggressive in providing additional monetary stimulus as the market was hoping for.  This is also a slight negative for gold.


The grain markets had a relatively sublime session yesterday, as they are primarily and weather/export market for now, ahead of the acreage report on June 30.  In the US, some beneficial rains are making their way into the near term forecasts, while the longer term outlook remains leaning towards hotter and drier.  The wheat market remains under pressure as harvest progresses.  Russia is expected to receive some needed rain, and announced that export limitations will not be put in place for the next 6 months.  Today, Egypt is conducting a purchase tender, where 11 companies placed bids, domiciled in Russia, Ukraine and Romania.  While US prices have been converging on Black Sea competitors, they are yet to be competitive enough to participate here.


Hog futures have been under pressure of late, not necessarily on economy concerns or plant closures, rather from the rapid drop in pork cutouts and cash prices, as producers attempt to catch up on 2 months of missed production.  Hog prices also come under pressure when concerns about China relations come up.  China has been a very good buyer of hogs this year, but if that were to fall away, it would be a major blow. 


Cocoa prices dropped to the lowest level in 14 months, as not only the much discussed demand sag impacts prices, but also from a growing supply outlook.  Heavy rains in West Africa recently have improved the outlook for next season’s crops, leading to thoughts of more supply.  Looking at coffee, the Brazilian real has resumed its trek lower, which is adding to the selling pressure there.  One reason for this leg down in the real is the resignation of the Treasury secretary.  COVID-19 remains a big concern in Brazil as well, and its effects on the local economy could be a strain on the currency.                    


Technical Moving Averages:

Product               50 day                100 day               200 day

SN0                      850.00                   871.00                   911.25

CN0                      323.75                   348.25                   373.75

WN0                    519.75                   530.50                   530.00

KWN0                  469.50                   472.00                   465.50

MWN0                518.25                   529.50                   543.00

SMN0                  289.5                     298.0                     305.4

BON0                   26.96                     28.05                     30.15

CLN0                    30.16                     35.95                     45.57

GCQ0                   1728.7                   1668.6                   1595.9

LHQ0                   57.705                   66.785                   77.510

LCQ0                    94.905                   97.920                   105.370

KCU0                   107.95                   110.90                   114.65

CCU0                   2350                       2467                       2482

CTN0                   57.06                     59.81                     63.46

SBV0                    10.95                     12.01                     12.64

JOU0                    119.10                   113.20                   112.15

HGN0                  240.50                   242.95                   256.90

HON0                  99.04                     119.69                   153.39

XBN0                   95.24                     111.39                   143.68

NGN0                  1.968                     1.987                     2.167






Michael Clifford


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