Commodity Corner: Morning Comments

Good morning,


DXU0  96.885  -0.270                GCQ0  1778.5  -1.4                         ESU0  3127.00  +24.00                  CLQ0  40.04  +0.22


US employment data awaits the markets, ahead of the holiday weekend.  Following yesterday’s strong reading (including the large revision to last month) on the ADP Employment Index, today brings June Non-Farm Payrolls, along with the June Unemployment Rate.  While this data may be perceived as somewhat stale news, the markets also see initial jobless claims and continuing claims, for more of a current view on the employment story. 


Estimates for the data:
June NFP:  +3.058m vs +2.509m last

June Unemployment Rate:  12.5% vs 13.3% last

Average Hourly Earnings m/m:  -0.7% vs -1.0% last
Labor Force Participation Rate:  61.2% vs 60.8% last

Initial Jobless Claims:  1.350m vs 1.480m last

Continuing Claims: 19.0m vs 19.522m last

May Trade Balance:  -$53.2B vs -$49.4B last


Gold prices appear to have rejected the $1800 level for the time being.  However, the rotation away is shallow thus far, and this market is just another serious second wave legitimate scare away from being back up there.  The dollar is under pressure again today, which also should provide some underlying support for gold.  Today’s employment figures, which could come in anywhere really, could also provide a boost to gold, if the data takes back a good portion of the surprising strength observed last month. 


Oil prices are extending higher today, managing to sustain prices above $40.  Positive progress on vaccines and treatments for the coronavirus have supported numerous asset classes, including oil.  Yesterday, the EIA confirmed the API’s projection of a significant drop in crude oil inventories last week.  This has the market interpreting an uptick to oil and gas demand.   OPEC+ acknowledging much better compliance on the production cuts also supports oil prices.


The grain markets continue to be caught in a short covering rally, led by corn.  The speculative short position in corn was a t record levels a few weeks ago.  Tuesday’s lower than expected forecast for corn acres planted, coupled with very hot and mostly dry forecasts in the extended forecast, has created the rush to cover.  Wheat is seeing a similar trade of short covering.  Wheat also saw a reduction in acres.  Soybean acres were also less than expected.  Funds had been carrying a small long position there, on expectations of increased Chinese buying, and now the acres and weather story provides another leg to stand on, justifying the long.  Cotton prices are also experiencing a sharp rally, with the catalyst again being a much larger reduction in planted acres, than what was expected.  There remains many questions for the USDA, regarding the balance sheets.  July 10 brings the next WASDE report, where the market will be looking for some clarifications.  Aside from this, grains are in a weather market now, while still trying to come to position balance.    


Coffee prices continue to extend upwards, as weather drives the price action.  Frost fears continue to raise concerns of stress to the crops, while continuous rains keep delaying harvest.  The weakness in the dollar is also aiding the rally, as a stronger domestic currency keeps the producer from selling aggressively.  Cocoa prices were lower again yesterday, as the lackluster demand story continues to weigh on prices.  Lean hog and cattle futures have been sagging of late, as low cash prices, due to a growing supply story as packing plants re-open and attempt to catch up, while the consumer is still working off inventory accumulated at the beginning of the pandemic.  China still has a need for hogs, so there should be an underlying bid here.  However, if the US continues to heat tensions up with China again, the Chinese can certainly look elsewhere to source hogs.


Many markets are closed, or have reduced trading sessions tomorrow, due to the holiday.  Check the availability and times for any markets you will be trading for tomorrow and all night sessions.       


Technical Moving Averages:

Product               50 day                100 day               200 day

SQ0                      855.25                   869.00                   911.75

CU0                      328.25                   345.00                   371.00

WU0                    511.25                   527.25                   535.25

KWU0                  464.50                   474.00                   473.75

MWU0                525.50                   535.50                   551.00

SMQ0                  289.4                     296.9                     305.2

BOQ0                   27.34                     27.84                     30.17

CLQ0                    33.01                     35.55                     45.09

GCQ0                   1738.5                   1687.0                   1607.5

LHQ0                   56.445                   63.815                   75.705

LCQ0                    96.160                   96.555                   104.970

KCU0                   103.65                   110.00                   114.10

CCU0                   2341                       2416                       2481

CTZ0                    58.67                     59.42                     63.68

SBV0                    11.23                     11.76                     12.61

JOU0                    122.05                   115.05                   112.55

HGQ0                  248.30                   244.45                   257.45

HOQ0                  105.44                   117.59                   151.40

XBQ0                   105.18                   108.42                   140.60

NGQ0                  1.962                     2.008                     2.167





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC