Commodity Corner: Morning Comments

Good morning,


DXU0  96.825  -0.014                 GCQ0  1814.2  +4.3                    ESU0  3141.00  +4.50                  CLQ0  40.73  +0.11


It feels like the markets have yet to shake off “holiday mode” as the markets have been relatively quiet so far this week.  The economic calendar is fairly light, although the grains have the WASDE report on Friday to look towards.  Equities are muddling around unchanged levels today, after the fairly shallow correction observed yesterday.  The depths of wave 2 of the coronavirus is the main focal point for the markets. 


Oil, which should be coming under some pressure as COVID worries mount, appears to have some decent underlying support, managing to hold above $40.  The announcement of the price increase in August from Saudi Aramco, and the pipeline issues in the US aiding the support argument.  Yesterday afternoon, the API came out with a bit of a surprise, forecasting US crude inventories grew by 2.05m barrels last week, when the market is expecting a decline of 2.8m barrels.  Today brings the EIA data on US crude production and inventories from last week.  The oil market, while holding firm, is waiting for the next OPEC+ meeting, expected in mid-July, to see if the production cuts that have been in place will be eased up, as was originally announced for August. 


Gold prices appear to be the star of the show of late.  Prices, for the moment, have firmly established themselves above $1800, and are currently trading at the highest price level since 2011.  The haven aspect of gold, given the renewed uncertainties surrounding the virus are helping drive up prices.  Gold ETF’s have had a huge influx of cash recently, also pushing prices higher.  The low level of real interest rates, globally, also supports gold.


Corn and soybeans had a slight correction lower yesterday, and it has been continuing modestly in the overnight trade.  Some  changes to the weather models, bringing more rain into the forecast than what was previously expected, brings some necessary relief to these crops.  Especially for corn, which is now entering the pollination phase of development.  The hotter temperatures and little moisture were increasing concerns about lost yields for corn.  Friday’s WASDE report is expected to show increases to yield forecasts for corn and soybeans, but overall production in corn should be lowered, due to the reduced amount of acres expected to be planted.  The domestic inventory numbers should be reduced for new crop corn, but still coming in well above 2bn bushels.  New crop soybeans are also expecting to see an increase to inventories.  On the global front, corn stocks are expected to be lower.  China is the catalyst here, as it has been in the process of replenishing its reserves.  Soybean stocks, globally are expected to show a modest increase, while global wheat a modest decline.  WASDE estimates can be found on the current data attachment.  Taking a quick look at US products in the export arena, US soybeans have approximately a $14 price advantage over Brazil, for this fall, into China.  US wheat continues to be very expensive, compared to the Black Sea.  This fact was again seen yesterday, as Egypt purchased 230k tons of wheat from Russia.  US prices were not even close enough to be able to show on offer price to Egypt.  Global wheat prices have ben on the rise over the past couple of sessions.  Hot and dry weather issues are having an impact on the US crop, and also on the crops in Europe and the Black Sea.  Russia has had a couple of agencies revise lower the expectations for the size of this season’s crop.  In Brazil, CONAB just released it’s updated production forecasts for this season’s crops.  It had a small increase to soybean production and small decrease to corn production.  CONAB’s soybean number, 120.9 mmt, remains well below what the USDA is projecting out of Brazil, 124 mmt. 


Cotton futures have been fluctuating between gains and losses as traders weigh the prospects of lower demand from the coronavirus outbreak, with hot and dry temperatures in Texas creating stress for the crops.  With the forecast for Texas expected to hold with above average temperatures, the drought conditions there are likely to continue.  An updated look at cotton supply and demand will also come form the USDA on Friday.                   


Technical Moving Averages:

Product               50 day                100 day               200 day

SQ0                      858.50                   868.50                   911.00

CU0                      329.25                   343.75                   370.25

WU0                    508.50                   525.50                   535.00

KWU0                  461.00                   472.25                   473.75

MWU0                524.75                   534.00                   550.25

SMQ0                  289.6                     296.7                     304.9

BOQ0                   27.49                     27.75                     30.13

CLQ0                    34.01                     35.23                     44.89

GCQ0                   1741.8                   1693.4                   1611.5

LHQ0                   55.965                   62.850                   75.105

LCQ0                    96.840                   96.290                   104.870

KCU0                   103.00                   109.80                   113.95

CCU0                   2331                       2395                       2478

CTZ0                    58.98                     59.22                     63.66

SBV0                    11.34                     11.68                     12.60

JOU0                    123.05                   115.60                   112.70

HGQ0                  250.95                   244.95                   257.60

HOQ0                  107.56                   116.35                   150.43

XBQ0                   108.19                   107.30                   139.92

NGQ0                  1.935                     2.000                     2.158






Michael Clifford


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