Commodity Corner: Morning Comments

Good morning,


DXU0  96.310  -0.058                GCQ0  1815.2  -5.4                     ESU0  3164.00  +0.50                  CLQ0  40.78  -0.12


It has been a quiet overnight trade, adding on to what has been a fairly quiet week, to this point.  Markets appear to be marking time, waiting for the next big shoe to drop, regarding the pandemic.  As the markets wait, traders are trying hard to get positioned appropriately, and then find a way to hold on to the positions amidst the choppy trade. 


Gold prices make another new high overnight, trading $1825.5.  With this market feeling comfortable with prices above the $1800 thresh hold, picking a top to this market can be a very risky proposition.  It feels like traders prefer to wait for dips in the market to buy.  However, be aware that the technicals show an overbought market, so the dips could be deeper than what may otherwise be expected. 


Oil prices appear to have shrugged off yesterday’s report from the EIA, showing inventories rose by over 5m barrels last week, as production held steady.  The market was expecting a drawdown to stocks of close to 3m barrels, but the API provided some warning Tuesday afternoon, projecting an over 2m build to inventories.  Anticipated strong demand for oil has been a major driver to this rally, and allowing prices to stay perched above $40.  Any serious questions on forward demand can certainly cause a correction to prices.


The grain markets have 1 more day to wait, before tomorrow’s July WASDE report.  The trade for the week thus far has predominantly been a weather trade.  With a few more rain events placed in the 5 day forecast creating the removal of weather premium to prices in corn and soybeans.  The extended forecast has a return of very hot temperatures, with miniscule rain, so if the short term rain doesn’t take place, there will be great concern about crop stress, especially for corn.  Tomorrow’s WASDE is likely to still show big numbers for production and inventories, even with the recently projected reduction to corn acres and any demand adjustments.  The USDA most likely won’t change its yield estimate until the August report, so big production numbers can still be expected.  The market doesn’t expect to see any significant changes to the soybean balance sheet in this report.  Any surprises here could come in global inventories, depending on if the USDA makes any significant changes to Brazil’s soybean production figures.  The USDA projections is running about 4mmt above where CONAB has bean production, so we’ll see.  The global wheat markets are also being impacted by weather.  Hot and dry conditions over the growing season is having an effect on crop sizes in the US, Europe and the Black Sea.  With talk of an even smaller US wheat crop than what has previously been projected, reports from harvest suggest lower yields, but better quality and protein levels.  WASDE estimates can be found on the Current Data attachment. 


The Chinese hog market has seen prices trading sharply higher, as strong demand exceeds production with the issues created by the redevelopment of AFS.  Hog imports are also being impacted by the Chinese government blocking shipments from international processing plants, due to coronavirus concerns.  Domestic hog prices in China have rallied back up to levels in February, just ahead of the COVID lockdowns, and are withing striking distance of the all time highs posted last October.  While part of this story has benefited the US hog market over the past few sessions, yesterday saw hog prices retreat a bit.  Weakness in the cash hog markets was weighing on prices.


This morning brings a fresh look at the US employment story, with Initial Jobless Claims, and Continuing Claims.  Initial Claims are expected to print 1.375m for last week, vs 1.427m the prior week.  Continuing Claims are expected to be 18.750m vs 19.290m last.            


Technical Moving Averages:

Product               50 day                100 day               200 day

SQ0                      859.50                   868.25                   910.75

CU0                      329.75                   343.25                   370.00

WU0                    508.25                   525.25                   535.00

KWU0                  460.50                   472.00                   473.75

MWU0                524.75                   533.75                   550.25

SMQ0                  289.7                     296.7                     304.8

BOQ0                   27.54                     27.72                     30.11

CLQ0                    34.40                     35.12                     44.83

GCQ0                   1743.6                   1695.7                   1612.9

LHQ0                   55.685                   62.510                   74.900

LCQ0                    97.015                   96.190                   104.835

KCU0                   102.85                   109.70                   113.90

CCU0                   2326                       2387                       2476

CTZ0                    59.13                     59.17                     63.67

SBV0                    11.39                     11.66                     12.60

JOU0                    123.30                   115.80                   112.80

HGU0                  252.40                   245.50                   258.00

HOQ0                  108.36                   115.90                   150.11

XBQ0                   109.29                   106.93                   139.71

NGQ0                  1.926                     1.997                     2.155






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC