Commodity Corner: Morning Comments

Good morning,


DXU0  92.300  -0.547               GCZ0  2021.5  +22.8                              ESU0  3385.75  +6.00                  CLV0  43.07  -0.10


US equities continue to grind higher, managing to avoid numerous landmines such as virus upticks in many parts of the world, and US / China tensions clearly heating back up again.  As the economic data continues to come in better than the estimates, optimism remains for the economy.  The inflation data has been heating up as well, and that has carried an impact in the markets, with the pick-up in yields observed in Treasuries last week.  The dollar index remains in its downward channel, helping to provide support for some commodities. 


The gold market has recovered from it’s massive flush last week, which saw prices drop close to $150 from the highs in about 3 sessions.  However, once the dust settled from the massive long liquidation, the market was able to refocus on the fundamentals for gold, and resume the climb back up.  Prices have now ascended back above $2000 (December futures), from printing a low price of $1874.2 last Wednesday.  The high for the move in GCZ0 is 2089.2, from 08/06/20.  A retest of  this level wouldn’t be out of the question here. 


Oil futures remain well entrenched above the $40 level, and continue to grind up.  However, the extension to higher prices is meeting some definite headwinds, in the form of questions about demand continuing to grow as the virus just won’t go away.  Not only are continuing to increasing virus concerns a major issue in the US, but parts of Europe are now experiencing similar.  If this continues, and global economies are forced into a more restrictive closure of business, the demand story will see a major hit.  OPEC+ will be holding a meeting tomorrow, where the main areas of focus will be the global demand story, as the production taps were opened up a bit in August, and on the production cut compliance story for a few of the members.  OPEC has done a good job of market management, getting prices elevated from the abyss, and now they need to make sure the remain vigilant here.  Lastly, CLU0 futures stop trading today.  Open interest, coming into this last day is over 80k.  The historic and catastrophic for many plunge in oil prices on the last day of the May contract will forever be inscribed in many minds. 


The grain markets have had quite the story since my last report.  The August WASDE came, and delivered big projections for yield, hence production and inventories.  This news was already imbedded in prices, which mitigated the move down.  More to the point of the mitigation, was the derecho storm which caused severe damage not only to crops across the Midwest, but to storage facilities as well.  Following the WASDE print, and not fully knowing the extent of the damage, prices quickly bounced, led by short covering.  Confirmation of the extent of the damage is coming from yesterday afternoon’s weekly crop conditions and progress reports.  Frankly, these reports weren’t as bad as the market feared, but not good nonetheless.  More light on the damage will come this week from the Pro Farmer Crop Tour, which runs from yesterday through Thursday.  The results from day 1 were positive, as yield projections for Ohio and South Dakota were above the historical averages.  This allowed for a slight decline to prices overnight, but with China lurking to continue with the aggressive grain buying program of late, support to prices comes fairly quickly.  Speaking of China buying, the market was a bit surprised with the announced purchase of HRW by an unknown source (presumed China) yesterday morning.  Chicago wheat futures posted double digit gains on the news. 


Sugar prices continue to surge higher, driven by a couple of factors.  China has been an aggressive buyer, as shipping logistics derived from renewal of the virus and a smaller crop out of Thailand due to a drought was them worried about available supply.  The softer dollar is also helping push up sugar prices.  Funds have been adding to spec long positions on this, adding fuel to this rally’s fire.  Coffee prices were lower yesterday, as the concerns about freezing temperatures have abated and beneficial rains have been observed.  Today’s drive higher in price is from the softer dollar, as it discourages the local producer from aggressively offering int eh market.            


Technical Moving Averages:

Product               50 day                100 day               200 day

SX0                      885.50                   871.00                   902.50

CZ0                      337.50                   339.00                   365.25

WZ0                     517.25                   528.50                   543.00

KWZ0                  452.50                   473.00                   482.50

MWZ0                 528.50                   536.50                   553.25

SMZ0                   296.0                     296.7                     304.5

BOZ0                   29.71                     28.68                     30.43

CLU0                    40.45                     35.80                     43.48

GCZ0                    1866.6                   1794.2                   1678.5

LHV0                    50.635                   52.175                   61.925

LCV0                    103.760                 100.665                 106.815

KCU0                   104.55                   108.00                   114.15

CCU0                   2296                       2320                       2457

CTZ0                    61.77                     59.21                     63.30

SBV0                    12.15                     11.44                     12.50

JOU0                    123.05                   120.50                   114.00

HGU0                  279.65                   257.40                   261.55

HOU0                  123.08                   114.26                   143.35                  

XBU0                   122.16                   107.05                   132.44

NGU0                  1.893                     2.010                     2.114






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC