Good morning,

 

DXU0  93.195  -0.094                 GCZ0  1930.0  -9.2                                     ESU0  3440.00  +12.50                  CLV0  42.95  +0.33

 

The equity market continues the march onwards and upwards.  Oil prices have a cautionary bid, as Hurricane Laura makes her way towards the US.  Laura is expected to be a major storm at landfall, and expected to cause disruptions to gas and oil production.  Many refineries have shut down in advance of the event.  Gold prices are hovering around unchanged, having traded approximately $10 on both sides of settlement in the overnight trade.

 

Besides the hurricanes and the renewal of the pressure on the dollar index, probably the biggest news in the commodity space came to the grain markets yesterday afternoon.  The USDA released its weekly update on crop conditions and progress.  The market is still in the process of sorting out how much damage was caused in Iowa by the Derecho, and what effects the mostly hot and dry conditions over the past month have had on the crops.  Analysts have been reducing yield expectations for both corn and soybeans, and this data helps with the projections.  For corn, the overall conditions index fell 5 points, led by Iowa and Illinois with drops of 9% and 4% respectively.  Equally as concerning for corn are the doughing and dented statistics, coming in ahead of the 5 year averages (last year’s figures are very low, due to the late planting).  Given the current conditions, the yield potential for corn should be capped.  Many in the market believe the USDA’s yield projection in the August WASDE report will be the highest for this season.  Soybean conditions also declined by 3%.  Soybean pod setting data is also above the 5 year averages, suggesting the recent weather will have an impact on bean yields too.  Unlike corn, soybeans do have more time to develop, so with some more moderate temperatures showing up in the extended forecast, there may be more hope for bean yields.  Funds are helping drive prices higher today, with continued short covering taking place in corn, and adding to longs in soybeans.  China, while absent yesterday, is expected to remain active in the purchasing of US agricultural products.

 

Looking at the wheat market, weather in parts of the world outside of the US is playing a role in supply concerns.  Argentina, which has had hot and dry conditions, did receive some minimal rain, but it needs more to relive the stressed crops.  Freezing weather and frost in Brazil and Paraguay over the weekend could lead to crop damage there.  Russian agencies keep revising higher production numbers in that country.  Egypt is conducting a purchase tender today, with the Black Sea again expected to dominate the trade.

 

Cotton prices were also up solidly yesterday, and extending further today.  The combination of China releasing strong import data from July and the hurricane hitting the states is pushing prices up.  Funds, that are carrying a decent sized spec long position in cotton, are also taking advantage of the fundamentals to keep a bid in the price.  Cocoa prices are firm, aided by the softer dollar.  In spite of the recent rains in  the Ivory Coast, the overall drought conditions keeps concerns about the current crops being hurt.  These concerns should remain until we get into October and harvest begins, to see some actual results.  The softer dollar and the freezing temperatures mentioned above are also keeping a bid in coffee prices.  If you’re looking for some excessive volatility in the commodity space, then look no further than lumber futures.  Having experienced a few limit up days last week, lumber began yesterday locking limit bid again.  However, yesterday lumber wasn’t able to maintain the strength, and did an about face to limit down.  No doubt some longs that rode the wave up were looking for the exit door.  With lumber not being the most liquid of products, not sure how successfully they may have found that door.                   

 

Technical Moving Averages:

Product               50 day                100 day               200 day

SX0                      888.50                   872.75                   901.00                  

CZ0                      337.25                   338.00                   363.75

WZ0                     518.00                   526.50                   542.50

KWZ0                  450.00                   470.00                   481.75

MWZ0                 526.50                   534.75                   551.75

SMZ0                   296.2                     296.3                     304.0

BOZ0                   30.01                     28.88                     30.41

CLV0                    41.07                     36.79                     43.36

GCZ0                    1888.7                   1810.8                   1689.2

LHV0                    50.605                   52.055                   61.340

LCV0                    104.770                 101.370                 106.645

KCZ0                    108.85                   110.00                   116.40

CCZ0                    2300                       2311                       2416

CTZ0                    62.21                     59.77                     63.22

SBV0                    12.23                     11.54                     12.50

JOX0                    123.95                   121.85                   116.30

HGU0                  283.15                   261.25                   262.25

HOV0                   125.48                   117.27                   143.36

XBV0                    115.56                   102.09                   121.62

NGV0                   2.065                     2.133                     2.183

 

Thanks,

Mike           

 

Michael Clifford

 

141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              

312-604-6404