Commodity Corner: Morning Comments

Good morning,


DXM9  97.115  -0.005                       GCM9  1299.7  -2.1                                                                 ESM9  2828.00  +21.00                    CLM9  61.74  +0.70


The markets appear to be catching their collective breath this morning, as most are recovering from being decimated in yesterday’s price action.  Trade remains the main topic of conversation / concern for the markets, as the saber rattling from the weekend carried through into yesterday.  The markets have now had a chance to digest and attempt to price the impacts of the tariffs from both the US and China.  Bottom  line is that the longer this trade battle continues, the potentially bigger negative impact for the global economy.  This was reflected yesterday, as most asset classes took it on the chin.


Aside from the trade story, WTI oil had a very interesting trade yesterday, having almost a $3 range on the day.  Oil came in with a bid, and extended it on the news of the Saudi tankers being attacked on Sunday.  Reports of Russian production coming in below the agreed  upon levels by OPEC+ also boosted prices.  However, oil fell to the same fate as most markets, trading down sharply as the breakdown in trade talks was viewed as an impediment on the economy, and on potential oil demand.  Some late selling came into the space, as technically, yesterday was an outside day down, with the higher high from Friday, lower low and settle.  A major Wall Street bank was projecting a possible trade down to $50, based upon signals generated from this close. In the overnight trade, oil traded down right to the 200 day moving average, held this level, and then proceeded to bounce over $1, assisted by a story of a reported drone attack on pump stations in Saudi Arabia.  Not to be outdone, Brent crude also traded lower initially, taking out the psychologically important $70 level, only to bounce over $1 on this news as well.  All of the tension in the Middle East, the OPEC monthly oil report being released this morning and with US weekly production figures coming out, oil should see a very choppy trade.


The US grain and oilseed markets, along with the livestock, took a direct hit to the bow on the announced tariffs from the announced US tariffs, and the retaliatory ones from China, where US agricultural products were specifically pointed out as a prime target.  All of the “ags” products traded down to multi year lows.  Soybeans were trading at over a 10 year low.  Funds, carrying very large speculative short positions, piled on to the carnage.  Corn open interest increased by over 23k on the decline, soybeans by almost 5k.  The wheat complex managed to find support and proceeded to deliver a double digit bounce to prices.  Support for wheat came from a very good export inspection number, along with US prices being at a substantial discount to European wheat from the recent price declines.  This wheat bounce managed to serve as a bandage for corn and soybeans, and those markets were able to put in a short term bottom.  Corn and beans have a decent bounce to prices here in the overnight trade, as yesterday afternoon’s crop progress reports showed planting and development well behind the 5 year averages (breakdown of crop conditions and progress are on the attachment).  The market was expecting to see lower numbers here, but the magnitude, coupled with the oversold condition of the market perhaps helped some short positions think about booking some profits.  As mentioned, lean hogs were limit down yesterday, as the trade tensions can have a direct effect on the amount of pigs sold to China.  One point to keep in mind is that the swine fever epidemic is bad, and eventually China may have to look back towards the US.  Live cattle was almost limit down as well, on demand concerns.


The other soft commodity markets, for the most part, experienced the same fate, trading  sharply lower as the apparent moving further apart between the US and China doesn’t bode well for the overall global economy, hence less demand.  Cotton and lumber also had limit down days yesterday.  Cotton traded at the lowest prices since September of 2016.  The exception to the commodity onslaught was frozen orange juice, which closed higher on the day.  It should be reminded that orange juice has been decimated of late, as the combination of an expected very good Florida harvest and health conscious consumers (less sugar) have pushed prices down to levels not seen in a long time.  Yesterday can be viewed as a corrective bounce in an extremely oversold market.  The rest of the commodities are up in the overnight trade, in a corrective mode from yesterday’s flush lower in prices.  Aside from the supply/demand stories surrounding each market, and sharp moves in the dollar, coming from issues on trade or the Middle East, can have a big impact on prices.    


Gold had a very interesting  trade yesterday as well.  Yesterday morning, gold was lower, even with all of the trade banter and the reports of the tanker attacks in Saudi Arabia.  It almost seemed like gold was ignoring the stories out there.  Then, as oil kept moving upwards and global equities were getting pummeled, gold caught a bid and managed to trade up and through the key $1300 level.  With stocks looking like a possible short term bottom may have been established yesterday, gold has rotated back down, below the same $1300 level.  Copper also was hit hard yesterday, not that surprising, given the equity trade and overall views of stagnating economies.  Copper does have a slight bid this morning, most likely tied to the direction of the stock market. 


The US weather continues to show an opportune window for farmers to get in the fields and get crops planted.  It can be expected they will be going full tilt, as more rain systems appear towards the end of the extended outlook.  Talk remains that the weather this spring will lead to lost acres in corn, and possible even in soybeans, based upon how far behind yesterday’s figures showed the crops to be and more rain projected longer term. 


Technical Moving Averages:

Product               50 day                100 day               200 day

SN9                      891.25                   913.5                     914.5

CN9                      371.5                     381.875                 387.375

WN9                    455.0                     487.125                 520.125

KWN9                  430.375                 470.375                 514.75

MWN9                539.5                     557.0                     584.0

CLM9                   61.52                     57.34                     60.69

GCM9                  1295.3                   1302.8                   1268.4

LHM9                  90.080                   84.175                   82.090

LCM9                   118.805                 118.145                 116.175

KCN9                   95.32                     101.35                   108.90

CCN9                   2297                       2317                       2278

CTN9                   76.38                     75.82                     79.04

SBN9                   12.56                     12.73                     12.64

JON9                    113.37                   118.50                   133.91

HGN9                  289.10                   282.40                   280.25


Have a good day,




Michael Clifford


141 W Jackson Boulevard                             

Ste 1201A                                                              

Chicago, IL 60604                                              

Trean Group, LLC                                              


312-896-2012  (fax)