Commodity Corner: Morning Comments

Good morning,


DXM9  97.205  +0.145                       GCQ9  1326.8  -1.1                         ESM9  2770.50  +21.00                   CLN9  53.28  +0.03


The gold market continues to work higher, but today safe haven will not be sufficient for a reason.  Equities are bouncing as oil is working back towards the lows of the move.  Corn and soybeans gapped higher overnight, as yesterday afternoon’s planting report showed both are seriously behind.  With corn coming to the end of the planting cycle, the market is now recalibrating how much corn may be grown in the US this season.  Wheat, having rallied sharply yesterday on concerns about the conditions of the wheat crops with all the rain of late.  Yesterday afternoon’s conditions report for wheat showed an improvement, and wheat prices are coming off this morning.  Coffee prices continue to reverse lower, as improved weather in Brazil is allowing harvest to progress.  The main feature for all the markets today will be Fed Chairman Powell speaking at 8:55 AM CDT in Chicago.  Given all the of focus on the Federal Reserve and the level of short term interest rates, all markets will be tuned in.  Economic prospects have been a driver of many markets here. 


The grain markets move back to center stage overnight, as yesterday afternoon’s crop conditions and progress reports from the USDA showed (not surprisingly) that corn and soybean plantings remain well behind the yearly averages.  However, the reported results were even lower than what the market was expecting to see, hence the gap opening last night.  For corn, as the planting season comes to a close, the reality of taking prevent plant or switching to soybeans is almost a certainty for many.  Soybeans, with the planting lag and an extended forecast that continues to show rain events, faces the same potential fate as that of corn, not getting all the crops planted.  The later start to the planting season does allow for beans to catch up, but the market is on edge.  For wheat, the uptick in conditions was well received, as the violent storms of late left concerns about crop damage and quality levels.  Prices have come off overnight, following another huge run up yesterday ahead of the report and with dry conditions in other growing parts of the world.  Russia, Australia and Canada all are experiencing drier conditions, having an impact on those wheat crops.  While the global supply remains abundant, weather conditions certainly keep the markets on edge. 


The oil market continues to sag lower, rejecting yesterday’s bounce off the lows and rolling over to the downside again.  Prices came within 30 cents of yesterday’s low, and is in the area of some old lows on a nearby chart, which should serve as some support for the trade.  At this point, it seems hard not to think that $50 is a target for the downside.  Oil has been appeared to be  moving in tandem with the prospects of the US/China trade talks and the implications for the global economy.  Some of the pressure could be positioning ahead of the production and inventory data coming from the US, which have shown ramped up production and plenty of stocks in reserve.  Some comments that recently hit the tapes, that are spraying hope for trade progress, is causing the latest uptick for oil.


Along those lines, gold, which had a breakout to the upside over the past few sessions, driven on safe haven status, taking out the key resistance point of the 100 day MA along the way, rallied over $60 from the lows of a couple weeks ago.  Gold had been higher overnight, but is coming off a bit here, from these same trade headlines.  Depending upon how the equity market and dollar trades, especially with Fed Chairman’s Powell’s comments, gold should see a fairly volatile trade.  If prices do rotate down, keep an eye on 1308.6 in GCQ9, which is the 100 day MA and should eb support.  Interestingly, copper, which had been moving lock step with equities, is actually a touch lower this morning, as stocks are bouncing.  Industrial metals have been under pressure of late, with the questionable strength of the global economy. 


The other soft commodities have been trading off the same themes mentioned in this commentary over the past few weeks.  All of these markets are very vulnerable to any comments from Powell today that can create a big currency move, as they are denominated in dollars.  The coffee market, after trading higher most of last week on hot weather in strong storms in Brazil causing a risk to the coffee beans and slowing harvest.  Orange juice continues its corrective bounce higher, after prices were decimated most of last month on the prospects of a very large crop and diminishing consumption of orange juice, due to its high sugar content.  Cotton prices are slightly higher this morning, probably also aided by the trade headlines.  Prices have been driven down of late on an expected large cotton crop and the potential loss of China as a trading partner.  Cocoa prices are softer today as West African rains are good for the plants.  Yesterday saw prices bounce from the lowest prices of the last few weeks, as the rainfall of late was thought to pose a threat of disease for the cocoa beans.


Looking at the US weather, there are mixed views out there.  Heavy rains are expected to remain in the South, while a planting opportunity appears in the 10 to 14 day forecast west of the Mississippi.  This could present a window for the bean farmers to get into the fields, and try to catch up.  The same drier conditions to the west should be helpful for the wheat crops, are maturing and with the amount of moisture already received should make for good development.                       


Technical Moving Averages:

Product               50 day                100 day               200 day

SN9                      871.0                  901.5                   908.5

CN9                      377.25                   382.75                   387.25  

WN9                    461.5                     480.5                     512.25

KWN9                  428.75                   458.75                   503.0

MWN9                535.0                     552.5                     576.5

CLN9                    61.92                     59.21                     60.45

GCQ9                   1296.7                   1308.6                   1278.0

LHM9                  91.620                   85.035                   83.165

LCM9                   115.830                 117.300                 116.040

KCN9                   93.97                     99.58                     107.21

CCN9                   2351                       2316                       2290

CTN9                   74.15                     74.71                     77.69

SBN9                   12.32                     12.64                     12.63

JON9                    107.60                   114.80                   129.50

HGN9                  282.85                   282.80                   279.40


Have a good day.





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC