Commodity Corner: Morning Comments

Good morning,


DXU9  97.135  +0.083                      GCQ9  1357.3  +14.3                         ESM9  2908.00  +16.00                   CLQ9  52.41  +0.24


Today begins the 2 day Federal Reserve monetary policy meeting, where no changes (cuts) to policy are expected, but a cut is expected at the July meeting.  ECB President Draghi got the party started at 3 AM CDT, speaking at the European central bank conference.  Draghi basically said the ECB would remain accommodative, and cut rates further if need be.  Equities and the dollar (vs the Euro) popped on this, as the general theme of global central bank easing remains.  The US, while remaining neutral to even carrying a dovish bias, is the laggard here, and the dollar firms up.  Gold has held its rotation lower over the past few sessions, and is resuming the march up towards its high.  Central banks lowering rates is good for gold, along with economic concerns which create the need to cut rates. 


The oil market is chopping around in a relatively tight range, as economic concerns raise questions about demand for oil.  Hopes that additional stimulus will be good for future growth has oil a touch higher at the moment.   OPEC+ is trying to solidify dates for the next meetings, where production quotas, and whether to keep current quotas in place will be discussed.  The meeting was supposed to be next week, but the dates have yet to be finalized.  Today brings crude stocks data from API, with DOE and EIA reports tomorrow.  Over the past month+, these reports have showed strong production and high inventory levels.  The market will most likely be on the defensive in front of these.


The grain markets are lower today, led by wheat and then corn.  Yesterday afternoon’s crop conditions and progress reports, while not good for this time of year, were probably better than feared.  There appears to be a break from the rains for the plains area, which will benefit the crops and allow for harvest to fully get underway.  The corn market has so much disappointment priced in, that the 92% planted number was actually viewed as a relief.  Also pressuring corn prices are expectations for a very large and good crop out of Brazil.  Soybean plantings, while still lagging behind the yearly averages, made so good progress and with half a month to go, hope remains for the beans.  It will still be a later planting date for the last 25% of the crops, which could impact yields.  Weather forecasts and any news on exports will remain the focus of grains for the next week or so, ahead of the planting intentions and quarterly stocks report due on June 28.  Of course, any surprises from the Fed tomorrow will impact the dollar, which in turn will impact grain prices. 


The metals markets are higher this morning.  As mentioned, gold is resuming its march to the highs, as central bank easing, driven by economic concerns hits currencies and increases gold’s value.  In addition, all of the economic uncertainty again creates the safe haven bid for gold.  Copper is stronger this morning, following S&P futures higher.  Copper tends to follow forward prospects for the economy, so the global stimulation is thought to be good for copper prices down the line.  Copper is also being supported by news of violence at a labor dispute outside a mine, threatening to disrupt production.    


Other commodity prices are lower today, feeling pressure from the dollar strength.  Worth noting is the lumber market, which is staging its longest rally in 2 years, closing higher for the 8th straight day yesterday.  It appears to be called sharply higher again today.  Softening monetary policy should be stimulative for the economy and lumber demand.  Today’s May housing starts data coming in stronger than expected also provides a big boost to  prices.  Closure of lumber mills is another reason for the strength in prices, although it is noted that stocks are still trading at a steep discount.  The other commodity markets are trading in relatively tight ranges today. 


So the trade today should be similar to yesterday, with all things being equal becomes a back and forth session, awaiting the decision and press conference from the Federal reserve tomorrow afternoon.           


Technical Moving Averages:

Product               50 day                100 day               200 day

SN9                      864.25                   895.75                   906.75

CN9                      387.5                     386.5                     389.0

WN9                    470.75                   479.5                     509.5

KWN9                  431.5                     452.5                     496.5

MWN9                536.0                     551.0                     573.25

CLN9                    60.28                     59.07                     59.84

GCQ9                   1301.9                   1311.7                   1283.7

LHQ9                   92.680                   88.530                   84.885

LCQ9                    110.225                 112.990                 113.090

KCN9                    94.50                     98.55                     106.60                 

CCN9                   2391                       2327                       2299

CTN9                   71.92                     73.82                     76.86

SBN9                   12.29                     12.57                     12.68

JON9                    103.50                   112.90                   126.80

HGN9                  277.90                   282.60                   278.90


Have a good day,




Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC