Commodity Corner: Morning Comments

Good morning,


DXU9  97.045  -0.108                       GCQ9  1345.7  -5.0                         ESM9  2921.50  -0.25                      CLQ9  54.05  -0.06


Optimism regarding trade negotiations progress with China, coming from positive comments both from President Trump and President Xi gave many markets a shot in the arm yesterday.  The 2 sides agreed to carry on the trade conversation at the G-20 next week.  It was thought to be a day of waiting, ahead of today’s Federal Reserve monetary policy decision, coming this afternoon.  Instead, many markets that benefit from an improved economy or trade situation, moved higher.  US equities led the charge, as did oil.  Gold, which had been near the recent highs earlier in the session, rotated down, but copper found a renewed bid.  Cotton and soybeans were supported by the news. 


Equities are chopping around this morning, hanging near unchanged, waiting for the decision.  Oil is also hanging around unchanged levels today, which is towards the upper end of the recent trading range.  Gold continues it’s rotation down overnight, and grains also work lower.


The oil market received a fresh crude stocks report yesterday afternoon.  While the report showed a decline in stocks, it wasn’t down as much as the market expected, helping to keep oil prices at the upper end of the range.  Also helping prices is talk that OPEC+ may have agreed upon dates for its next meeting.  July 1 and 2 are being tossed around as the dates, where production quotas will be a major topic of the conversations.  More production and inventory data come later this morning for oil.


Wheat again leads the grain markets lower today, as there is a period, following the current rain system, which shows an extended stretch of warmer and drier weather.  This should be beneficial for harvest of winter wheat, although it is believed that a fair amount of crop damage may have occurred from the recent storms, especially in central Kansas and norther Oklahoma.  There is rain in the forecast for Canada and the northern Plains, where drought like conditions have created much stress to the wheat crops there.  This rain should help to alleviate the stress.  Egypt is conducting a purchase tender today, where the Black Sea is expected to win the business.  Corn and soybeans are lower today, having been supported yesterday afternoon on the Trump and Xi comments, and prospects for trade progress.  The response with lower prices from these markets would suggest they have seen this movie before, bid on the hype and then disappointment when nothing follows.  Will the movie have a different ending next week?


Looking at other commodity markets, lumber continues its surge higher, locking limit bid again yesterday for part df the session, as the housing data released yesterday was better than expected.  Lumber is trading at a 3 month high.  Prices did retreat later in the session, but still had a positive close for the day.  The cotton market had a strong bid, as trade agreement prospects provided a boost.  The cotton market has been facing concerns of a very large crop and, without China as a trading partner, a much lighter demand picture.  Cotton was also supported on concerns that a plague of locusts in Pakistan could hurt crops.  Coffee fell yesterday, as a report on green coffee stocks from the GCA was much stronger than expected.  The report, for the month of May, showed an increase of 264k bags, where the market was expecting an increase of less than 150k.


Copper prices had a strong performance yesterday, trading up sharply also on the trade prospects.  Copper has tended to track equities, so as stocks shot higher, copper did as well.  It finds itself a touch lower this morning, again with equities.   Gold, which had a see saw day yesterday, but ultimately ended down, is leaking lower today, ahead of the Fed.  Gold still remains within striking distance of the highs for the move, and any signs of trouble in markets can always quickly bring a bid back to gold.


It’s an empty calendar today, aside from the oil data, with the exception of the Federal Reserve’s decision at 1 PM CDT and the press conference which follows at 1:30 PM.  Expect another choppy trade ahead of this.  No change in policy is expected today, but the market does expect a cut in short term interest rates to come at the July 31 meeting.  The market will be looking for clues as to how far from the neutral the Fed may have moved its bias over the past few weeks.  Any developments which are not what the market is thinking will have a direct effect on the dollar and many other markets.  Stay tuned….         


Technical Moving Averages:

Product               50 day                100 day               200 day

SN9                      864.25                   895.5                     907.0

CN9                      389.25                   387.0                     389.5

WN9                    472.0                     479.5                     509.5

KWN9                  432.0                     451.75                   496.0

MWN9                536.5                     550.5                     573.0

CLQ9                     60.16                     59.23                     59.85           

GCQ9                   1302.9                   1312.2                   1284.3

LHQ9                   92.300                   88.545                   84.910

LCQ9                    109.990                 112.905                 113.070

KCU9                     96.86                     100.95                   109.05                

CCU9                   2395                       2337                       2310

CTZ9                    70.91                     72.58                     74.47

SBV9                    12.60                     12.90                     12.97

JOU9                    106.20                   115.10                   128.35

HGN9                  277.45                   282.60                   278.90


Have a good day,




Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC