Commodity Corner: Morning Comments

Good morning,


DXU9  95.505  -0.213                       GCQ9  1413.4  +13.3                         ESM9  2956.50  +6.00                    CLQ9  57.78  +0.35


The dollar remains under some pressure to begin the week, as a hot topic in the weekend media was just exactly where the Federal Reserve should currently have short term interest rates in its monetary policy.  Most feel rates are too high, and will be cut at the July meeting (July 31).  The popular debate now is whether the Fed needs to cut by 25 or 50 basis points.  President Trump is thought to be bringing tougher sanctions against Iran, beginning today, and oil and gold have responded with higher prices.  Part of gold’s bid stems from the dollar weakness.  Grains are higher today, as the softer dollar and the continued storm systems that keep hitting the middle of the US keep flooding issues at the forefront, and overall does not bode well for the crops.


Global events coming up, on this the 3 year anniversary of the UK’s Brexit decision, include the G-20 meeting at the end of the week and the OPEC+ meeting at the beginning of next week.  Clearly, there are major conversations to be had in both, with global monetary policy and FX levels in the one, and production quotas and oil price stability in the other.  The market will be prone to knee jerk reactions to headlines from these meetings.  Friday also marks month and quarter end, so markets may face some position squaring / window dressing ahead of that.


The oil market (CLQ9) pushed through the $58 level overnight, primarily driven by the talk of additional Iranian sanctions.  Brent crude also trade sharply through $65, and came close to challenging the $66 level.  Both markets have rotated lower in the European trade, with CLQ9 back below $58.   Choppy price action can be expected, with the sanctions talk continuing, the supply data coming from the US, preparation for the OPEC meeting, and month end. 


Gold opened trade for the week above the psychologically significant $1400 level, and has proceeded to extend higher.  Global uncertainties, geopolitical and in terms of monetary policies provide support.  With the safe haven currency (the dollar) getting hit on expected reduction to short term interest rates, gold is viewed as a safe alternative.  Gold funds have seen huge inflows over the past several weeks, and it wouldn’t be a surprise to see gold stay bid throughout the week, into quarter end.  Not to mention, with G-20 and OPEC on the horizon this coming weekend and into next week, gold could be the spot to park assets.


The grain markets are higher today, as the continued rains and strong systems hinder fieldwork, along with pose risk of crop damage.  This season just can’t seem to catch a break.  There is a break from the storms coming for a majority of this week, with actual summer like temperatures as well.  Perhaps the remainder of the soybean crops can get planted. This afternoon brings updated reports on crop conditions and progress.  Last Friday’s CFTC COT report showed funds continuing to add to a long position in corn, and covering shorts in soybeans.  Makes sense given how June has gone.  In addition to the end of the week being quarter end, Friday offers to big reports form the USDA.  Planting intentions and quarterly stocks reports are hoped to shed some light on how much corn may have been planted, or may be lost.  Soybean intended plantings will be in view as well, especially to see if there are more switches to corn than previously thought.  Friday is also First Notice Day for July futures contracts at the CBOT.  To avoid the risk of being stopped for exchange delivery, any open long positions should be liquidated or rolled to another contract by the close of business on Thursday.  


The lower dollar is helping the cotton and coffee markets today.  Cotton is also getting a boost from trade optimism ahead of an alleged Trump/Xi meeting at the G-20.  Coffee is aided by a lack of South American selling, as local currency appreciation reduces the profitability on sales.  Sugar is a touch firmer, but significant upside is held in check as more cane is dedicated to ethanol in Brazil than sugar.                 


Technical Moving Averages:

Product               50 day                100 day               200 day

SN9                      864.0                     894.25                   907.25

CN9                      393.75                   388.5                     390.25

WN9                    475.5                     479.25                   508.75

KWN9                  433.25                   449.75                   494.25

MWN9               536.25                    549.25                   571.75

CLQ9                    59.68                     59.28                     59.70

GCQ9                   1306.9                   1314.0                   1286.7

LHQ9                   91.165                   88.600                   84.945

LCQ9                    109.155                 112.600                 112.960

KCU9                    96.95                     100.55                   108.90

CCU9                   2398                       2343                       2312

CTZ9                    70.26                     72.34                     74.30

SBV9                    12.57                     12.88                     12.98

JOU9                    105.40                   114.50                   127.55

HGN9                  276.05                   282.50                   278.90


Have a good day,





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC