Commodity Corner: Morning Comments

Good morning,


DXU9  96.610  -0.056                       GCQ9  1409.8  +3.1                                                                 ESU9  3010.50  +6.50                      CLQ9  60.28  +0.08


A brief recap, as I was out of the office yesterday.  I will also be out a few days next week.


The markets are digesting Fed Chairman Powell’s testimony from the past 2 days, and attempting to price how aggressive of an interest reducing campaign the Fed will be on, going forward.  Today’s economic data includes the June PPI figures, with the market looking to see if the low inflation pattern continues, providing room for the Fed to cut.    


Equities continue to keep pressing to new highs, as the possibility of more aggressive rate cuts supports the market.  Gold continues to benefit from the softening dollar from these same lower rate expectations..  Next week is big on the earnings front for stocks, with the major banks reporting.    


The oil market remains firm, supported by data this week showing a sharp decline in inventories, and concerned about Tropical Storm Barry moving onto land this weekend.  Looking at the oil charts, and significant bottom has been established down in the $50 neighborhood, and now the market keeps finding support on dips as it continues to nudge higher.    


The grain markets are a little softer today, following a sharp rally, led by wheat yesterday, from the latest WASDE report from the USDA.  The numbers for corn and soybeans are somewhat murky, as the USDA used the results of the planting intentions to survey (which most in the market have serious reservations about the accuracy of) to calculate its production and stocks numbers.  Wheat was aided by an increase to exports, along with lower production expectations from competitors.  It was the global balance sheets in wheat and soybeans that brought support to the markets, as they came in lower than what the market was expecting.  At the August WASDE report, the USDA will release the new results from the re-survey of farmers planting intentions.  Thus the market expects that set of data to be a more accurate read on supply.     


Cotton came under pressure yesterday on production numbers that were stronger than expected.  Also, a high domestic stocks number hit prices.  Cocoa futures continue to trade well, although they have rotated off the 1 year highs, still driven by the reality of producers charging a premium over futures prices for beans.  There also appears to be a pick up in demand, as global chocolate sales were up 09.% for the period from August to April.     


Coffee futures traded higher yesterday.  The Brazilian real rallied, driven by passage of a pension reform bill in the lower house of congress.  This hurt the incentive for producers to make sales, as the domestic currency strength directly cuts into the profit margins.  Also, the coffee market remains concerned about how much frost damage may have occurred from the recent cold temperatures in Brazil.    


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       889.75                   909.75                   924.75

CZ9                      426.50                   409.00                   404.75

WU9                    499.75                   485.75                   515.25

KWU9                  451.50                   452.25                   499.25

MWU9                548.50                   551.50                   574.50

SMZ9                   316.3                     316.9                     319.1

BOZ9                   28.25                     29.24                     29.69

CLQ9                    58.13                     59.61                     59.12

GCQ9                   1338.2                   1324.2                   1298.5

LHQ9                   85.650                   88.375                   84.845

LCQ9                    106.275                 111.490                 112.470

KCU9                    100.28                   100.21                   108.74

CCU9                   2429                       2367                       2324

CTZ9                    67.43                     71.30                     73.55

SBV9                   12.42                      12.78                     12.99

JOU9                   103.50                   111.85                   124.10

HGU9                  270.25                   281.40                   279.05


Have a good day,