Commodity Corner: Morning Comments

Good morning,


DXU9  97.240  +0.300                       GCQ9  1424.5  -2.4                                                                ESU9  3000.00  +11.00                     CLU9  56.09  -0.20


The top stories overnight are The US appears to have a debt deal completed and in the UK, Boris Johnson is voted to be the new Prime Minister.  The dollar is firm, along with equities.  Oil is a touch lower, but the tensions in the Middle East remain.  The debate over the handling of Iran will continue, and this afternoon begins the weekly reports on US production and inventories.    


Grains are higher today, but have come off the highest prices of the evening session.  Yesterday afternoon’s crop conditions and progress reports continue to show this season’s crop substantially behind the pace of last year and the yearly averages.   So, in spite of the forecasts for beneficial growing conditions (although some areas are concerned about moisture deficits, if you can believe it), grain prices are higher as concerns about the crops mount moving towards the end of July.  Egypt is in again today with a wheat purchase tender, with any deals expected to go towards the Black Sea.  There are some concerns about what the final tally will be for Russian wheat this season, so Romania or the Ukraine could slip in here and win this business.  The grain market continues to debate the amount of corn and bean acres that were actually able to get planted, along with watching the weather.       


The dollar strength is putting some pressure on other commodity prices, such as coffee and cocoa.  Coffee traded lower yesterday, as improving weather is viewed as good for the beans, where potential freezing risks raised concerns last week.  Cocoa traded higher yesterday, as a major bank is calling for demand to outweigh supply, thus creating a potential deficit.  The bank is calling for lower production in Ghana and the Ivory Coast.  Cocoa inventories have been moving lower for the past month, and are currently the lowest since April.  The same bank is calling for a potential production shortfall in sugar, making those prices vulnerable to a rally.  Sugar prices have moved sharply lower over the past few weeks, primarily led by the fund community establishing a large short on the premise of an abundant crop.  If crop production falls short of expectations, short covering could quickly find its way into the market.  Cotton prices continue to trade better, as optimism remains on a China trade deal, giving a boost to demand for US cotton.


Gold prices are lower today, but still remain within shouting distance of the highs for the move.  Gold prices tested and rejected the $1400 price level a while back, and has been holding in, with a slight bid, ever since.  Today’s dollar strength, along with no real surprise from the UK election allows for a bit of a correction to the downside.  Copper prices are a touch lower ahead of today’s report on existing home sales in the US.  Any signs of improvement in the economy tends to help out the industrial metals sector of the market. 


With little on the economic calendar this week, most markets continue to wait for next Wednesday, when the results of the Federal Reserve’s monetary policy meeting will be announced.  At this point, the market expects short term rates to be reduced by 25 basis points.  But, the debate will continue on this for another week.          


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       897.50                   907.00                   924.50

CZ9                      434.50                   412.00                   406.25

WU9                    508.00                   486.25                   513.75

KWU9                  455.75                   449.75                   494.75

MWU9                549.00                   548.75                   571.50

SMZ9                   318.2                     316.7                     319.2

BOZ9                   28.31                     29.03                     29.61

CLU9                    57.51                     59.58                     58.68

GCQ9                   1356.7                   1329.4                   1305.4

LHQ9                   83.795                   88.630                   84.920

LCQ9                    106.155                 110.875                 112.245

KCU9                   102.35                   100.35                   108.55

CCU9                   2446                       2376                       2334

CTZ9                    65.98                     70.58                     73.09

SBV9                    12.36                     12.65                     12.99

JOU9                    104.30                   110.45                   122.40

HGU9                  269.10                   279.80                   278.60


Have a good day,




Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC