Commodity Corner: Morning Comments

Good morning,


DXU9  97.360  +0.038                       GCZ9  1516.3  +7.8                         ESU9  2902.25  -17.50                   CLU9  54.15  -0.35


Equity markets were higher in the Asian and early European trade, only to sell off in the past couple of hours (6 AM CDT).   The violence from the protests in Hong Kong remains, and has even escalated, hitting the late trade for Asian equities.  The yuan fixing came in above 7.   Another cause for the quick change in sentiment may be the economic release of new loans generated in China for the month in July dropped to 1.06T yuan, versus 1.28T yuan in June.  This being another sign that China’s economy continues to struggle during the trade dispute.  Also weighing on markets is the results of the primary election in Argentina, where President Macri suffered a strong defeat to his opposing candidate, Alberto Fernandez, from the left wing.  This sent emerging market assets into a tailspin. 


Gold prices, which were under pressure early in the evening, have also reversed course and are now trading higher.  Gold did dip below $1500, but has found fundamental support and bounced back above.  The safe haven play will remain intact for the gold trade. 


Oil prices opened up below Friday’s settle, and have been leaking lower throughout the day.  Lack of optimism for trade progress is weighing on prices.  Saudi Aramco announced profits for the first half of the year fell by 12%, due to lower oil prices.  Oil remains prone to some wild swings, from headline risk. 


Grains are lower today, ahead of the much anticipated WASDE report from the USDA.  Probably more important, is the release of the re-surveyed planting intentions of farmers.  A sharp decline in the amount of corn acres from what was announced on June 28 is expected, while soybeans are expected to see a small increase in acres.  The WASDE should give a fresh look at where the USDA sees production and stocks headed for this season.  Given the difficult growing conditions this season, downticks to production and inventory figures are expected.  Estimates for today’s data can be found on the “Current Data” attachment.  Following the WASDE, this afternoon brings an updated look at crop progress, which has been lagging all season. 


Cotton prices are lower again today, and have been hit hard over the past week on trade disappointment.  Today’s WASDE report is expected to show a large supply of cotton coming from harvest, and absence of a major trading partner brings into question where the cotton will go.  Funds continue to carry a spec short position in cotton.  Funds also have a very large spec short position in sugar, as favorable growing conditions keep expectations for an abundant crop in place.  Rains in Brazil keep big crop thoughts alive in that market as well.  Also pressuring prices is the report of Brazil breaking its export record for shipments in July.


On the data front, the grain markets will dominate the action today.  Over the course of the week, fresh looks at inflation in the July CPI on Tuesday and retail sales on Thursday could provide volatility to the trade.  While it seems unlikely, any news on trade can always cause a reaction.  Political tensions in Hong Kong and elsewhere can also create movement.  The oil markets will get the weekly production and inventory data from the US, while continuing to wait for the next OPEC+ meeting in September.  Emerging market assets, given the uncertainty mounting in Argentina can also influence prices.                


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       904.75                  899.75                   921.50

CZ9                      437.50                   415.50                   407.50

WU9                    512.00                   489.75                   508.25

KWU9                  452.25                   445.25                   484.50

MWU9                543.00                   543.25                   564.75

SMZ9                   317.3                     315.1                     318.4

BOZ9                   28.53                     28.74                     29.46

CLU9                    55.93                     59.07                     57.62

GCZ9                    1412.6                   1360.5                   1331.9

LHV9                    74.155                   80.675                   74.715

LCV9                    107.150                 110.485                 112.845

KCZ9                      107.00                   103.45                   110.30                               

CCZ9                    2463                       2409                       2360

CTZ9                    64.41                     68.87                     72.05

SBV9                    12.31                     12.49                     12.87

JOU9                    103.75                   107.40                   119.30

HGU9                  267.00                   275.80                   277.25





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC