Commodity Corner: Morning Comments

Good morning,


DXU9  97.825  -0.164                GCZ9  1542.0  +4.8                         ESU9  2888.00  +4.75                 CLV9  54.29  +0.65


The markets continue to sway back and forth from the most recent headlines surrounding trade.  Following the grenades tossed on Friday from both sides, and the attempts for a cordial resumption to the talks, equities managed to recover, but the highs remain off in the distance.  Gold has rotated down about $25 from its highs and oil is recovering, trading back above $54.  Commodity prices, for the most part, are rotating back down, following the bounce yesterday derived from renewed trade optimism.  The announced trade deal with Japan shot hog and cattle prices higher, with hogs moving to an expanded limit bid.  Grain prices were also supported yesterday on the Japan news and in front of yesterday afternoon’s crop progress reports. 


Grain prices are off a touch today, with beans down more after yesterday’s trade driven bounce.  The crop progress reports, while still lagging prior years, did show improvement.   This following last week’s Pro Farmer Crop Tour results, which projected lower yields and production totals for this season, but the numbers didn’t come in as poor as what was feared.  Trade and the weather will be the 2 inputs to follow for the grains, as the crops move into the final stages of development.  Egypt is conducting a purchase tender today.  The best bids are expected to come from the Black Sea region.  It is possible some bids may come in from France as well.   


Other soft commodities saw coffee stage a strong rally yesterday.  A combination of the Brazilian real coming under pressure, as the government announces the current account deficit expanded to 9 billion and longer term available supply concerns sent prices upwards.  The long term supply concerns stem from the recent weather over the past couple of months being bad for the trees and could impact the large harvest expected both this season and next.  Cotton prices recovered from the drubbing on Friday, touching a 41 month low, and traded higher yesterday, as this market, and the demand levels generated from China, is greatly influenced by all the of trade rhetoric.  An abundant crop is expected, so having a home for it is significant.  Orange juice prices were higher yesterday, as hurricane season approaches.  Earlier this year, as many as 15 major storms were predicted for the season, so some weather risk premium is warranted for OJ prices, especially given how low they are currently trading.  Sugar prices also remain at the lower end of the recent range.  The concern here is that Mexico may flood the market with large export numbers, due to the fact that the amount it can sell to the US is limited by the new trade agreement, and Mexico needs to clear out old supply ahead of the next harvest.  This while other global producers are also anticipating large harvest amounts this year.


Hog futures continue to add excitement to what has already been a very active year.  The trade news with Japan yesterday shot prices higher, posting a jump of 7.6%, which is the biggest 1 day gain ever for a lead contract.  This follows a recent drubbing, led by the China trade news, which sent prices down to a 13 month low.  Also aiding the bounce, in a story that won’t go away, are reports that the hog losses in China from the ASF this year are reaching critical levels.  If a trade resolution with China can get in place, this could alleviate some of the stress from this situation.


Gold prices remain the one relatively constant asset in this crazy, headline driven, trading world all the markets find themselves in.  With al of the uncertainty out there, and never knowing what may come next, gold continues to attract.  The safe haven status is likely to remain until more clarity comes from many areas.  Gold has tested the $1500 level a couple of times, when the markets think an all clear signal is coming, only to hold the level when the next round of whatever hits.  It certainly feels like the whatever isn’t leaving any time soon, so gold likely will continue the back and forth, grind higher trade. 


The oil market, while also getting pulled around by the trade banter and what it means for global economic growth, still manages to find itself reverting back into the $54 to 56 range, when the dust settles.  This has been the tendency for a major portion of the summer, and is likely to remain.   Aside from global economic concerns, some of the risks the oil market is facing are geopolitical tensions heating up in the Middle East (in spite of President Trump’s attempts to play nice at the past G-7), the coming OPEC+ meeting and production disruptions from hurricane season in the US. 


The end of this week brings month end and First Notice Day for numerous September futures contracts.  For month end, it is common to see profit taking or position window dressing taking place ahead of this.  If the market quiets down at week’s end, into the holiday weekend, this position squaring could influence the late trade on Friday.  Regarding First Notice Day, any LONG September positions, as of the close of business on Thursday, August 29, are subject to being stopped for exchange delivery.  To avoid the risk of receiving a delivery notice, all LONG September positions should be liquidated or rolled to another contract by Thursday’s close.              


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       898.25                   893.25                   919.00

CZ9                      422.25                   413.25                   406.00

WZ9                     509.00                   500.00                   516.25

KWZ9                  451.75                   457.75                   494.00

MWZ9                 541.00                   549.25                   572.00

SMZ9                   311.2                     312.7                     317.5

BOZ9                   28.76                     28.67                     29.43

CLV9                    56.37                     58.39                     57.06

GCZ9                    1451.4                   1382.1                   1346.0

LHV9                    71.015                   78.315                   74.565

LCV9                    105.890                 108.455                 112.035

KCZ9                    104.90                   102.75                   108.40

CCZ9                    2406                       2402                       2354

CTZ9                    62.81                     67.06                     71.04

SBV9                    12.05                     12.33                     12.75

JOX9                    104.20                   107.05                   119.10

HGZ9                   266.20                   272.95                   276.75






Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC