Commodity Corner: Morning Comments

Good morning,


DXU9  98.485  +0.030                GCZ9  1541.3  -1.7                         ESU9  2944.50  +17.75               CLV9  55.98  -0.73


The end of the month and the end of the summer sees the equity market grinding higher, even with the US set to begin tariffs on additional goods with China on Sunday.  China came out last night and said the do not plan to retaliate at this time.  Perhaps the market’s apparent ambivalent response to the tariffs stems from President Trump, sometime earlier this week, declaring the US has not actually collected a dime from China on any of the tariffs to this point.  So, with some in the market viewing the tariffs as possibly a mere negotiating tool, it may be thinking the amount China owes, similar to the fines Ezekiel Elliott is piling up with the Cowboys, will disappear when a deal is signed. 


The dollar continues to stay firm, as the fixed income markets appear to be taking back a bit of the aggressive easing from the Fed that was being priced in, as glimmers of hope that a trade deal could be on the horizon.  Likewise, gold is a touch softer, but still holding well above the now key $1500 level.  Oil prices are rotating back down, following a large run up the past couple of sessions driven by soft inventories and Hurricane Dorian approaching the US.   Oil, even with its big swings, continues to ultimately find its way back to the $54 to 56 area.  Speaking of Dorian, which is expected to hit Florida on Saturday, orange juice futures have spiked over $8 this week ahead of the storm. 


The grain markets are mixed again today.  With corn and soybeans higher, while wheat is lower again.   The wheat story appears pretty simple, winter wheat harvest is complete, spring wheat harvest is progressing well and the US prices are too expensive compared to the competition.  So prices need to come down to move some wheat.  Corn has been the benefactor the past few sessions of President Trumps efforts to support the renewable fuel programs.  He is talking a big game, in part, it is believed, to win back the farmer constituency that has been hurt badly from the trade war.  The question remains if anything actually materializes from this.  Soybeans are also stronger today, being supported by China’s declaration of no retaliatory tariffs at this time.  A private analytic firm, that uses satellite imagery in its forecast, has raised its yield estimates for the US crops.  It raised corn to 168.8 bpa vs 168.0;  soybeans 47.5 bpa vs 47.3;  spring wheat 48.9 bpa vs 48.6. 


Cotton prices are a bit lower this morning, but have rallied for most of the week.  Poor growing weather in Texas and hopes on trade have provided support and caused some funds to do some short covering.  Sugar prices have resumed the leak lower, as abundant global supply continues to weigh on the market.  This will be the 7th consecutive down month for sugar, and prices are approaching lows last seen in 2008.  Funds carry one of the largest short positions ever accumulated in sugar, and there doesn’t appear to be any hurry to close out.


As mentioned, today is month end, which can bring some additional volatility to the late price action.  Position closing or window dressing could dominate some flows, especially if the trade is subdued in front of the holiday weekend.  Some markets, like the grains, will not have access to trade until Monday evening after today’s close.  Leaving an additional amount of time to be vulnerable to any trade or weather developments.  This may warrant some position squaring as well.       


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       894.00                   891.00                   917.75

CZ9                      416.75                   412.50                   405.50

WZ9                     504.75                   499.50                   515.00

KWZ9                  446.00                   455.75                   491.25

MWZ9                 537.00                   547.75                   570.25

SMZ9                   309.3                     312.1                     317.2

BOZ9                   28.73                     28.62                     29.41

CLV9                    56.51                     58.18                     56.97

GCZ9                    1462.6                   1389.0                   1350.4

LHV9                    70.230                   77.520                   74.515

LCV9                    105.470                 107.890                 111.825

KCZ9                    104.60                   102.55                   107.95

CCZ9                    2389                       2397                       2352

CTZ9                    62.32                     66.51                     70.75

SBV9                    11.96                     12.28                     12.71

JOX9                    104.15                   106.55                   118.60

HGZ9                   265.50                   271.85                   276.45






Michael Clifford


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