Commodity Corner: Morning Comments

Good morning,


DXU9  98.570  -0.379                       GCZ9  1546.9  -9.0                                                               ESU9  2932.00  +26.00                    CLV9  54.89  +0.95


Equity markets have recovered from yesterday’s minor sell-off, being led up in Asia, as it is being reported that Hong Kong’s Chief Executive Lam is retracting the extradition bill that created all the havoc 13 weeks ago.  This has led to a bit of a relief rally in global equities.  In the UK, Boris Johnson suffered a tough loss in Parliament, and no longer holds the majority there.  This improves the chances for Brexit, and the British pound has exploded higher, pressing the dollar and other currencies down.  The positive tone in equities is also providing support for the oil market, that was hit hard yesterday on the ramped up tariff news and gloomy economic prospects that result from lack of a trade deal.  The lower than expected manufacturing index in the US didn’t help matters either.  Gold has corrected a bit from its powerful over $26 rally yesterday, but still remains towards the upper end of the move. 


Grain prices are higher today, as yesterday afternoon’s crop conditions and progress reports continue to show this season’s crops well behind last year and the averages.  Good to excellent conditions were downgraded slightly for spring wheat, while soybeans were steady and corn showed marginal improvement.  Wheat prices are in a corrective bounce today, following numerous sessions of lower prices.  The oversold condition, coupled with the worsening conditions, support wheat today.  Corn and soybeans continue to hover not far off the recent lows, as the USDA projections continue to show abundant crops in both.  The next reading from the USDA will come on September 12 with the WASDE. 


Aside from the safe haven status with all the global uncertainties out there, another argument for this huge move in gold is global monetary policies all maintaining strong easing campaigns.  The lower interest rates improves the attractiveness of gold.  Going one step further, last month, 4 trillion notional of fixed income securities was issued with a negative interest rate.  This brings the total outstanding to over 17 trillion notional.  Gold, while not carrying any interest payments, is thought to be a stable enough place to park money and benefit from economic improvements and inflation increases. 


Oil prices are bouncing today, as the market is forecasting another decline to crude inventories from last week in this week’s data.  Oil is also being supported from many participants in the OPEC+ group saying they intend to stick to the agreed upon production quotas.  Of course, trade and the global economy will continue to have an impact on prices. 


Orange juice prices were again hit hard yesterday, as Hurricane Dorian missed a good portion of Florida, sparing the orange groves.  Prices were higher most of last week, ahead of the storm.  Coffee prices were hit yesterday, as weakness in the Brazilian real is being attributed as the reason for the lower prices.  The real is stronger today, and coffee is up a touch.  Cotton prices have also been pushed and pulled by the dollar trades.  As the dollar spiked higher yesterday, cotton prices moved lower, partially from this.  Also pressuring prices was the trade topic, as the calendar turned to September, meaning the next wave of tariffs on China was to kick in.  The dollar being lower today, and with the chance of the tensions in Hong Kong possibly easing a bit (thought to help with the overall US/China relationship and the renewed movements toward a trade deal) has cotton prices trading higher. 


On the economic front, yesterday’s ISM Manufacturing Index came in lower than expected, and below the critical 50 level, which is thought to signal if the economy is expanding or in decline.  Given the uncertainties surrounding the stability of the US economy, and if the Fed is keeping monetary policy too restrictive, the sub 50 print spooked the market into thoughts of the Fed needing to be more aggressive with interest rate cuts going forward.  Today’s data includes the trade balance data for July, along with the release of the Beige Book from the Fed this afternoon, which is used as a set up for the next Fed meeting on September 17-18.  Tomorrow and Friday will have more data on manufacturing in the service sector, along with productivity data and a picture on employment.    


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                       891.50                   889.75                   917.25

CZ9                      413.00                   412.00                   405.00

WZ9                     501.25                   498.75                   514.00

KWZ9                  442.00                   454.00                   489.50

MWZ9                 534.50                   546.25                   569.00

SMZ9                   308.0                     311.5                     316.9

BOZ9                   28.73                     28.59                     29.41

CLV9                    56.40                     57.99                     56.94

GCZ9                    1467.9                   1393.3                   1353.4

LHV9                    69.860                   77.025                   74.490

LCV9                    105.240                 107.505                 111.680

KCZ9                    104.25                   102.45                   107.65

CCZ9                    2379                       2393                       2352

CTZ9                    62.02                     66.14                     70.56

SBV9                    11.90                     12.23                     12.70

JOX9                    103.95                   106.20                   118.20

HGZ9                   264.85                   271.00                   276.25





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC