Commodity Corner

Good afternoon,


DXU0  93.015  +0.019             GCZ0  1937.3  -15.2                                     ESU0  3487.00  +6.75                  CLV0  42.98  -0.41


The market dealt with 2 powerful forces today.  Hurricane Laura being the first, hitting land in Louisiana and causing much destruction in the form of chemical fires, wrecked buildings and flooded roads.  Laura did lose some steam, so to speak, as she moved inland, and was downsized to a tropical storm.  Numerous refineries were projected to be on Laura’s path, but they managed to avoid the worst of her brute strength.  With this, oil and gasoline futures traded down today in the aftermath. 


Cotton futures also came off a touch today, as Laura was downgraded.  The cotton area on Laura’s path will receive heavy rain, but the overall damage is expected to be limited.  Cotton prices are also facing headwinds as another good production year is expected.  The virus  this year had a big impact on demand, and inventories are the second highest on record.  Production is expected to outweigh consumption for the 3rd time in 4 years, which will tend to limit prices.


Lumber prices were limit bid again, on concerns about the aftermath of Laura and on a strong pending home sales number this morning.  Pending home sales are viewed as a leading indicator of the housing market.  Today’s GDP print, while still a horrible number at -31.7%, was an upward revision to the initial print last month, adding another layer of  hope to economic recovery thoughts. 


The next main event came in the form of Federal Reserve Chairman Powell kicking off the Jackson Hole Symposium with a speech of significant consequence for monetary policy.  Powell took advantage of this opportunity to give a view of the Fed’s plans for price stability and to strengthen the employment outlook.  The Fed is willing to let inflation run in the short run, to achieve the desired objectives.  This provided support for the equity market, while putting a bid into food based commodities.  Gold was hit on this, and interest rates increased (prices went down). 


Grain prices shot higher today, with a triple whammy of supporting items.  Analysts continue to take yield off from the final crops, as the dry growing conditions persist, evidenced in today’s drought monitor report, which continues to fan the flames of the rally.  Planalytics lowered its yield estimate on corn, while raising it slightly in soybeans and spring wheat.  Powell’s comments about inflation provided another reason for the bulls to make a push.  Lastly, another large purchase announcement, this time in corn, from China gave the market more reason to trade up.  Gregg Doud, the chief agricultural negotiator at the USTR, made comments regarding China’s performance thus far with Phase 1.  He said US exports to China are up 11% for agriculture, 31% for pork, 23% for dairy and 7% for poultry.  He did acknowledge that soybean sales were a bit disappointing to this point, but there have been strong sales made over the past few weeks, and he expects a big pick up beginning in September.


The factors mentioned above helped push soybean prices to the highest level since mid-January.  Corn and wheat prices also traded at their highest levels in 6 weeks.  Funds are carrying a healthy spec long position in soybeans, while continuing to scramble to get the remaining shorts covered in corn.  Funds are also believed to have flipped to a modest long in wheat.  The renewed demand for inflation products is providing the funds another reason to get on board.


Cocoa prices rallied for the 4th day out of the past 5, as the declining available supply held in warehouses received a new partner in crime to support the rally.  Politics in the Ivory Coast, about the existing President seeking a third term, could create much tension for the country.  This potentially could lead to production disruptions.


Important Note 


Monday is First Notice Day for many September futures contracts.  Any long positions as of the close of business tomorrow are subject to receive a delivery notice.  To avoid any risks of being stopped for delivery, positions should be liquidated or rolled before the end of the trading day tomorrow.             


Technical Moving Averages:

Product               50 day                100 day               200 day

SX0                       891.75                   874.75                   900.25

CZ0                      338.00                   338.25                   363.00

WZ0                     519.75                   526.00                   542.50

KWZ0                   450.00                   469.00                   481.75

MWZ0                 526.25                   534.00                   551.25

SMZ0                   296.5                     296.2                     303.7

BOZ0                   30.25                     29.03                     30.41

CLV0                    41.35                     37.10                     43.20

GCZ0                    1899.8                   1819.1                   1695.9

LHV0                    50.825                   52.180                   61.030

LCV0                    105.245                 101.920                 106.500

KCZ0                    110.30                   110.05                   116.40

CCZ0                    2315                       2318                       2417

CTZ0                    62.59                     60.16                     63.17

SBV0                    12.26                     11.61                     12.50

JOX0                    123.55                   121.85                   116.35

HGZ0                   287.10                   265.05                   263.80

HOV0                   125.68                   117.44                   142.46

XBV0                    116.38                   103.42                   121.16

NGV0                   2.109                     2.149                     2.185





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC