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Commodity Index, Tech Guy Comments & Rain Days Update 03/27/2022

A commodity index is an investment vehicle that tracks the price and the return on investment of a basket of commodities. These indexes are traded on various exchanges.

There are mutual funds of various commodity indexes. The most popular commodity index is the Commodity Research Bureau (CRB) Index. It is a daily indicator of global commodity markets.

The CRB Index is made up of 19 commodities:

39% of which are energy contracts

41% to agriculture

7% to precious metals

13% to industrial metals

The CRB is designed to isolate and reveal the directional movement of prices in overall commodity trades.

After the Great Depression in the 1930s, trading activity in stocks, bonds, and commodity futures was beginning to show some life. However, traders of commodities found very few sources of comprehensive information were available.

A journalist, Milton Jiler, founded the Commodity Research Bureau, with the Futures Market Service as its first publication. He felt traders needed something that better reflected the overall price activity in the commodity markets rather than individual commodities which had very few contracts traded through the day.

To improve trade transparency, the CRB Index was designed to provide a dynamic representation of broad trends in commodity prices.

In 1986, the New York Futures Exchange (NYFE) introduced the CRB Futures Price Index. It quickly became the most watched contract on the exchange. Today, there are several different commodity indices that track baskets of commodities to reflect price movements, but the CRB Futures Price Index, in our opinion, is the one business owners (includes farmers) need to watch.

The CRB Index is an inflation index for commodities, but not consumer goods, which, of course, follow commodity prices, but also wages. Its futures contracts are traded on the Intercontinental Exchange (ICE) where interest rates, coffee beans, metals, currency pairs, and even carbon credits are traded.

The CRB Index name was eventually changed to the Reuters CRB Index.

While the CRB Index is a reasonable way to hedge inflation and, to a lesser extent, interest rates (which follow inflation), we soon will cover hedging interest rates.

Reuters CRB CCI Index Futures Contract Specifications:

Units of Trading $500 x Index

Tick Size 0.05 points ($25.00 per contract)

Trading Months January, February, April, June, August, November.

Trading Hours 9:00 AM to 1:30 PM Central Time


Tech Guy Comments:

I believe the May Corn minus Dec Corn spread has bottomed since selling off from March 4. Looking for an initial target of 120. Most markets like the 50% correction for pivot points. Please see the line chart below.

May Wheat Support: $10.69; resistance or upside target: $11.49, then $11.73.

May Corn Support: $7.46, $7.40; resistance: $7.65, $7.73.

May Soybean Support: $16.96 then $16.80; resistance: $17.59.

Crude Oil sold down to $108.68 on Friday and bounced to 114+.

I expect another leg down to the $104.50 to $101.00 area where a stronger up reversal should occur.

Please view the Crude Bar Chart below.


Rain Days Update

Yesterday, in the dry areas of South America: Santa Maria high temperature 76°F with 0 inches rain. Cordoba high temperature 88°F with 0 inches rain. Salto high temperature 81°F with 0 inches rain. Total rainfall and temperatures expected in the next ten days: Santa Maria 2.41 inches, 68 to 90°F. Cordoba 0.00 inches, 67 to 88°F. Salto 0.13 inches, 64 to 82°F.

The Western Corn Belt has 1 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 1 more rain days than yesterday.


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