Breitinger: Beans blast to four-year high
Exports to China, very dry weather in South America, and a tumbling U.S. dollar all contributed to record highs in soybean futures.
There seems to be no end in sight to the drought in Argentina and Southern Brazil, a major soy-producing region which typically competes with U.S. farmers in world markets, especially for Chinese business.
The explosion in beans was accompanied to a lesser degree by a rise in corn, wheat, and oats. Dryness in Russia and our own drought in the southwestern plains continues to threaten wheat production and, according to NOAA, is the worst drought in that region in seven years. Next Tuesday, the USDA will publish a supply/demand report describing our current and future stockpile of our major crops.
With roughly 90% of our bean crop harvested so far and Joe Biden poised to win the presidency, agricultural economists are now focusing on Biden’s domestic and foreign policy proposals, stimulus, and COVID plans in addition to the weather.
As of midday Friday, January soybeans traded at $11.01 per bushel.
COVID Cases Explode: New U.S. COVID cases exceeded 100,000 for the first time on Wednesday, causing farmers, ranchers, and investors to wonder how supply and – even more dramatically – demand for commodities may be affected.
Consumers could be facing a winter of restrictions, hurting demand for foods, travel, discretionary goods, and related commodities as well.
Gasoline, diesel, jet fuel, cotton, cocoa, copper, livestock could all decline if the pandemic worsens in the U.S., and the economy becomes more dependent on fiscal stimulus as the main income source for millions of Americans.
Investors Flock to Gold with Election Results: Many investors stood aside as they feared rising economic uncertainties or civil unrest during the election, but some of that cash moved into precious metals during the week.
Gold for December delivery rose nearly $100 per troy ounce by Friday, topping $1,960 for the first time since September. A sharp decline in the U.S. dollar contributed to speculation into gold as well. December silver traded at $25.65 toward week’s end.
Alex Breitinger is a commodity futures broker with Paragon Investments in Silver Lake, Kansas.