Oil slides as demand decreases
Threats of a slowing world economy due to COVID-19 concerns pushed crude oil down this week. Reduced air travel, a slowdown in Chinese oil imports and a surging U.S. dollar lowered demand for U.S. crude oil. Diesel fuel, heating oil and gasoline tagged along for the trip south.
Crude oil for September delivery traded at $62.85 per barrel midday Friday, while gasoline traded at $1.91 per gallon and heating oil at $1.93.
Water Shortage Spreads: While the fires and intense heat cooking our Western states impact every aspect of life, it's especially threatening to our farmers, ranchers, fishermen, lumbermen, miners, manufacturers and those depending on hydro-power.
For the first time, the Bureau of Reclamation declared a water shortage in the Colorado River Basin. Allocations from the river were cut by as much as 18% for next year. Since Arizona gets roughly 40% of its water from the Colorado, the mandate could hurt their commodity producers. Smaller cuts will be imposed in Nevada and New Mexico.
Clean water's cost along with use policies are gaining importance. Water quality and government subsidies play a big role in consumption and costs. In response to the water shortage, some regions are building more dams and digging deeper wells, but these solutions may worsen the problem. In the western U.S. 90% of the water goes to agriculture. The megadrought there has now lasted for over 20 years. The Colorado River basin is the driest it's been since the year 1500 by some estimates. Lake Mead, the largest reservoir in the country, is currently at its lowest level ever. The farmers dependent on Mead will have to relocate or stop growing their crops.
John Deere Developing Robots: John Deere, the largest farm equipment manufacturer in the US, announced the purchase of Bear Flag Robotics last week. Similar to driverless cars revolutionizing the auto industry, autonomous tractors could plant and harvest crops with no farmer aboard. The robotic tractors will allow for 24-hour planting, fertilizing, and harvesting. It could also solve labor shortages, just as the cotton gin and internal combustion engines dramatically changed agricultural production.
Grain Prices: A small drink in some of our driest crop-producing areas dampened enthusiasm for buying grains this week. Corn for December delivery traded at $5.41 per bushel, September wheat was down 8 cents to $7.20 midday Friday and November beans fetched $13.10.
Walt Breitinger is a commodity futures broker with Paragon Investments in Silver Lake, Kansas.