Weekly commodity wrap-up

Grains fired higher by drought fears

A drop in crop condition ratings, especially in Iowa and Illinois, triggered more midweek buying of corn and beans. Young, parched plants are being threatened during the early development stage. While there is time for most crops to catch up if timely rains fall, no major relief is in sight. Stories abound of reservoirs, wells, rivers and canals that are needed for transportation continuing to be affected. Wheat rallied briefly as Russia’s expected production has waned, thus removing extra supply that could hurt demand for U.S. wheat.

The U.S. has some level of drought in 57% of soybean-growing regions and 64% of corn-growing regions. Predicted rains have not occurred, putting corn at risk during pollination. Drop in demand for U.S. exports continues as a bearish factor that could cause a large price setback at any time, however. The generalized fear of recession continues to threaten consumption since reduction in income can reduce food purchases.

Besides the weather and export challenges, grain traders are watching a stronger U.S. dollar (a bearish factor) and the suspense associated with the biggest crop report of the year for corn and soybeans. That U.S. report, scheduled for Friday, June 30, will assess both the planted acreage and the stockpile of corn, beans and wheat.

Fed’s rate plans tank crude, stocks, metals

Crude oil, stock indexes and precious metals were knocked down by the prospect that the Federal Reserve, as predicted by Chair Powell, is likely to raise interest rates in the coming months.

Other central banks also signaled expectations of raising their rates to temper inflation in their economies. Raising rates two more times in the U.S. would create a 22-year-high and cause fear of a recessionary response in all agricultural and financial sector markets.

The decline in crude could impact the global economy because transportation, chemical industries (including agricultural inputs), construction and heating and cooling depend on petroleum. Products like diesel, heating oil and gasoline also fell this week.

Weekly winners and losers

Natural gas rallied 10 cents per mmBtu from last Friday. Wheat gained roughly 35 cents per bushel. Silver went down about $1.75 per ounce, and gold dropped $40. Crude oil lost more than $2.50 per barrel, with RBOB Gasoline futures down 14 cents per gallon. Corn and soybeans, with all their up and down movement, didn’t see much change from last Friday.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.