Weekly commodity wrap-up

Fed remains flat

The Federal Reserve left rates unchanged this month in an announcement on Wednesday, but the comments following the announcement from Fed chairman Jerome Powell made it clear that it is not dove season for policy makers, yet. The path for a soft landing is still plausible but factors outside of the Fed’s control might prevent interest rates from being lowered as much or as fast as previously hoped.

The prospect of higher interest rates for longer had both stock indices and bond prices experiencing heavy selloffs with several other commodities in tow the following day. The 30-year U.S. treasury bond reached a low of $115.72 this week making a new low price not seen since April of 2010.

Crude oil futures were one of the few commodities that did not move lower after the Fed news, which was even more impressive considering the broad commodity selloff and a strengthening dollar. November crude oil futures are trading around $90 per barrel.

Soybean prices disappoint with questions surrounding both supply and demand

November soybean futures fell roughly $.50 this week measuring from last Friday morning to this Friday morning’s open of around $13 per bushel. This price drop comes even as questions about decreasing yields following an extended dry finish to the growing season linger.

Weekly export sales for soybeans were disappointing showing only 463,000 metric tons on the week, one of the lowest reportings for this week when looking at the last decade.

A combination of a bumper crop in Brazil that has allowed them to continue to capture more export market share and low Mississippi river levels for the second year in a row were blamed for the move.

This is the second year in a row that drought in the Midwest and Plains states is creating a backup of barge traffic along the mighty Mississippi. The fall/winter months are critical for soybean shipments as that is the timeframe when Brazil is planting soybeans and not shipping as many. If that window is reduced due to low water levels it will add another hurdle to competing with Brazil when it comes to U.S. exports.

Have a comment or question? Please reach out to derrick.hermesch@pinion.global.com.

Opinions are solely the writer’s. Derrick Hermesch is a commodity futures broker with Pinion. He can be reached at 785-338-9605. This is not a solicitation of any order to buy or sell nor does it provide any recommendations in regard to the market. Information contained herein is believed to be reliable but cannot be guaranteed as to its accuracy or completeness. Past performance is no guarantee of future results or profitability. Futures and options trading involve substantial risk of loss and is not suitable for all investors.