Weekly commodity wrap-up

Grains gain on weather, export prospects

Corn and Soybeans rallied consistently during the week on continued reports of China’s diminishing stockpiles, as well as hot temperatures and drought in Argentina, a major exporter of beans, corn, wheat and beef. Fears of damage and even winter kill to the U.S. wheat crop drove buyers into that market as well.

All U.S. agricultural products face export demand challenges as producers and processors try to predict and understand the impacts of President Trump’s warnings and negotiations with our largest foreign customers. Though weather and tariffs seem to dominate prices at the moment, fuel and labor costs could emerge at the top of concerns at any time.

Crude still the rule as economic tool

Despite environmental concerns and the push toward alternative fuels, crude oil remains a key driver in many worldwide economies today. For food production down on the farm, most equipment is fueled by diesel derived from crude, powering both implements and pumps for irrigation. Pesticides and fertilizer also rely upon petroleum products derived from crude oil as does transportation of farm goods.

The widespread use of the “black gold” also fuels jet planes, contributes to the manufacturing of plastics and helps heat our homes and offices. It appears in clothing, couch cushions and common lubricants. Wars have been fought over “The Prize,” with modern wars motivated by obtaining control of energy.

World War I and World War II, the Korean War and Vietnam, were influenced by oil, as were Desert Storm and Desert Shield. Now, the war in Ukraine has heavily impacted conflict over natural gas. The costs of production of virtually all commodities and manufactured goods are substantially increased by the cost of energy.

Trump’s crude policy: March the drill team

President Trump has declared a “national energy emergency” giving more power and control to the White House to suspend environmental measures and restrict crude oil exports. The president emphasizes the policy shift with his mantra, “We will drill baby, drill.”

Withdrawing from the Paris climate deal along with revoking efforts to move to 50% electric vehicles by 2030 both show his dramatic turn in oil policy. In addition, President Trump is expected to relax emissions regulations and pause offshore wind support.

The national oil reserve currently stands at 400 million barrels, 350 million barrels below capacity. A White House effort to top off the reserve would come at a cost of $20+ billion dollars.

If the president follows through with proposed 25% tariffs on Canadian goods, experts estimate that gasoline prices could increase from 25 to 75 cents per gallon since 52% of U.S. crude imports come from our northern neighbor.

In Trump’s speech before the World Economic Forum on Thursday, he called for OPEC, led by Saudi Arabia, to lower the price of oil. He claimed that OPEC was responsible for fueling the war in Ukraine by keeping oil prices high. Oil prices have declined since his inauguration speech as his ”Drill baby drill “ policy has been touted. The concurrent sharp rise in gold prices hints that the fight on inflation might be lost even if oil prices are declining.

CME midday prices: Price per bushel: March Soybeans, $10.55; March Corn, $4.86; March Wheat, $5.42. February Livestock per 100 pounds: Cattle, $204.85; Hogs, $82.40. Metals per troy ounce: February Gold, $2,778; March Silver, $31.16. March Copper per pound: $4.32. March Crude oil per barrel: $74.40. March Natural Gas $3.43 per 10,000 MMBTU.

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