Weekly commodity wrap-up

Silver slammed by profit taking

Metals markets saw a massive sell-off as traders raced to grab profits accumulated during the pandemic as the U.S. dollar declined and financial uncertainties drove a flight to quality and safety of precious metals. Gold, silver, platinum and copper took a hit with silver falling more than $5.40 per ounce at Thursday’s low compared to last week’s close. Gold had its worst tumble since March.

Silver’s earlier huge upward swing to $30.00 accompanied fears that stimulus like the Payroll Protection Program, extreme low interested furthered by the Fed, and fears of geopolitical risk associated with China trade and the elections could all cause inflation or a flight into metals from paper currencies. Speculators will now watch for clues to the next wave of buying or selling.

Beans decline on harvest pressure

Not all areas of the Grain Belt received the drink in time they needed to finish growing but harvest, at least in most of the Corn and Bean Belt, continued without any major threats. The price rally in the soybean complex stimulated mostly by Chinese buying, finally subsided as beans for November delivery dropped 50 cents from last Friday’s high primarily due to good harvest weather.

In addition to the fires out west and predictions of the La Nina pattern affecting moisture and temperature, farmers are also watching COVID, political extremes which could impact tariffs and trade after the elections, and many economic factors which could affect demand for our crops.

Chicago merc to trade water futures

Farmers and ranchers sell their commodities on the futures markets and need to buy or hedge gasoline or diesel fuel to lock in some of their costs. The CME plans to launch a water futures contract based on the NASDAQ Veles California Water Index so agricultural, commercial, and municipal water users will have a chance to manage costs and risks associated with undependable or vacillating water supplies and prices.

Diesel fuel futures, as of today, traded about $1.13 per gallon, gasoline about $1.18 per gallon, and soybean oil 33 cents per pound. The price of water last week was about $526 for an acre-foot of water which is the volume needed to cover an acre a foot deep, or roughly 326,000 gallons. Investors may find it interesting to compare the value of water to that of crude oil, milk, and other commodities as water becomes more precious and difficult to supply where it is needed to support the human population.