Weekly commodity wrap-up

2020, the Year to Remember

In addition to an erratic and contentious election, 2020 rang the bell for record-smashing events. Huge market moves will undoubtedly remain in the minds of investors and commodity traders and will be memorialized in the history of economics for centuries.

What went down?

This year, the stock market suffered its worst loss in decades. More than 1/3 of its value was lost in less than a month as the financial implications of COVID-19 sank in and massive lay-offs swept the U.S. That crash later recovered as the Fed and Congress orchestrated a bailout dwarfing any attempted previously in U.S. history in an effort to prop up the economy with the CARE’s Act.

But nothing in the history of formal trading compares to the unimaginable crash in the price of crude oil. Crude oil dropped to not only below zero, but got sucked into a black hole reaching a price of negative $49 per barrel on April 20, meaning those who bought it would be paid $49 per barrel to take delivery of it. The bizarre crash in crude also was related to the Pandemic since travel came to a halt and demand for fuels close to nil.

Crops and hogs fell dramatically in the beginning of the year as tariffs thwarted exports to China and the trade war worsened relations with our biggest customer. That tumble, too, was followed by a roller-coaster ride to the upside as drought concerns, both domestically and in South America, frightened producers while China’s pent-up needs returned to our export markets.

What went up?

Precious metals, especially palladium, silver and lumber were among the biggest winners in the upward race. Lumber hit bottom in March and then began a continuous upward move helped by a record low mortgage rate. The assent accelerated as the pandemic drew city-dwellers into new homes in the suburbs and the suburbanites to the home improvement stores.

Commodities and COVID

In recent years, commodity producers and futures traders learned investors and traders must watch diseases that infect not only human populations, but also those affecting birds, bats, cattle, hogs and many types of plants including all of our row crops, grasses and cover crops are vulnerable to significant attacks that can change the supply/demand formula so dramatically that the entire world economic balance can be altered.

As traders, we also must be weathermen, soil scientists, political junkies, sociologists, chemists, entomologists, accounting and tax experts, land value and labor experts, but nothing stands out like this year’s challenge to learn virology. Those who listened were able to keep up with COVID news and adjust their plans and purchases to respond to massive changes.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind.