Weekly commodity wrap-up

COVID Returns, China Descends

The world’s second largest, but struggling, economy has suddenly relapsed into a tsunami of COVID that is expected to infect as many as 800 million people. Every aspect of their lives may be affected, including an immediate stress on the supply chain and concurrent commodity prices that could be dramatic. Inflation might be stimulated, but temporary declines in demand for many commodities could accompany pockets of price increases if goods are hoarded like in previous outbreaks. Infections are rising in the U.S. and will probably rise further with holiday travel and visiting.

Bird Flu

As the rise in COVID plays havoc with the economy at the macro level, the highly contagious avian flu is an emerging threat to our domestic protein complex. The World Health Organization reported this week that the flu triggered the death of some 52.7 birds. Wild aquatic birds are spreading the flu to our domestic flocks, which leads to a need to cull. Domestic poultry shortages could lead to an increased demand for beef, pork, fish, eggs, and myriad other animal proteins. Conversely, livestock feed made from corn and soybean meal could see a drop in demand and a subsequent drop in those prices. The Center for Disease Control stated the avian influenza poses only a slight risk to humans as long as it doesn’t mutate into a worse version.

Fusion’s Future

Seldom have discoveries or inventions held the promise of boosting our economy and potentially solving every current or future threat to our civilization than the prospect of free, limitless, clean energy. The Energy Department announced a breakthrough in nuclear fusion research this week. It could eventually lead to virtually limitless energy based on fusion ignition, which uses lasers to fuse hydrogen atoms and release vast amounts of energy. Fusion — as opposed to nuclear fission, which uses technology developed in the early 1950s — holds the promise of producing power without the risks of nuclear waste or the challenge of supplying uranium as fuel. Currently, France is restarting fission reactors that are based on existing technology; they had previously been taken offline due to safety concerns.

Inflation Rate Deflates

The rate of U.S. inflation slowed again for the seventh month in a row, according to the Labor Department. Although prices did rise in October, the rate of the increase declined, especially for fuels, cars, and healthcare. The subsequent decline in stock indexes and metals followed Tuesday’s commentary from Federal Reserve Chairman Powel. The belief that the Fed will be more hawkish with interest rates and trigger a recession dominated investors’ liquidation of stock index futures.

Weekly Gainers and Losers

There weren’t any big winners this week. Losers are the stock indexes and March lumber, which was down nearly 10% per 1,000 board feet, at $379.00. The grains continued sideways, with March wheat closing at $7.53 per bushel. March corn settled at $6.53 and March Beans at $14.85.

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.