Weekly commodity wrap-up

Metals Tarnished by Dollar Strength

A rise in the producer price index and Thursday’s hot jobs data prompted the Federal Reserve to warn of further rate hikes, and that lifted the U.S. dollar. The stronger dollar and fears of more aggressive rate hikes knocked the legs from under gold and silver Thursday and Friday morning. Stock indexes followed the down direction at the end of the week, with the NASDAQ staging the largest declines. Crude, too, which is often correlated to the direction of gold, fell hard on Friday morning.

Cotton Unravels on Recession Fears

Higher interest rates and huge credit card debt are not a formula for folks buying new wardrobes. Arguments with China—our biggest cotton customer—regarding the balloon and high-flying objects did little to stimulate that business, either.

Carbon Capture and Commodities

In its simplest form, carbon sequestration is the capture of carbon dioxide (CO2) from our air and the storage of it in solid or liquid forms. This process reduces CO2 in the atmosphere, and reduces the most prevalent heat trapping gas that is causing droughts, fires, storms, and floods. Plants capture carbon naturally through photosynthesis, and they can store in soil. This is a biological form of sequestration. Many farmers have worked to do this since the beginning of the agricultural revolution. So, we have our farmers to thank for studying and following best practices for land use that balance carbon emissions with carbon capture and storage, in addition to growing our food.

However, dramatic emissions produced during and after the industrial revolution have added such enormous quantities of CO2 that the greenhouse effect has been warming the earth at too fast a pace and causing serious climate problems.

Geologic carbon sequestration is the industrial storage of carbon (usually in liquid form) underground in porous rock or other depositories. This process can offset the CO2 emitted, or the carbon can be used as a component of petroleum production, power generation, and recovery.

Since trading crops, lumber, and petroleum serve as the foundation of commodity trading, watching developments in carbon sequestration, both biological and geologic, will probably be the focus of the futures markets for the foreseeable future.

Weekly Winners and Losers

Cocoa and coffee were the winners with coffee rising to $1.8650 per pound, and cattle jumped to $1.6475 per pound.

Gold traded at $1,851 and silver brought $21.70 per pound. Cotton, crude oil, and lumber were also among the losers, along with natural gas.

The grain market continues to go nowhere fast, remaining in a sideways trading range. March corn closed at $6.76 per bushel, March wheat at $7.65, and March soybeans at $15.26.

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.