Weekly commodity wrap-up

Stormy Season Ahead

This year’s Atlantic hurricane season continued breaking records after the 10th named storm, Josephine, formed on Thursday. This is the earliest arrival of the 10th storm of a season; typically, the J-named storm doesn’t arrive until mid-October.

For now, the storm is not expected to affect the U.S. mainland, but recent warnings from the National Oceanic and Atmospheric Administration (NOAA) should put many Americans on edge. NOAA recently updated its 2020 forecast to call for an “extremely active” season with 19 to 25 named storms, including 7 to 11 hurricanes.

Commodities markets are not facing any direct threats right now, but they could run wild depending on where storms develop and make landfall. Orange juice and cotton are two of the agricultural markets most sensitive to storms. Both crops are near high levels for the year, trading Friday for $1.19 and $0.63 per pound, respectively.

Lumber, which can see high demand from post-storm rebuilding, is already at all-time highs above $700 per thousand board feet. Do-it-yourself remodelers and strong new home construction during the COVID outbreak have created massive demand, taxing supplies and nearly tripling prices. Should a storm create widespread damage later this year, lumber prices could strike even higher.

Crude oil production in the Gulf of Mexico and refineries near the coast make the energy sector especially vulnerable to hurricanes as well. Prices could explode should a storm knock out production in that region.

Corn Rallies on Supply Threats

Corn prices struck a contract low this week at $3.20 before exploding to $3.40 on Thursday. The quick 6% gain came on the heels of a USDA report showing that farmers may not harvest as much corn as previously expected.

Meanwhile, a massive windstorm ripped through Nebraska, Iowa, Wisconsin, and Illinois on Monday, knocking out power while damaging property and crops.

Known as a “derecho,” the storm packed hurricane-force winds, which ripped apart fields and grain storage facilities as well. The magnitude of the damage is still being assessed, but it will likely affect thousands of farmers. Even if their crops escaped unharmed, losses of on-farm storage or damage to commercial grain elevators could leave farmers scrambling to find a place to take their harvest.

As of midday Friday, December corn traded for $3.38 per bushel.

Opinions are solely the writers’. Walt & Alex Breitinger are commodity futures brokers with Paragon Investments in Silver Lake, KS. They can be reached at (800) 411-3888 or www.paragoninvestments.com. This is not a solicitation of any order to buy or sell any market.