Breitinger
Federal Reserve members, particularly Chairman Jerome Powell, continued to appear committed to keeping interest rates high and raising rates to fight inflation.
According to financial futures markets, there is a 28% chance that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 72% chance that the rate will be hiked 75 basis points at the Sept. 21 meeting.
This stance contributed to an extremely strong US dollar, which weighed on commodity prices, particularly US exports. The higher dollar makes our exports more expensive for foreign countries to import and can weigh heavily on both agricultural and industrial commodities.
Crude crashes in recession, growth worries
Dollar strength was just one of several factors pushing energy prices lower this week. Fears of a slowdown in the US economy and, worse, recessions in Europe and China sent traders in crude oil, gasoline and diesel soaring. Crude oil is down more than $27 a barrel from its June high.
Russia’s announcement on Friday that it would keep the Nord Stream pipeline closed for maintenance had little impact on natural gas prices. Crude oil for October delivery traded at $88.15 a barrel, while October gasoline futures were $2.48 a gallon excluding taxes and transportation costs. Heating oil in October brought $3.63. Oct Natural gas cost $8.93 per 10,000 metric million British Thermal Units (mmBtu).
Cotton Nose Dives on Demand Fears
US cotton prices are particularly sensitive to China’s economic health, more so than other commodity groups. China’s role as the world’s largest manufacturer of clothing and textiles.
The strong US dollar, high energy prices and ongoing COVID-related shutdowns have hurt China. Timely rain in parts of Texas and the Delta contributed to downward price pressure.
The fall in oil prices also means that synthetic fibers could become more competitive against cotton. Cotton for December delivery was $1.035 per 50,000 pounds. Soybeans, which are often grown on the same land as cotton, were little changed this week, with November beans trading at $14.18 a bushel. December corn ended the week at $6.65 a bushel while December wheat closed at $8.10
Commodity Quiz
Name the three largest exporters of copper ore in the world. When were copper futures first traded in the US?
Opinions are solely those of the author. Walt Breitinger is a commodity futures broker based in Valparaiso, Indiana. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation to buy or sell any market.
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