This week, tensions eased between Syria and the United States as it looked like a Russian-brokered deal might lead to peaceful removal of chemical weapons. The potential for peace caused a sell-off in gold, crude oil, and related commodities.
Investors frequently buy precious metals in times of economic or political uncertainty and sell in times of peace, while Middle Eastern strife can restrict the flow of crude oil from the region, causing traders to bid up petroleum on expectations of conflict.
By Friday, the gold market melted $81 to a one-month low at $1,305 per ounce, while silver slid to $21.42, down $2.57. Meanwhile, crude dropped $3 per barrel to $107.53, while gasoline prices fell nearly 10 cents per gallon. Despite this week’s sell-offs, prices for all these commodities remain well above their midsummer lows.
Corn crunched, Soybeans soar
A USDA report released Thursday raised projections for the size of this year’s corn crop, pushing prices lower. The expected corn yield rose to a bin-busting 155.3 bushels per acre, potentially producing a record-breaking crop size of 13.84 billion bushels. This increase in supply caused the price of corn to fall to a four-week low under $4.57 per bushel.
The same report showed more skepticism about the soybean crop. Due to the hot, dry weather this summer, the USDA cut yield estimates to 41.2 bushels per acre, dropping the total crop size 3.3 percent to 3.15 billion bushels. The drastic cut to supply caused the soybeans to rally by 40 cents per bushel to (up 2.9 percent) $14.
Although the corn and soybeans are nearing full maturity, weather during harvest can still affect farmers’ ability to bring in the crop, making weather in the coming weeks important to the agricultural community across the Midwest. Soaking rains or freezing temperatures can upset the final growth stages or prevent field work, potentially bogging down this year’s harvest.
Cocoa charges higher
Cocoa prices rose to the highest price since last September as traders grew increasingly concerned about dry conditions in Ghana, Ivory Coast and neighboring nations. Overall, West African countries produce two-thirds of the global cocoa crop, and drought in that region is hampering this year’s production. These concerns have been pushing prices higher for months, with cocoa trading for $2,595 per metric ton on Friday, up $440 (up 20 percent) since July.
Opinions are solely the writer's. Walt Breitinger is the president of Breitinger & Sons LLC, a commodity futures brokerage firm in Valparaiso. He can be reached at (800) 411-3888 or indianafutures.com. This is not a solicitation of any order to buy or sell, nor does it provide any recommendations regarding the market.