As snow melted across the Midwest, so too did corn prices, falling to six-week lows on Thursday. Corn futures dropped 12 cents per bushel (-3.2 percent) this week as bearish factors weighed on the market. Strong production out of South Africa and Argentina threatened to balloon global supplies, while U.S. stocks were reported higher than expected by this week's USDA report.
Warmer weather also melted snow that had been covering fields, giving farmers hope they will be able to plant on schedule this year. All these factors helped push the corn market lower this week, with the May corn contract trading Friday morning at $3.63 per bushel.
Crude oil and gasoline
The petroleum markets surged skyward until Friday morning, gaining as global economic sentiment strengthened, supplies tightened, and a falling U.S. dollar made most commodities more valuable. The strongest of the petroleum markets was unleaded gasoline, with the April contract making an 18-month high at $2.31 per gallon on Wednesday morning.
The recent rally has been fueled by refinery slowdowns and expectations for stronger demand in the coming months, which has some market bulls believing supply/demand factors could continue pushing the market higher into the summer. An abrupt downturn midmorning Friday dropped gasoline to $2.24 per gallon and could provide relief to those needing to buy fuel next week.
Although $2.31 per gallon may seem inexpensive to consumers, the futures market price represents wholesale gasoline in the New York harbor, without taxes. As such, drivers are certainly feeling the price pinch as gasoline prices have risen 195 percent since December 2008, when gasoline bottomed out during the economic slump.
Soybean oil
Unlike most other agricultural markets, soybean oil prices advanced this week, rising Thursday to two-month highs. The cost of producing soybean oil is linked largely to the underlying price of soybeans, which has been working gradually lower for weeks, but demand has been strong, especially from the biodiesel market. Biodiesel production is centered in the Midwest and uses the oil to produce an alternative fuel that can be used in place of diesel fuel. For this reason, soybean oil prices have benefitted from the recent rise is diesel fuel prices, pushing soy oil up 13 percent over the last month to a high of 41.02 cents per pound on Thursday. Yet on Friday morning, as fuel prices plunged, so too did soybean oil, erasing much of its recent gains, with May soybean oil trading near 39 cents per pound at midday.
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.
