Back to the Futures: Beans bounce, silver shines and cotton rips higher

Published: August 16 2013 | 1:00 pm - Updated: 28 March 2014 | 7:10 pm in

[Editor's note: Every Friday visit the Business 380 for "Back to the Futures," a quick discussion of the week's grain, livestock, gasoline prices and other topics.]

Beans bounce on frost fears

The USDA released a monthly report on Monday showing that the US soybean crop would be notably smaller than expected, though still large by recent standards. The shrinking crop expectations started a rally that lasted all week, with soybeans climbing by as much as 90 cents (+7.6%) by Friday morning to $12.72 per bushel. The weeklong upswing was primarily fueled by strong soybean exports to China and weather concerns.

The soybean crop was planted late this year and has been hampered by cool weather this summer, putting this year’s beans behind schedule. This delay has prompted fears than an early or even a normal first frost or freeze could damage soybeans. As temperatures recently dipped into the 30s in some growing areas in the Midwest, traders pushed soybean prices sharply higher as they were reminded about the threat of crop damage.

Silver shines

Silver prices exploded $2.90 higher (+14%) this week, reaching the highest price since May. The rally was sparked by news that Europe’s recession is likely over, a sign that the world’s largest economy will increase its demand for industrial commodities, including silver.

Meanwhile, there was also a “flight to safety” lift in the precious metals as investors sold stocks and other assets in favor of gold and silver. One focus of these investors is the increasingly violent political crisis in Egypt. Longer term, most silver followers continue to watch the US Federal Reserve for further indications about when the Fed will cut back on stimulus.

Despite the recent rally, silver is still down by more than $10 per ounce (-34%) during the last year, making Friday’s price of $23.20 seem cheap to some.

Cotton rips higher

Cotton prices have been rising recently as the US crop was drenched by heavy rain in southeastern states like Alabama, Georgia, and Mississippi. A USDA report released Monday showed a drop in the estimated US crop size of nearly a half million bales of cotton, a 3.3% reduction.

Ongoing unrest in Egypt also has cotton traders concerned about potential supply disruptions. Although Egypt is a minor cotton exporter, its crop is prized for its high quality, making Egyptian cotton important to high-end cloth producers.

These supply threats and stronger foreign economic news helped to boost cotton to a six-month high of 93.9 cents per pound.

Opinions are solely the writer's. Walt Breitinger is a commodity futures broker based out of Silver Lake, KS. He 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.

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