Unseasonably cold weather struck across the Great Plains this week, bringing snow and freezing temperatures to major wheat producing regions. Although the extent of the damage is uncertain, some analysts expect significant yield loss in the wheat crop that is growing in the hard-hit states Kansas, Oklahoma, Texas and Colorado. Temperatures were recently as high as 90 degrees in some areas that were hit with a freeze this week, a temperature swing that can hurt the development of wheat in its early growth stages.
In response to this production threat, wheat for delivery in July rose more than 30 cents per bushel (+4.6%) this week to $7.27 on Friday.
Corn Delays Continue, Soybeans Substitute
In the Midwest, cold temperatures and snowfall are delaying corn planting further, with areas of Iowa (America's #1 corn-producing state) under as much as two feet of snow. Nationally, it is estimated that as little as 5% of the corn crop had been planted as of last week, compared to an average of 31% over the last five years. This delay is causing some analysts to downgrade expectations for the size of this year's crop, causing prices to rally as much as 46 cents per bushel (+8.7%) by Friday.
If farmers are unable to plant corn due to the weather, some may switch to planting soybeans, which can be planted a month later than corn. The expectation of more soybean planting has kept soybeans from following corn prices higher. November soybeans futures, which track the value of this fall's harvest, finished the week at $12.81, up marginally on the week.
Stronger Economy Lifts Commodities
US economic numbers released this week showed a rosier outlook for our domestic economy. Decreasing unemployment claims, increased job creation, rising home prices and the prospect of further Federal Reserve stimulus all boosted optimism. US stock markets rallied, pulling up many commodities that are linked to economic strength. Copper, which is closely tied to the housing and automotive industries, rose as much as 12 cents per pound (+3.3%) to $3.80. Meanwhile, crude oil jumped by $3.00 per barrel (+3.2%) to $96.
Despite strong US numbers, some market bears point to economic slowing in China and stagnation in Europe as warning signs for a slowdown in global commodity demand.