Hot Commodities Heat Up Further

Commodities are the raw materials and resources on which modern civilization depends. Unlike stocks, bonds, mutual funds, cryptos, and insurance, commodities are the foundation of our economic system. They create the food, shelter, fabrics, and fuels on which human life depends.

During wartime, economic uncertainties, or weather events, forward-thinking investors recognize the value of these essential qualities; commodity prices increase compared to intangible or “paper “ investments. If Wall Street were to disappear, our country would still need raw materials as well as those who produce and trade them.

In our recent past, which includes a pandemic, record fires, floods, inflation, and the war between two of the world’s biggest commodity exporters, commodity investments and futures trading have been launched into a new level of popularity and inherent risk. Virtually all consumers, producers, investors, and policymakers need to study and monitor commodities. However, very few should consider trading or investing in futures because a great deal of leverage and volatility has also added commensurate risk.

Inflation Highest Since 1981

Inflation, as measured by the Consumer Price Index (CPI), jumped 8.5% year-on-year from last March, while producer prices rose 11.2% from a year ago. The CPI is a measure of retail prices, whereas the PPI measures changes in wholesale prices. The CPI was heavily impacted by the cost of gasoline, used cars, rentals, and groceries. How our citizens will react, adjust, and invest in this economic climate—new to half our population—has yet to be seen. While many analysts expect inflation to heat up further and for a long period of time, others predict prices will peak and decline in the months ahead.

Biden to Allow More Ethanol in Gasoline

On Tuesday, the White House announced that high-ethanol content gasoline (E15) would be permitted to be sold this summer. It is normally not sold during the hotter months because of alleged higher emissions. The announcement added demand for the yellow grain, since ethanol is made from corn, which has already been climbing due to reduced supply coming out of Ukraine.

Thursday afternoon, toward the end of a shortened holiday week, May corn traded for $7.90 per bushel, May wheat at $10.97, and May beans at $16.80. Gold for June delivery brought $1,975 per ounce, May silver $25.60, May gasoline $3.36 per gallon, and crude oil $106.30 per barrel. Cotton traded at $1.42 per 1,000 pounds, while lumber was at $890 per thousand board feet.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.