Crude, Copper Can't Be Stopped

The crude oil and copper markets bullied their way higher this week, reaching new 18-month highs. Both markets have been steadily rising since the beginning of 2009, accelerating their upward momentum recently as economic news boosted the markets. Stronger than expected U.S. manufacturing levels, encouraging consumer sentiment figures, and a rosier U.S. employment outlook all contributed to the recent rise in industrial commodities.

On top of all of the positive news in the United States, the Chinese government reported on Thursday night that their manufacturing industry is continuing to expand at a rapid pace. China is the world's largest consumer of copper and second largest crude oil importer, which causes the commodities markets to follow Chinese news closely.

After the one-day, 20-cent spike following the Chilean earthquake on February 28, the copper market had been trading quietly near $3.40 per pound until recently. This week, the economic news gave copper the boost it needed to break above $3.60/lb, the highest price for the red metal since July 2008. Market bulls were especially emboldened when the copper prices "broke out" of the recent range, making new highs at $3.606/lb.

Although the markets were closed on Friday, copper and crude oil were still able to post significant gains on the week, rising 17 cents/lb (+5%) and $5/barrel (+6%) respectively.

Grains

The corn market reacted negatively to Wednesday's USDA report which hinted that food inflation would remain mild this year. U.S. farmers plan on planting more than 88 million acres of corn and 78 million acres of soybeans in 2010 -- amounts which could possibly yield bumper crops this fall. The report also indicated that the stockpile of corn left over from last year's harvest was unexpectedly high. May corn futures dropped 9 cents when the report broke and continued lower on Thursday, closing at $3.54 per bushel. This is a level not seen since the peak of the harvest of 2009. Moving forward, traders will focus on weather, energy prices, and demand factors such as exports to China.