USDA Report Shocks Grain Markets

A monthly USDA grain production report released Friday morning drove the grain markets toward new highs. After the report was released, corn, wheat, soybean and oat prices all went "limit up", rising the maximum amount permitted by the Chicago Board of Trade.

The USDA slashed estimates for the size of the U.S. corn crop, suggesting that the U.S. corn supply could be extremely tight over the coming year. A few months ago, the government agency had predicted that this year's crop would be a record-breaker, but hot temperatures and flooding in the Corn Belt have trimmed the size of the crop.

As of midday Friday the grains were all locked limit up, with December corn at $5.28/bu, November soybeans at $11.35/bu, and December wheat at $7.19/bu.

With grain prices heading toward sharply higher, many end-users are concerned that they may be forced to pay astronomical prices for corn to feed animals, produce ethanol, or make food products.

Metals Continue Higher

While grain prices exploded this week on supply concerns, metals prices levitated on strong world demand.

U.S. investors were especially motivated to buy precious metals as our "greenback" fell to new 5-month lows. Furthermore, a consensus is building that gold and silver could retain value while "paper investments" decline. Gold hit a new all-time high this week at $1360 per ounce and silver, often called "the poor man's gold", blasted over $23.50/oz, the highest level seen since 1980.

Natural Gas Sinks to New Lows

In comparison to the high-flying grain and metals markets, natural gas limped to its lowest close in over a year.

Natural gas is used to produce steel, fertilizer, and electricity among other things. Before being used, it is normally stored in large underground storage systems. The U.S. government reported this week that the amount of natural gas in storage was significantly higher than expected.

As a result, natural gas for November delivery fell to $3.58 per million BTUs -- a level not seen since September of last year. Some bullish traders were left scratching their heads as they were expecting a drawdown in supplies in preparation for the winter heating season.