Coffee and Sugar Swirl Lower

Your morning fix of java and sweetener just got cheaper, thanks to rising production around the world. Coffee and sugar prices fell near 2 ½ year lows this week as the markets adjust to oversupply.

Hefty coffee harvests are expected this year in Brazil, the world’s largest producer, while rising sugarcane production in India and Thailand could flood the global sugar market.

Unfortunately for many Americans, the savings may be limited, as the underlying cost of the raw commodities is only a small component of a $5 latte; coffee futures are worth $1.15 per pound, sugar costs under 12 cents per pound, and milk trades for under 15 cents per pound.

**Better Weather Clouds Grain Prices

Corn, wheat, and soybeans fell this week as farmers cheered better weather forecasts.

Across much of the Corn Belt, farmers have been worried that cold, wet weather could delay spring planting, but warmer and drier weather is expected next week, hopefully allowing them to get into the fields. This could boost corn and soybean acreage this year, an expectation that sent both markets to a two-week low on Friday, at $3.78 and $10.32 per bushel respectively.

Meanwhile, wheat farmers across Colorado, Kansas, Oklahoma, and Texas are expecting heavy rains, which should alleviate drought concerns, a factor that pulled Kansas City wheat down to $4.85 per bushel on Friday.

**Housing Boom Hoists Lumber Higher

Lumber prices exploded to all-time highs again this week, topping $550 per thousand board feet as U.S. new home construction reaches a 10-year high.

Housing starts have been steadily rising since bottoming out in 2009 as the housing market recovered, with new construction almost tripling over the last decade. After the devastation of Hurricanes Harvey, Irma, and Maria last year, there has been even more demand for lumber as people rebuild.

Aside from rising construction demand, lumber has been rising due to limited supplies. Major wildfires in the Pacific Northwest destroyed timber and limited sawmill output last year. Worse yet, the U.S. levied a 20% tariff on Canadian lumber imports, which account for one third of U.S. wood supplies.

Lumber price increases are especially painful for builders and new home buyers who are also being hit by climbing mortgage rates and rising prices for concrete, drywall, and steel. Despite the rising prices, demand for construction hasn’t shown signs of slowing down yet.