Dry weather in Brazil, fears of drought in our Corn Belt and extremely tight supply fueled the perfect storm to drive corn prices into the stratosphere again this week. On Thursday, China jumped into the fray by buying US ag goods under the Phase II Agreement. This underscores China’s need for feedstocks while reports are circulating their corn supply is lower than advertised. Concerns regarding vegetable oil crops, including canola crops in Canada, further support soybean prices as well. May corn for immediate delivery exploded to $7.73 per bushel on Friday, the highest we’ve seen corn in nine years. Big money continues to move into our agriculture markets.
Copper Price Makes History
Copper for July delivery hit $4.74 per pound on Friday, the highest ever recorded in history. Government-versus-mineworker’s disputes continue to threaten supplies coming from Chile, the world’s largest producer and exporter. This comes as a tax fight between the government and the copper industry makes problems worse. Rapidly increasing demand from construction in China and the U.S., the switch from petroleum-based fuels to electric and solar energy continues to stimulate investors and those trying to build inventories for manufacturing. Overall, the world copper deficit could emerge as a substantial economic problem, just as computer chips have threatened manufacturing sectors.
Gold and silver rose this week as well, but not nearly to the extent that copper did.
What are Commodities?
Commodities are the foundation of our civilization — the food, clothing, housing and fuels we have depended on for thousands of years to sustain our lives. Commodities are natural resources we can’t live without, unlike stocks, bonds, mutual funds, annuities, insurance, paper currencies and cryptocurrencies. If, for example, Manhattan, London and Shanghai were flooded off our earth as glaciers melt, or if our financial systems toppled from excessive debt, we would still need farmers and commodities. Commodities support humans’ basic needs: food, water and shelter. Futures contracts are the most popular tool or method we currently use to buy, sell and trade commodities.
Words of Wisdom for Commodity Traders
“The impulsive trader asks: How much money will I make if I'm right? The objective trader asks: How much money can I lose if I'm wrong? The latter question is much more important to your trading success.” - Robert Prechter