The opening excitement of last week’s commodity and financial markets was a $5-per-barrel explosion in crude oil prices. The blast came in response to a pledge from the OPEC nations plus Russia to cut production by 70,000 barrels per day. Iraq’s blocking of Kurdistan’s crude shipments helped to send West Texas crude over $80 per barrel for the first time in a month. It was the biggest one-day gain in over a year. By Friday morning, May crude traded at $80.70, up $5.10 on the week. Economists and analysts are watching to see the impact of that sharp rise on gasoline prices and, subsequently, on inflation. Those effects have yet to be seen, but analysts view the recent decline in prices in general as being related to the nearly $40 drop in crude prices. This may have contributed to reduced inflationary fears and analysts will continue to watch for effects of this upturn. May gasoline finished the week at $2.81 per gallon and heating oil at $2.66. The rally in crude yanked precious metals higher, too.
Cattle Roars Higher
Nearby cattle futures were on fire Thursday. Packers competed for small supplies and lightweight live cattle to meet increasing demand with few animals available. Cattle supplies, reduced by lack of feed during two-year-long drought conditions, have not been replenished, and are not expected to be anytime soon. April live cattle closed at $1.710 per pound, up four cents from last Friday. April hogs closed near 74 cents on Thursday.
Beans Threatened by Politics
Soybeans and corn took a hit at the week’s end as tension with China — our biggest bean customer — dominated political headlines. House Speaker McCarthy met with Taiwan’s President Tsai Ing-wen on Wednesday, leading to expectations that the U.S. will deliver weapons to Taiwan. The meeting spurred speculation that mainland China may retaliate by reducing trade with the U.S. They could suspend buying our beans, corn and hogs, which have been high on their shopping list so far. May beans fell 18.5 cents per bushel on Thursday, while May corn was down 9.25 cents.
Words of Wisdom for Traders
Bruce Kovner’s advice for the novice trader, as cited in Jack Schwager’s "Market Wizards:" "First, I would say that risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least in half."