Commodities Futures and Options Brokerage


Paragon Commentary

Futures File: China, Copper & Grains

Jul 17, 2020

China Clamors for Commodities

Unlike the U.S. economy which continues to suffer from unemployment, political uncertainties, and a sharp increase in COVID-19 cases in the southern and western states, China’s economy is roaring back beyond pre-pandemic levels.

China’s energy, agricultural, and now, industrial metal consumption has risen above most optimistic forecasts as COVID cases, and worries, seem a thing of the past in the world’s second largest economy.

Ironically, one of the biggest threats to China’s rebound could be a continuation of the deep recession in America.

China’s voracious appetite for our hogs, soybeans, and cotton has helped our producers remain solvent despite increasing trade actions, travel bans, and military tension in the South China Sea.

 

Copper Climbs to New Highs

The recovery in China, which consumes roughly half of the world’s copper, quickly reduced copper stockpiles. These supplies cannot be replenished rapidly as mining operations require many months or years to gear up heavy equipment and increase production. Much of the world’s copper supplies come from Chile, where the labor force has been weakened due the virus.

Americans receiving stimulus payments have been purchasing new cars, pickup trucks, and RVs, all of which contain copper as a major component. Wealthier Americans have continued to buy property in the suburbs including high-end houses, subsidized, in part, by interest rates falling to the lowest levels in 50 years.

The price of copper for September delivery blasted over $2.99 per pound early in the week and traded at $2.91 mid-day Friday.

 

Grain Needs Rain

U.S. corn and soybean crops are looking great and benefiting from ideal pollination weather in most of the Midwest.

However, fears of a growing drought, severe in North Texas, has put some farmers and ranchers on edge. Our crops need regular drinks during the next 30 days in order to maintain high yields and produce enough feed for the livestock and poultry industries. Many eyes will be glued to the clouds and weather forecasts during this critical time.

As of midday Friday, corn for December delivery traded at $3.40 per bushel as November beans brought $8.93.

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