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Paragon Commentary

Futures File: Corn, Fuel & Gold

Jul 31, 2020

China Craves U.S. Crops

Exports of grains to China broke records this week with the largest weekly “new crop” sale of soybeans in almost four years and the single biggest ever purchase of corn announced on Thursday.

Corn prices in China are exploding as they use up their stockpile to feed hungry poultry and hogs. Their current demand needs outweigh political considerations such as meeting our tariff and export requirements.

Despite the substantial purchases, corn and soybean prices fell this week as beneficial growing weather should add more supply to the large stockpile of grains left over from last year. Good pollination weather helped our corn crop during July, and ample moisture should boost yields from our bean fields. Unless drought and scorching heat south and west of the center to the corn belt moves easterly, prices could suffer further as supply could exceed the Chinese and domestic demand.

As of noon Friday, new crop December corn traded at $3.26 per bushel while November beans brought $8.91. Chicago wheat for December delivery traded at $5.39 while Dec oats exchanged at $2.70.

 

Fuel Sinks as Travel Plans Stall

Crude oil, gasoline, and diesel fuel prices fell to a one-month low this week as demand dropped from both the automotive and airline sectors. Renewed coronavirus concerns from Florida to California are slowing plans for vacations and business travel, sapping future fuel consumption.

Meanwhile, domestic production and U.S. imports of foreign oil are dropping, which could continue to reduce U.S. oil supplies, potentially stabilizing oil prices near $40 per barrel where they traded Friday morning.

 

Gold Rush Grows

Gold raced to an all-time high over $1980 per ounce as fears and uncertainty dominated the financial and geopolitical arena.

The quarterly U.S. Gross Domestic Product shrank at a 32.9 % annualized rate and virus-related jobless claims continued to plague hopes for recovery.

Election concerns, huge corporate losses, our relationship with China, and near-zero interest rates have worried policy makers, the Federal Reserve, and the investment community. These fears are causing many to expect low interest rates for the long term, which is inspiring demand for gold, which traded midday Friday for $1960.

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