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Paragon Commentary

Futures File: Soybeans, Gold & Lumber

Aug 28, 2020

Soybeans Sail

Soybeans neared a one-year high on Friday, exceeding $9.47 per bushel. Prices are shooting higher on continued concerns that weather is too dry in much of the Midwest, especially Iowa and Illinois, the nation’s top two soybean-growing states.

Meanwhile, China continues buying U.S. soybeans at a rapid pace, supporting prices. Rumors that Brazil, the world’s largest soybean exporter, may need to buy U.S. beans due to limited domestic supplies roiled markets as well.

These factors combined to help beans gain over 40 cents per bushel during the week, a jump of nearly 5%.

 

Fed Chair Powers Gold Sharply Higher

In a decision pegged as having massive historic significance, Federal Reserve Chairman Jerome Powell announced on Thursday our central bank will allow higher inflation rates in the future and not snuff out inflation by raising interest rates.

The Fed’s decision, disclosed at the Kansas City 44th Annual Economic Policy Symposium, required “robust updating” which indicates the Fed will allow inflation to rise above the Fed’s 2% goal following periods, such as that one experienced for the past years in which inflation has been below 2%. Powell’s statements emphasized slow growth, low productivity, and an overall difficult macroeconomic context. The COVID pandemic and high unemployment were clearly factors in the landmark decision.

The sweeping change stimulated the stock market, caused a drop in the value of the U.S. dollar, and most dramatically, lifted precious metals prices toward the week’s end. Gold for December delivery jumped over $ 1,980 per ounce by midday Friday while silver and platinum spiked as well.

 

Lumber Lurches Sky High

Continued demand for lumber resulting from both increased housing starts and remodeling have created a shortage for virtually all building and home improvement products. Rumors the U.S. might impose a tariff on Canadian lumber is contributing to the rally, as Canada is a major source of lumber.

2x4s have almost tripled since May and have seen enormous volatility as well. Lumber for September delivery topped $900 per thousand board feet on Friday morning, an all-time record high.

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