Rising interest rates and fear of a recession knocked the legs out of most commodities, stocks and bonds futures contracts that came in waves of selling throughout the week. Early Tuesday, a shocking increase in core inflation — double what had been expected by analysts — was announced and it triggered the first huge sell-off in stock index futures.
The Dow Jones futures contract was down 3,000 points on the week. As of noon Friday, gold was down $80 per ounce, while the U.S. dollar, which tends to move opposite everything else, was sharply higher.
Whew, rail crisis averted
Railroad workers and railroad companies reached a tentative deal to avoid a midweek strike. It could have crippled virtually every segment of our agricultural, industrial and commercial economies.
Most wheat futures dropped sharply after the rail strike resolution since many had been buying truck space. Rail is critical in the supply chain of all our grains, petroleum, metals, livestock, manufactured goods and even human passengers.
Both suppliers and users would have suffered enormously if the strike had taken place. The agreement still must be approved by union members for ratification.
Beans facing sudden death
Another close call for many farmers came from late-season pests and diseases. Soybean farmers in Illinois have seen recent signs of sudden death syndrome, which can cause an extreme drop in yields if present early in the growing season.
A soil-borne fungus that invades the roots and lower stem of soybean plants causes sudden death. Grasshoppers are chomping away at many sections of our western corn belt. Indiana corn farmers have seen late-season tar spot which could present a significant drop in yields, but probably not at this point since it’s late in the season.
Wheat, corn and beans were all down on the week.
Triple El Nino spells trouble for the West Coast
NOAA is predicting a third La Nina year in a row. When combined with established trends of global warming, it could exacerbate the droughts and heat waves in the Southwest.
The Northwest, concurrently, would face a slightly raised likelihood of increased rain and storms. Regrettably, almost all the weather anomalies we’ve dealt with for the past two years may be with us for a while.
Words of wisdom
“My grandfather used to say that once in your life you need a doctor, a lawyer, a police officer and a preacher. But every day, three times a day, you need a farmer.” — Brenda Schoepp
Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.