Unless we witness some type of shocking recovery between now and when the final bells chime to end trading, it would appear that we will have posted a pretty dour week in commodities and in the Ag sector especially. As it stands right now nearby corn is down 23-cents, beans 65-cents and wheat actually the lessor of the group at down just 14-cents. Grain and soy were not the only recipients of this wrath as nearby hogs are currently $4 cwt lower and cattle a little over $3 cwt in losses. Even last weeks’ Ag stellar performer cotton has surrendered 1.7 cents for the week. Coffee, cocoa and sugar are all posting losses, but the pressure was not confined solely to the ag sector either as we have crude oil down $1.45, gold right at $3 and silver down just over 30-cents. I am sure you have probably already surmised that on the other side of the ledger, we find the commodity arch nemesis, the U.S. Dollar, up over a half cent for the week and possibly closing at the highest point since late February. It is almost a bit surprising that the commodity indexes have not been pushed harder this week, but the Goldman Sachs index appears set to lose over 11 points for the week and should close at the lowest levels since early May. One of the most discouraging aspects of all of this is that there is nothing within the picture for now to suggest that the bloodletting is complete. By no means does that have to suggest that prices for corn, beans, and wheat have to continue on the same negative course that we have this past week, but it would imply that we will continue to at least “wander through a desert” of barren returns into the fall and possibly right through the end of the year. For grain and soy markets, this is the time of year that I refer to as “supply” mentality and with no threat being posed, we will basically ignore the demand side of the equation now until sometime after harvest.
It would appear the trade is more than content to look beyond the extreme temperatures that have plagued much of the Midwest this week, believing that they will be so brief that no possible ill effects could occur. Of course several waves of storms, many violent, have been working their way across as well providing a little extra relief for crops and for people like me who have been trying to fly from location to location hours upon hours of fun filled activities either stranded at airports or on airplanes. I do remember a day when flying was actually fun. The weather runs that I have read this morning predict that the heat will have indeed peaked today, and we should see much of the nation return to more normal summer like temperatures moving forward.
I would like to have been able to provide something just a bit more positive to close out this week, particularly as we are holding one of our summer outlook meetings in Nashville next week, and this is most likely the same story I will need to carry there. That said, from the long-term macro perspective I continue to believe that the overall commodity cycle has turned positive, but as I have commented in the past, when you are in the process of changing the direction of a massive ship, it takes some time to swing that bow around and inevitably you will run into cross currents that will temporarily push you backwards, which is what we are battling with for the time being.