Slip­pery slope

The Oklahoman (Sunday) - - BUSINESS -

Soy­bean prices slipped last week de­spite a gov­ern­ment fore­cast that pro­duc­tion will de­cline sig­nif­i­cantly this year.

Higher crude oil and ga­so­line prices lead this week’s edi­tion of Fu­tures File, our weekly com­modi­ties wrap-up.

En­ergy mar­kets ex­plode

Pres­i­dent Don­ald Trump an­nounced Tues­day that the U.S. was with­draw­ing from the mul­ti­lat­eral nu­clear ac­cord be­tween the U.S., Iran, Rus­sia, China and Euro­pean al­lies, main­tain­ing a cam­paign prom­ise. He also an­nounced that his ad­min­is­tra­tion would im­pose harsh sanc­tions on Iran, which could af­fect Euro­pean com­pa­nies who have in­vested heav­ily in Ira­nian busi­nesses.

Many global lead­ers are anx­ious that los­ing the deal, un­der which Iran agreed to stop nu­clear weapons devel­op­ment, could lead to in­sta­bil­ity in the Mid­dle East. Re­in­forc­ing this con­cern, fight­ing im­me­di­ately broke out be­tween Ira­nian forces in Syria and Is­raeli forces in the Golan Heights on Thurs­day, with Ira­nian mis­siles be­ing met with Is­raeli ar­tillery strikes

Fears of larger con­flicts shot en­ergy mar­kets higher, with crude oil ap­proach­ing $72 per bar­rel for the first time since 2014. Higher oil prices drove ga­so­line and diesel prices to mul­ti­year highs as well, ris­ing by more than 5 cents per gal­lon this week.

Soy­beans tum­ble de­spite USDA con­cerns

On Thurs­day, the U.S. Depart­ment of Agri­cul­ture up­dated its monthly Sup­ply & De­mand es­ti­mates, show­ing a much tighter sup­ply out­look for soy­beans.

The USDA is pro­ject­ing much lower global soy­bean pro­duc­tion than most an­a­lysts had an­tic­i­pated, and ex­pects that U.S. stock­piles could be as low as 415 mil­lion bushels at the end of next sum­mer, com­pared with ex­pec­ta­tions of 535 mil­lion bushels.

This caused a brief rally in the mar­ket, but by Fri­day, soy­beans had tum­bled to a five­week low at $10.02 per bushel, driven pri­mar­ily by on­go­ing con­cerns that trade dis­putes will hurt Chi­nese de­mand for U.S. beans.

Wood works higher

Lum­ber prices con­tin­ued rat­tling higher this week, top­ping $600 per thou­sand board feet for the first time in his­tory. U.S. tar­iffs against Cana­dian lum­ber im­ports, which ac­count for one-third of our lum­ber de­mand, have re­stricted the sup­ply of wood com­ing into the U.S., while rapid new home con­struc­tion is in­creas­ing de­mand.

Over the last three years, lum­ber prices have nearly tripled, ris­ing from a mere $215 in Septem­ber 2015 up to $610 on Wed­nes­day.

Ris­ing prices don’t just hurt home­builders and home­buy­ers, as they splin­ter into all other wood-based prod­ucts as well, rais­ing costs for fur­ni­ture, boxes and even the pa­per that this ar­ti­cle is printed on. Opin­ions are solely the writ­ers’. Walt and Alex Bre­itinger are com­mod­ity fu­tures bro­kers with Paragon In­vest­ments in Sil­ver Lake, Kansas. They can be reached at 800-411-3888 or www. parag­o­nin­vest­ments.com. This is not a so­lic­i­ta­tion of any order to buy or sell any mar­ket.

[THE OKLAHOMAN ARCHIVES]

Rail­road crude oil tank cars move through Ok­la­homa City in this 2014 photo. Crude oil prices reached highs not seen since 2014 last week.

Walt & Alex Bre­itinger www.paragon in­vest­ments.com

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