The unusual and tragic back-to-back hurricanes have produced a major impact on many markets, and that’s the focus for this edition of Futures File, our weekly commodities wrap-up.
Hurricanes hitting the Southeast U.S. have typically caused extreme swings in commodity markets as they attempt to assess threats and damage to the natural resources that we depend on for our food, fuel, clothing, and shelter.
•Citrus crops: The southern half of Florida is famous for serving as a center of citrus production. Consequently, OJ prices virtually exploded all week with frozen juice for November delivery running from $1.30 per pound just before Labor Day to a high of $1.55 on Friday. The severity of destruction to that crop may be reduced because most of the fruit is still in early stage of development where it is well attached to the trees and is not nearly as vulnerable as it will be a few weeks from now.
•Cattle: Florida is one of the nation’s largest producer of calves and feeder cattle, which are heavily threatened by Irma. Feeder cattle for October delivery jumped from $1.42 per pound around Labor Day to nearly $1.48 on Friday.
•Cotton: That crop is especially sensitive to rain as we approach harvest in the southern states hit heavily by Harvey. Cotton prices for December delivery rose from 71 cents per pound 75 cents during the last week on fears that further moisture could impede harvest.
•Sugar: Though Florida is our second-largest producer of sugar cane (next to Hawaii), that crop tends to be relatively tough and can withstand even hurricane-force winds without large declines in yield.
•Lumber: Though not produced in the Southeast, the destruction of housing will surely increase the consumption of commodities used in construction of housing and commercial building damaged by the storms. Lumber prices were sharply higher.
•Oil, gasoline, natural gas: Since much of our energy is either produced near the Gulf of Mexico or shipped through the region, prices can explode or crash depending on the perceived threat to rig production or refinery operations. Typically, gasoline prices go up on fears that refineries will be shut down, but crude oil may decline as crude is backed up and cannot be used.
Wildfires out West
Ironically, just as nature deluges the eastern U.S. with too much rain, massive wildfires are burning across the western U.S. where an exceptional drought has forced evacuations of thousands of people and cattle as firefighters struggle with high winds and flammable conditions.
Ranchers in Western states are facing the loss of hay, feed, grass and fencing as wildfires ravage 1.5 million acres of land.
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.