Futures File

December 8, 2017

Cattle Drive Lower

Beef prices ground to a new low this week as investors bailed out of the cattle market.

Last month, buyers had been making bets on rising prices on hopes of rising demand, but they have largely been disappointed by large supplies and falling prices, which have lost almost 10% during the last month.

As traders unwind their long positions, they are accelerating the downward swing, exacerbating the drop. Meanwhile, end users like meatpackers are taking advantage of the cheap meat, buying as prices fall. For cattle producers, the recent cycle of exuberant rallies and drastic drops has presented opportunities for those who actively sold into the rally, and headaches for those on the sidelines.

As of midday Friday, live cattle futures for delivery in December traded under $1.16 per pound, the lowest price in almost two months.

 

Booming Economy Melts Metals

Platinum, gold, and silver lost their luster this week, tumbling to new low values. Investors dumped the precious metals as they rushed into cash, stocks, bonds, and even bitcoin this week.

U.S. government reports showed continued job growth, which inspired new record highs in the stock market and increased calls for the Federal Reserve to raise interest rates, a move that generally diminishes demand for metals.

As a result, gold and silver fell to four-month lows, trading Friday for $1250 and $15.80 per ounce, respectively, while platinum neared a two-year low when it broke under $885 per ounce. 

 

Softs Commodities Weaker

Breakfast beverages should be cheaper in the coming months as the underlying commodities are all dropping. Cocoa, coffee, orange juice, and sugar all reached new low prices this week as economists predicted global surpluses of the commodities again next year.

The so-called “soft commodities” are all produced in warm climates, especially Brazil, a major producer of each of the goods.

Outlooks for a healthy harvest next year have especially weighed on coffee, dragging March coffee futures to an all-new low price of $1.30 per pound.

For over 18 years, Walt taught his method of trading at Purdue University. His comments on the markets have been featured in USA Today and other national outlets.

Walt's weekly commentary has been published for nearly 25 years. Futures File, written on Fridays for Saturday publication, provides a brief summary of commodity futures market highlights for the week.