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FUTURES FILE

COVID – Good News and Bad News

Pfizer’s announcement that their COVID-19 vaccine tests indicated over 90% effectiveness opened the week with a flurry of buying in gasoline, diesel fuel, stock index futures, lumber, cattle, copper, and cocoa. “Risk on” trades benefited from optimism that employment, and our U.S. economy in general, would benefit or, at least, return to normal as the vaccine is introduced. Unlike other vaccine stories that included the caveat that more testing for side-effects could dampen prospects, Pfizer’s vaccine tests found no serious complications.

That optimism faded quickly, however, as the reality of a sharp increase in COVID cases and increased hospitalizations sent fears back into many of the markets. Investors and speculators fearing and dreading the impact of imposed social distancing, lockdowns and shutdowns turned to selling corn, hogs, cattle, and, especially, gasoline.

The anticipated economic healing from the drug companies may be dramatic, but it will be much slower than the current explosion in deaths and the economic reactions our country faces in the weeks and months ahead.

A sharp rally in orange juice prices could have been helped by health-conscious consumers but was more likely tied to Hurricane Eta which threatened the Florida crop.

By midday Friday, gasoline for December delivery was down about 3 cents per gallon whereas cattle retained a gain of about 3 cents per pound. January OJ was up roughly 7 cents per pound.

Government Report Ignites Explosion in Bean Prices

Nothing could hold soybeans and soybean oil prices down this week following a lift on Tuesday morning in response to the USDA World Supply and Demand report which listed another decline in the total supply of beans.

The USDA numbers showed downward revisions in the production of beans and an upward revision in demand, a win/win formula for higher prices. Dry weather in Brazil continues to be sighted as a contributing factor.

Corn and wheat also showed continued strength on Friday, but beans won the upward race, gaining 50 cents per bushel compared to last week’s close.

Biden to Benefit Biofuels

Though President Biden’s attitude and policies will impact virtually every aspect of our economy, some elements of his published agenda are already well-established.

Biden is, for example, likely to favor the production and use of biofuels, such as ethanol and biodiesel, as opposed to fuels refined from crude oil. This should boost corn and soybean prices over the coming years.

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