COVID lesson: Back to basics

As we reflect on year-end conclusions, the pandemic has imposed a few harsh realities on investors, such as paying more for food, fuel, lumber, grains and cotton. Meanwhile, luxuries have either declined or been abandoned. Restaurant meals, bars, concerts, cruises, visits to shopping malls, and most foreign travel are in our memories and hopes for the future, rather than our current realities.

Obtaining life essentials have, of course, been the focus of commodity trading for centuries. It’s the foundation of our past and present economic systems. A new generation of city dwellers has learned the value of farmers and growing food while living life with face masks and online meetings. Gardening has suddenly replaced unessential shopping.

Silver glitters, soybeans shine

Silver and soy were among the hottest commodities this week as the U.S. dollar tumbled into new low territory. This drove speculators into silver and soy – divergent but highly popular commodities. Record demand for beans to be crushed into soy meal and soybean oil for cooking and salads propelled January beans over $12 per bushel for the first time while silver, boosted by hopes Congress would pass a $900 billion stimulus bill, spiked up over $26 per ounce, gaining a phenomenal $2 per ounce.

Russia makes, Russia takes

More discoveries of a widespread Russian cyberattack on at least 18,000 companies and governmental agencies, including the Pentagon, were publicized last week. This gives us pause as we look at the considerable role Rusia has played as both a supplier and consumer of commodities and the impact this could have on our markets.

Russia’s major exports include iron, steel, natural gas, wheat, and precious metals. Their main imports are aluminum oxide, refined petroleum products (gasoline and diesel), and citrus. The U.S. sells Russia motor vehicle parts and heavy machinery, and we buy their unrefined petroleum products, which totaled approximately $13 billion in 2019. Germany has long purchased natural gas from Russia, but China is Russia’s primary trade partner. Russia is among the U.S.’s top 30 trading partners.