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Futures Files

Copper crushed, lumber lunges

Following the two biggest bull markets in the history of copper and lumber trading, these two key components of the construction industry got hammered. Copper lost 10% of its value, and lumber went down 20% last week.

Federal Reserve chair Powel hinted at raising interest rates twice in 2023, which provided a headwind to prices. Higher rates might put the brakes on booming home sales, and therefore construction, boards, pipes, wires, and the furniture and appliances that fill new houses and offices.

A more immediate cause of the copper crash was a mid-week announcement that Beijing will auction metals from China’s gigantic stockpiles to put the brakes on inflation, especially at the producer level. Copper for delivery in July traded at $4.15 per pound midday Friday, whereas July random-length lumber fell to $879.00 per thousand board feet.

Scorching temps threaten farms, financials

The drought now covering much of the southwest has worsened as triple-digit temperatures added fuel to the fire(s) in California and adjacent states. Las Vegas reached 119 degrees, reservoirs and rivers are drying up, and city dwellers are forced to conserve water and energy to avoid blackouts. These all serve as reminders of how vulnerable and dependant Americans are on rain to prevent widespread, life-threatening conditions. The corn market tumbled the permissible limit down on Thursday as one weather model forecasted rain in the driest parts of the corn belt, but the majority of the growing season lies ahead of us. Friday morning saw a considerable recovery in crop prices, with weather fears playing a role in the buying. As of noon Friday, July corn traded at $6.59 per bushel, July beans at 13.97, and July Chicago Wheat at 6.64.

Russia and China dominate news and resources

President Biden’s visit with Vladimir Putin focused on cybersecurity which, we painfully learned recently, is now critical to producing meat and fuels. The president will also talk with China, which, of course, is at once our biggest trade partner, while posing a multitude of both known and unknown economic and military threats. Their size, skills, and willpower have dominated commodity and financial markets for the past two decades, and it seems destined to continue. The importance of keeping tabs on the dialog with Russia and China may even exceed watching weather reports.

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