The Fed becomes more hawkish

Federal Reserve Bank members, especially Chairperson Jerome Powell, continued to come across as committed to maintaining high interest rates and raising rates in order to fight inflation. According to financial futures markets, there is a 28% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points, and a 72% probability that the rate will increase by 75 basis points at the Sept. 21 policy meeting.

This attitude contributed to an extremely strong U.S. dollar, which weighs on commodity prices, especially those of U.S. exports. The higher dollar makes our exports more expensive for foreign countries to import and can weigh heavily on both agricultural and industrial commodities.

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Crude crashes on recession, growth worries

Dollar strength was only one of several factors knocking energy prices down this week. Fears of a slowing U.S. economy and, worse yet, recession in Europe and China, sent crude, gasoline, and diesel fuel traders running for the hills. Crude oil has dropped more than $27 per barrel compared to its June high.

Russia’s announcement on Friday that they would continue to keep the Nord Stream Pipeline closed for maintenance had little impact on natural gas prices. Crude oil for October delivery traded at $88.15 per barrel, while Oct gasoline futures went for $2.48 per gallon without taxes and transportation costs. Oct. heating oil brought $3.63. Oct. Natural gas cost $8.93 per 10,000 mmBtu. 

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Cotton nose dives on demand fears

U.S. cotton prices are particularly sensitive to China’s economic health, more so than other commodity groups. China’s role is the world’s biggest manufacturer of clothing and textiles. The strong U.S. dollar, high energy prices and continued shutdowns related to COVID have hurt China. Timely rain in parts of Texas and the delta contributed to downward price pressure.

The decline in petroleum prices also means artificial fibers could become more competitive with cotton. Cotton for December delivery went for $1.035 per 50,000 pounds.  Soybeans, often grown on the same land as cotton, were virtually unchanged this week with November beans at $14.18 per bushel. December corn finished the week at $6.65 per bushel, with December wheat closing at $8.10

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Commodity quiz

List the world’s three largest exporters of copper ore. When were copper futures first traded in the U.S.?