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Column | Futures File

Walt Breitinger: King cotton reigns again, Crude and metals on rollercoaster

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During the Civil War, secessionists coined the term “king cotton” to highlight their key export to New England and Great Britain. Rich soils, hot summers, and southern seaports have benefited cotton farming, placing it high on America’s agricultural economy list and increasing world usage. The war in Ukraine has boosted demand for cotton, right as the supply of potash fertilizer from Russia has been all but shut off by their government. (Cotton requires roughly twice the nitrogen of corn.)

Cotton prices soared this week on the ongoing Ukraine news, dry weather, and continued strong exports. The May Contract rose from a recent $1.16 per pound to a high Friday of $1.2680. Cotton is the world’s most widely used textile; roughly 75% of all clothing globally contains some of the natural fiber. There's currently a surge in made-made fiber costs, such as polyester, as they're made from crude oil. This is also turning demand back to cotton. May cotton traded at $1.27 per pound Friday afternoon.

Crude and metals on roller-coaster

Along with wheat, massive swings in energy and metal prices continued all week as each report of the invasion and defense of Ukraine was released. Comments from Presidents Zelenskyy, Biden, and Xi stimulated both bulls and bears in virtually every financial and agricultural market. So far this year, crude and its products have risen more than any commodity group. Metals such as aluminum and nickel have also broken volatility records. Crude oil for April delivery tumbled below $100.00 per barrel briefly after hitting $130.50 just two weeks ago.

Friday afternoon, crude traded at $104.60 per barrel, April gasoline futures at $3.23 per gallon (the prices without taxes), and April heating oil at $3.56 per gallon. April gold brought $1,930 per ounce, while May copper shot up to $4.73 per pound. Chicago May wheat sank to $10.68 per bushel.

Fed raises rates, bond futures bounce

Tuesday, our Federal Reserve announced they would raise interest rates by a quarter of a point to keep the economy from overheating and reduce inflation. Chairman Powell also stated that our central bank would likely raise rates six more times this year. Mortgage rates immediately followed with 30-year mortgages exceeding 4% for home loans. In addition, the war in Ukraine and extreme weather are driving commodities higher. Treasury bond futures fell sharply as the news hit and remained down on the week. Note: Treasury bond prices decline as interest rates increase. As of Midday Friday, June T-bonds traded at $152.15.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Indiana. He can be reached at 800-411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

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