Back to the Futures: Crude gushes higher, USDA report sinks soy and Bernanke batters dollar

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[Editor's note: Every Friday visit the Business 380 for "Back to the Futures," a quick discussion of the week's grain, livestock, gasoline prices and other topics.]

Crude gushes higher

US crude oil prices rocketed to a sixteen-month high on Thursday, reaching as high as $107.45 per barrel. The price exploded after a US government report showed a sharp drop in US oil supplies in its weekly inventory report. The supply drawdown came as US refiners took advantage of large US supplies trapped in Midwest storage facilities.

Rising US and Canadian oil production have produced a glut in the Midwest, but, until recently, there was little infrastructure to transport the crude. Through the use of pipelines and trains, the supply imbalance is being resolved, allowing coastal refineries to use US oil in place of more expensive imported foreign crude.

Relatively abundant supplies domestically had kept US prices low, but the free flow of crude is now bringing our oil prices in line with the global markets, where prices are much higher due to supply constraints in the Middle East and Africa.

Some analysts believe the US oil prices may weaken in the future as the US continues to reduce its imports of foreign crude, making our markets less susceptible to foreign conflicts. As of midday Friday, US crude oil futures were worth $105.60, near the international benchmark “Brent” crude price of $108.70.

USDA report sinks soy

A USDA report released on Thursday morning showed rising projections for US soybean production this year. In the report, the USDA raised estimates of planted acreage and total soybean production by 30 million bushels, a moderate increase. This caused a sell-off in the soybeans, which dropped as much as 25 cents per bushel (-1.8%) in the wake of the report. As of midday Friday, soybeans for delivery in November were worth $12.66 per bushel.

Bernanke batters dollar

Currency markets reacted violently this week to commentary from Federal Reserve Chairman Ben Bernanke. Traders had been betting that the United States would soon raise interest rates, but Bernanke said Wednesday that they would not raise rates “for some time.” This adjustment in the outlook caused a sell-off in the US Dollar in favor of foreign currencies. If US interest rates stay low, it makes other currencies more appealing than the US dollar. During the week, the US dollar lost 1.7% in value against the euro, with one euro worth $1.305 on Friday.

Opinions are solely the writer's. Walt Breitinger is a commodity futures broker based out of Silver Lake, KS. He can be reached at (800) 411-3888 or This is not a solicitation of any order to buy or sell any market.

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