Back to the Futures: Corn collapses, Karen sparks gasoline and shutdown

[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.]

Corn collapses

A USDA report released on Monday showed that the US stockpile of corn was higher than expected, causing a sharp selloff. In the aftermath of that report, corn declined to $4.35 per bushel, the lowest price since 2010. The report confirmed that the US is no longer perilously short of corn as we were last summer when prices topped out at $8.06.

Corn's decline is certainly painful for farmers who produce the grain but is welcome news to end-users like ethanol producers, livestock feeders, and food manufacturers who all benefit from lower prices. In the coming weeks, market participants will be warily watching weather and final yield estimates for indications about the size and health of the corn crop being harvested this fall.

As of midday Friday, corn for December delivery was worth $4.40 per fifty-six pound bushel.

Karen sparks gasoline market

Earlier this week, gasoline futures fell to a nine-month low, primarily driven by fears that the government shutdown could cause a weaker economy and drain demand for the fuel. Over the last month, prices have fallen 46 cents (-16%) as domestic supplies climbed and the economic outlook soured.

By Friday, the gasoline market partially rebounded on fears that Tropical Storm Karen would hit Louisiana this weekend at or near hurricane strength, potentially knocking out refineries along the Gulf Coast. This would create a temporary supply shortage, which helped gas prices bounce four cents off their low.

As of midday Friday, November gasoline futures, which represent the wholesale price for the fuel without taxes or other fees included, were trading for $2.61 per gallon.

Flying blind without Uncle Sam

The government shutdown that began Tuesday has had far-reaching effects for commodities producers and traders who depend on the federal government for statistics about the markets. As the standoff in Congress continues, market participants are bracing themselves for a lack of fresh data due to federal agencies' closures.

Among the reports that could go missing are updates on crop progress, tallies of domestic crude oil and natural gas supplies, export statistics, unemployment figures, and national price data on cattle and hog sales. Without this critical information, some markets may be forced to pare back trading until the underlying fundamentals are better known.

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