Lumber prices avoid 7th straight decline with late-day surge as the commodity’s blistering 250% rally whipsaws

Worker loading lumber
  • Lumber prices avoided a seventh straight day of losses on Wednesday after spiking into positive territory right before 3:30 pm ET.
  • Prior to the surge, the commodity fell 2.41% to trade at $1,237 per thousand board feet.
  • Despite recent weakness, prices are still up roughly 250% since this time last year.
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A late-day surge helped lumber prices avoid a seventh straight daily decline as the commodity’s blistering 250% rally over the past year whipsaws.

Prior to the recovery, lumber futures traded down 2.41% to $1,237 per thousand board feet on Wednesday. Despite the rebound, the commodity is still down roughly 20% from its May 7 record high of $1,670.50 per thousand board feet.

As lumber prices fluctuate, local news outlets continue to reveal the effects of historically high lumber prices on consumers.

ABC’s Louisville outlet reported the story of Kenny Marine, the founder of Kentucky Hot Brown Pedalboards, who says his costs have more than doubled since last year.

“Something last year that cost me $12, $14 is costing me $30, $35, $60 in some cases depending on what wood I buy, and that’s the killer right there,” Marine told ABC.

CBS’s affiliate KXAN in Williamson County, Texas, reported that the construction of a new county-run children’s advocacy center is on hold due to increasing construction costs brought about by the spike in lumber prices as well.

Republicans have used rising lumber prices and inflation concerns as political tools to attack President Biden’s administration.

Rep. Bob Gibbs, R-Ohio, who serves on the House Oversight Committee’s environment subcommittee, told FOX Business that increasing lumber prices are “just one of the many indicators that President Biden is failing American workers.”

“Lumber prices are an issue that has many causes, from economic complications from the coronavirus pandemic to difficult trade issues with Canada. Biden has shown he is either unwilling or incapable of tackling these obstacles,” Gibbs told FOX Business.

The representative is referring to a proposed tariff hike on imports of Canadian softwood lumber. The US Commerce Department recommended doubling tariffs on Canadian softwood to 18.32% from 8.99% just two weeks ago despite rising lumber prices.

However, it’s important to note a similar tariff was originally imposed by the Trump administration before a decision favoring Canada by the World Trade Organization caused the tariff to fall to around 9% late last year.

Read more: ‘If lumber crashes, stocks might be next’: An award-winning portfolio manager who’s tracked lumber prices for years breaks down why futures hitting a record high of $1,600 is an ominous sign – and shares what investors can do ahead of the eventual crash

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Coffee is the latest commodity to hit multi-year highs as Brazil drought sends prices soaring

farmer, coffee farmer, coffee grower
  • Coffee prices hit a 4.5 year high on Friday extending their rise to nearly 70% in the past year.
  • Dr. Michaela Helbing-Kuhl, an agriculture analyst at Commerzbank, says Brazil’s persistently dry weather is to blame.
  • The drought is expected to continue through August which is “not a good sign for the 2022/23 crop,” according to Dr. Helbing-Kuhl.
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Prices of arabica coffee moved above $1.60 per pound last Friday for the first time since the fall of 2016.

Coffee prices have risen nearly 70% in the past year and currently trade around $1.66 per pound.

According to Dr. Michaela Helbing-Kuhl, an agricultural analyst at Commerzbank, global coffee production has been hurt by persistently dry weather in Brazil.

Brazil’s ParanĂ¡ Basin, which is home to Minas Gerais, the country’s biggest coffee-producing state, has been hit with a drought that forecasters expect to continue through August, according to a recent commodities report from Commerzbank.

2021 was anticipated to be a strong year for Brazilian coffee producers, but many have experienced weak yields as a result of the drought.

Dr. Helbing-Kuhl said the dry weather is “not a good sign for the 2022/23 crop” either, which begins flowering in September. Protests in Columbia have also hampered the transport of Brazil’s already weak harvest.

Coffee is the latest commodity to hit multi-year highs as the global economy reopens.

From lumber to copper, commodity prices have been on the rise this past year amid record demand and supply chain disruptions brought about by the current bust to boom cycle.

Lumber futures rose as high as $1,670.50 per thousand board feet in early May, although they’ve now fallen back to $1,309. Even with the price drop, however, lumber futures are still up more than 260% in the past year.

Similarly, copper futures are up 88% since this time last year amid surging demand. Bank of America commodity strategist Michael Widmer said copper is “the new oil” in a recent note to clients and claimed it could hit $20,000 per ton due to surging demand.

Oil prices also neared 2-year highs on Monday as investors are expecting OPEC+ to confirm it will continue restricting supply at a key meeting.

Despite rising commodities prices in 2021, there are some signs of a let-up for businesses and consumers. New data from Bloomberg shows hedge funds have cut their bullish bets on commodities in recent weeks.

According to data from the US Commodity Futures Trading Commission and ICE, hedge-fund holdings in 20 of the 23 commodities tracked in the Bloomberg Commodity Index fell by the most since November this week.

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Obese pigs in China are worsening a slump in pork prices, report says

china pigs
  • Obese pigs are being blamed for worsening the slump in China’s pork prices, Bloomberg reported.
  • Farmers anticipated that larger animals would generate higher returns when prices increased, but a slew of bad news has weighed on pork prices.
  • Now farmers have to spend more to feed the larger animals, meaning each animal generates less return.
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Obese pigs in China are being blamed for worsening a slump in the country’s pork prices, according to a report from Bloomberg.

In the hope that a larger animal will generate higher returns if prices rebound, farmers in China have been fattening their pigs to double their weight, nearly the size of a female polar bear, Bloomberg said.

However, the strategy hasn’t helped farmers as prices haven’t rebounded. Chinese pork prices have fallen more than 40% since mid-January amid sluggish demand, increased imports, and panic-selling after a recent swine fever outbreak.

The price rout since February triggered a sell-off in the large pigs that could be delaying a rebound in prices, Lin Guofa, senior analyst at consultancy Bric Agriculture Group told Bloomberg.

For farmers who still own the larger hogs, falling pork prices have led to poor returns on the animals because they’re larger and more expensive to feed.

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Goldman Sachs breaks down how a worldwide copper-mining shortage could drive parabolic gains in the metal’s price over the next 10 years

chile copper mine
Workers monitor a process inside a plant at the copper smelter of Codelco Ventanas in Ventanas city, Chile, February 15, 2012.

  • Andrew Snowdon of Goldman Sachs broke down how a supply shortage in copper mining projects will propel the metal’s price higher.
  • The firm recently said the metal is “the new oil,” and could reach $15,000 by 2025.
  • Snowdon said mining projects are hesitant to invest in growth, and the copper price will need to soar even higher to change that.
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Goldman Sachs recently published a note declaring copper “the new oil,” and forecasting it could reach $15,000 by 2025 as the world transitions to clean energy.

The firm said copper is the most critical raw material in the world’s path towards net zero emissions because it’s used in everything from electric vehicles to wind turbines and solar power.

In a recent Goldman Sachs podcast episode, Nick Snowdon, one of the researchers, broke down why the soft metal is facing a record supply shortage that will propel the price higher.

“The long-term supply gap in the markets, so when you look forward ten years, that gap currently stands at just over 8 million tons, so nearly 40 percent of the size of the market in terms of the long-term shortfall,” said Nick Snowdon. “That’s larger than anything we’ve seen in the history of the copper market.”

The market will need an enormous number of copper mine projects approved to meet demand, he said. He stressed that the shortage of supply isn’t in copper itself, but in mining projects.

“There is enough copper out there. This isn’t a story of the depletion of copper ore. But there is a very limited list, currently, of copper projects,” Snowden said.

Snowdon said the supply side is completely underprepared for the demand surge in copper that is set to come as countries move towards renewable energy initiatives. Over the last 12-18 months, he said hasn’t seen a single new major copper project being approved.

“Essentially we’re sleepwalking to huge deficits and scarcity. And prices will have to rise even higher than is currently our base case,” Snowdon said.

One reason for the mining-supply shortage is because the mining sector has been in a very conservative setting in terms of its balance sheet activity, said Snowdon. The sector hasn’t invested in early stage project development and so now, the quality of projects compared to 10 years ago is “very poor,” the researcher said.

Even now, record price levels haven’t caused a shift in supply investment like one might expect, he added.

That’s because in the early 2010’s, the mining sector invested heavily in projects, only for the price in copper to collapse shortly after, punishing any producer who invested heavily in new projects.

“That memory lingers really amongst the current generation of producer management,” Snowdon said.

He also explained that ESG initiatives slow down the process of getting a mining permit approved. Additionally, the coronavirus created operational challenges in copper mining.

Snowdon said right now, the quality of mining projects is lower and the costs are higher, and the price of copper will need to move up even further before there’s an incentive to invest in more projects.

“It’s not an easy proposition of saying, “Okay, let’s just invest in growth,” because the economics are not as attractive as they were if you go back to the mid/late 2000s,” said Snowdon.

He continued: “So, I think all of those are combining to generate this restraint. And really, the only thing that can break that has to come from price dynamics and an incredibly high price. And we don’t think the current price is, yet, at the level to generate that shift.”

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Corn prices have jumped 142% in the past year amid rising demand from China, drought in Brazil

Farmer corn field
Farmer Dan Roberts inspects his corn crop during the harvest in Minooka, Illinois.

Corn prices have jumped roughly 142% over the past year to $7.56 per bushel, the highest price seen in eight years for the crop.

A drought in Brazil and increased demand in China have put pressure on global suppliers.

According to data published on Tuesday by the US Census Bureau, corn exports increased from $2.2 billion through March of 2020 to $5.5 billion through the first three months of 2021, and in March alone, the US exported $2.12 billion worth of the crop.

China had not been a major corn importer for several years under the Trump administration, but domestic corn prices began rising in early 2020, leading to unusually large purchases from the Chinese.

Additionally, in the April 9 World Agricultural Supply and Demand Estimates (WASDE) report, the USDA revealed corn stocks in 2020-2021 hit a seven-year low of 1.352 billion bushels.

Falling supply and rising demand, coupled with a drought in Brazil, have corn prices surging globally.

Brazil’s 2020/2021 total corn crop estimate was lowered by nearly 8% to 104.1 million tonnes as dry weather continues to hurt yields in the country, forecaster Safras & Mercado reported last Friday.

“Brazil’s weather continues to provide support for the price gains. A material chunk of Brazil’s second corn crop sits in drying soils,” Tobin Gorey, director of agricultural strategy at the Commonwealth Bank of Australia, told Agriculture.com.

“The situation is critical in Brazil,” Paris-based adviser Agritel said in a report, per Bloomberg.

“This should further strain the global balance sheet, while the U.S. will have to partly compensate for the drop in South American exports,” Agritel added.

Rising corn prices have had a big impact on a number of goods including tortillas in Mexico.

CNN reported that prices per kilogram of corn tortillas are nearing $1 (20 pesos) in the country-last year national prices hovered between 9.7 and 18 pesos.

Rising commodity prices go beyond corn, with everything from lumber to copper surging and leading many economists to worry about inflation.

Mohamed El-Erian, the chief economic adviser at Allianz and president of Queens’s College, Cambridge, told CNBC on Monday that he believes inflation is here to stay and not “transitory” as the Federal Reserve claims.

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The prices of corn, cotton, and wheat have surged more than 50% over the past year – and it’s driving up the cost of everything from Coca-Cola to diapers

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  • Futures contracts for corn are up 96% over the past year. Cotton and wheat have jumped 54% and 50%.
  • Consumer-staple giants like Kimberly-Clark, Procter & Gamble, and General Mills are raising prices.
  • The Fed said on April 8 it wouldn’t allow a “substantial overshoot” of its inflation targets.
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Commodity prices have soared over the past 12 months, and consumers are about to start feeling the effects.

Corn futures contracts are up 96% over the past year, while cotton and wheat futures contracts are up 54% and 50%, respectively.

Lumber is also on a tear, with prices rising over 265% in the past year to a record high of $1,326 per thousand board feet on Monday.

The meteoric rise for commodities is beginning to have an effect on consumer-staple companies. That’s leading them to pass rising costs on to consumers.

Coca-Cola CEO James Quincey told CNBC on Monday that his company would raise prices for its products because of the increasing costs associated with higher commodity prices.

Leaders in the consumer-staple sector, including Kimberly-Clark, J. M. Smucker, Procter & Gamble, and General Mills, have also said they will be raising prices because of increasing costs for raw goods.

Prices on most of Kimberly-Clark’s North American products are set to jump by mid-to-high single digits by the end of June, according to CNBC reports.

J. M. Smucker raised its peanut-butter prices in August. CEO Mark Smucker told analysts in November that “it was very clear that we were experiencing cost pressure.”

General Mills CEO Jeff Harmening told investors on a March 24 earnings call that his company would also raise prices in the coming months amid inflation pressures.

“So I would start by saying that inflation is very broad-based, and it’s actually global. So we are seeing it across the globe, and it’s broad-based across commodities, across logistics, across things like aluminum and steel,” Harmening said.

The CEO added that his company would “use all of the tools” at its disposal, including and “price and mix,” to offset costs.

Procter & Gamble announced on Tuesday in its fiscal third-quarter results that it planned to hike prices for baby care, feminine care, and adult-incontinence products in September to respond to higher commodity costs.

The rising price of commodities, and now of consumer goods, has some experts and US senators worried about inflation.

Sen. Rick Scott wrote a letter to the Federal Reserve Chair Jerome Powell in March raising concerns about rising inflation and the central bank’s bond-buying program.

Powell has said he plans to maintain “easy-money” policies despite rising inflation over the past few months, but Reuters reported Tuesday that Powell wrote in a letter to Scott that he wouldn’t allow a “substantial overshoot” of inflation targets.

“We do not seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period,” Powell said in a five-page response to Scott’s March 24 letter.

If Powell does decide to raise interest rates to curb inflation, some experts say the markets may not be ready for the results.

Mohamed El-Erian, the president of Queens’ College, Cambridge, and chief economic adviser at Allianz, told Bloomberg in an April 9 interview that the US economy was unprepared for an interest-rate shock.

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