Thursday started off as the first solid day of the week, but as the trading session progressed with little to no information on the U.S. debt deal, major equities gave back their gains to finish yet another day in the red. As we draw ever closer to the August 2nd deadline, many analysts have begun to worry that both sides are deadlocked, and with a Republican House and a Democratic Senate, that will make it next to impossible to pass any legislation unless one side gives way to the other. While it seems highly unlikely that the U.S. will default on its debts, it is still a possibility at this point in time, a situation that could put the already beleaguered economy into an even bigger hole.
From a commodity standpoint, most futures contracts took a major hit for a second straight day, as the greenback posted modest gains, and investors continue to wait out the worsening debt situation. Gold finished the day relatively flat while its cheaper precious metal counterpart, silver, lost over 2%. The UBS Bloomberg CMCI Index lost 6.2 points and likewise, the S&P GSCI sank over 6.5 points. With this backdrop in the commodity markets, we outline two of the most notable commodity performances on the day:
One of the biggest commodity winners from Thursday’s trading session was lean hogs, which saw a healthy spike based on Chinese demand. The emerging economy hinted that it may be buying more pork from the U.S. despite record pork prices currently in place around the globe. China suggested that they wanted to keep a steady 10 day supply on hand at all times, yet for the time being they only have a two day supply, sparking traders to buy up lean hogs contracts as demand seems to be growing in the most popular country in the world. “China’s State Council in Beijing said on Thursday that China will do more to boost pork supplies and stabilize prices as part of its efforts to check inflation” writes Sam Nelson. Overall, lean hogs futures gained 0.54% on the day to finish at the $1.02/lb level.
Among the many losers today, cocoa emerged as one of the worst performing commodities of the session. While the softs have been particularly volatile as of late, cocoa has been thrust back and forth based on various reports from the Ivory Coast, the world’s largest cocoa producer. One commodity expert noted that there has been a major uptick in the availability of cocoa coming from West Africa, and while bean production has been increasing for weeks, people are just now becoming fully aware of the massive production increase. With a now saturated supply, and not enough demand to keep up, cocoa futures fell 2% on the day down to the $2,972/ton level to close Thursday trading [see also Ultimate Guide To Cocoa Investing].
Disclosure: Charts courtesy of Barchart. No positions at time of writing.