Commodity Blog

Commodity news, technical and fundamental analysis, market data on precious metals, energies, industrial metals, and soft commodities


European Crisis Hurts Cattle, Copper, Hogs & Wheat

May 25, 2010 at 19:34 by Vladimir Vyun

Cattle and hogs declined on concerns that global demand for U.S. beef and pork will wane after the dollar rose and equities fell. The global economic recovery is slowed by the EU crisis, making prospect for beef and pork demand less certain. August futures for cattle delivery subtracted $0.01175 (1.3 percent) to $0.89025 per pound by 9:40 on the Chicago Mercantile Exchange.

Wheat also felt the impact of the European troubles, tumbling to the lowest price in seven months. Shadow of the European debt crisis looms over markets, curbing demand for commodities. July futures for wheat delivery slid $0.0625 (1.3 percent) to $4.6125 per bushel as of 10:02 on CBoT.

Another victim of the sovereign-debt crisis in the European Union was copper, which fell today. Economists think that the industrial metal shouldn’t fall further and will be supported by demand from China. Three-month futures for copper fell 1.7 percent to $6,794 a ton at 12:07 on the LME.

If you have any questions and comments on the commodities today, use the form below to reply.

3 Responses to “European Crisis Hurts Cattle, Copper, Hogs & Wheat”

  1. brent futz

    Trade in cbot wheat has had little to do with fundamentals of late and everything to do with the composition of the open interest. The ETF’s are long 230,000 July and must liquidate or roll (approx. 12 cents/mos.). Not an enviable situation in either case. Liquidation not likely but still very possible (I have wittnessed Jim Rogers liquidate a long position held for several years at a very significant loss). The excessive long position has resulted in a lack of convergence and a lack of price discovery and a price that is more or less meaningless.The ETF’s have in a sense shot themselves in the foot. This situation where etf’s are forced to roll at something in excess of carry is not isolated to wheat, it has happened to crude three times over the past year and a half, most recently when the june-july traded out to $5.00. Commercials have figured how to deter excessive long positions by etf’s. Will be interesting to see how july wheat plays out over the next month. will be easy enough to see what their intentions are.



    enivid Reply:

    Nice explanation, Brent! Do you have any idea of if anything similar is going in other commodities?


    brent futz Reply:

    A similiar scenario was played out in rice may 24,25. In general, contracts settled by physical delivery with a limited underlying deliverable commodity is susceptible to a lack of convergence when large long positions are accumulated. Difficult for this to happen in corn. This may be viewed as a symtom of overly zealous (bullish) fund managers not anticipating potetial for spreads and allocating exessive capital to agricultural contracts. This is happening at a time when there appears to be an underlying current of demand surfacing from China, particularly in beans and corn. This makes me think the large long wheat positions may have been accumulated for the right reasons but the contract specifications limit the success of those positions.

    Regards, Brent.


Leave a Reply