Traverse City Record-Eagle

Business

April 6, 2013

Futures File: Expectations cause gas prices to drop

Gasoline futures dropped nearly 25 cents (-7.7 percent) per gallon this week, falling to the lowest level since late January. Prices are sliding as refinery operations are increasing, with U.S. refineries running at 86.3 percent of capacity, the highest level since early January. More and more refineries are coming on line as producers stockpile gasoline ahead of the summer driving season, which is usually defined as the period between Memorial Day and Labor Day.

Expectations for rising supplies in the coming weeks caused the price of May gasoline futures to drop as low as $2.87 on Friday. Futures prices are typically much lower than pump prices because they represent wholesale prices for fuel, without taxes or other expenses included.

As summer approaches, expectations for consumer driving demand will begin to affect prices as well, but for now, drivers may simply enjoy a lower bill the next time they fill up.

Corn Crumbling

The corn market continued its decline that started last Friday after a USDA report showed higher-than-expected corn stockpiles. Inventories are high due to a lack of demand from the cattle industry, which has culled its herds over the last year.

Since the report, prices have fallen by more than $1.00 per bushel (-13.8%), slammed lower as farmers and investors rushed to sell their holdings of last year’s crop. By the end of the week, corn had fallen as low as $6.27 per bushel, the lowest price in over nine months.

This spring, farmers are expecting to plant the most corn acres since 1936, providing further pressure to the corn market, as the prospect for a record-breaking harvest this fall looms ahead.

Despite all of the negative factors lined up against the corn market, increases in demand from livestock feeders, ethanol producers or foreign countries could cause prices to rebound. Furthermore, this year’s crop is barely beginning to be planted, and many dangers lurk between now and harvest this fall that could damage the crop and make prices rise.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, IN. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

 

 

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