Traverse City Record-Eagle

Business

January 26, 2013

Futures File: Gas explodes upward

Unleaded gasoline futures leapt higher this week, reaching a three-month high on Thursday. Prices for wholesale gasoline, which excludes taxes and other expenses, reached as high as $2.87 per gallon, up 7 cents per gallon (+2.5 percent) during the week.

Some traders attribute the recent rally to lower-than-expected gasoline supplies. Supplies are down due to increased demand and a slew of refinery shutdowns as they prepare to switch from "winter blend" fuel to "summer blend"-- a more expensive, but cleaner-burning fuel.

Unfortunately for drivers, futures markets are currently predicting higher prices in the coming months. Most dramatically, prices for gasoline delivered in April are as much as 18 cents higher than the currently traded February delivery period.

Hogs hurry higher

Cold weather chased hog prices upward as freezing temperatures limited the movement of hogs across the Midwest. Moving hogs in cold weather stresses the animals, and can even be life-threatening, preventing farmers from bringing their pigs to market. Additionally, hogs need to eat more to keep warm in cold weather, making cold snaps especially expensive for producers.

Subzero temperatures struck this week across much of Iowa and Minnesota, which combined produce nearly 40 percent of U.S. pork, making the cold snap especially felt in the hog industry. The short-term shortage of hogs caused prices to rally as much as 2 cents per pound (+2.3 percent) during the week, with February hogs reaching as high as 87.4 cents per pound.

Despite the recent bullish action, some traders warn that warmer weather could unleash a surge of hogs onto the market, potentially sending prices back down again.

Cotton rips to new highs

Despite a holiday-shortened week, cotton was able to make a massive 5.45-cent per pound (+6.9 percent) gain during the week, reaching the highest price in more than six months. Prices have been pushed higher as investors enter the market, buying the white fiber on expectations that the Chinese economy will stay strong this year, keeping their demand high.

As of midday Friday, March cotton was trading for 81.5 cents per pound.

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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