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Paragon Investments' Futures File: Oil, Sugar & Thanksgiving

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Record Oil Production in U.S.

U.S. oil production reached an all-time record last week, with drillers pumping over 9.6 million barrels per day. Domestic oil drilling has boomed during the last decade as new technologies have allowed for a sharp increase in production at lower cost. Oil fields once deemed too expensive to tap are now gushing oil, creating economic growth in a variety of states, including North Dakota, Wyoming, Colorado, New Mexico, Oklahoma, and Texas.

This increase in production has outpaced domestic demand, and the United States is now exporting a record volume of crude oil, over 2 million barrels per day.

Despite the increase in American production, global prices have been rising due to concerns about Middle Eastern stability and an agreement by OPEC to cut output. While this is good news for U.S. oil drillers, consumers are being squeezed by higher fuel prices, making the drive or flight to grandmothers house for Thanksgiving more expensive this year.

Sugar Market Extra Sweet

Sugar rushed toward a six-month high on Friday, topping 15.4 cents per pound.

The market has sweetened as investors buy sugar on fears of a supply shortfall in Brazil, the worlds largest producer. Poor weather has slowed sugarcane harvest in the South American country, and Brazil is increasingly using its sugar to produce ethanol fuel instead of food, which is reducing supplies available for export.

U.S. corn farmers may feel a pinch from the increased fuel production, as Brazil is the biggest buyer of U.S. corn-based ethanol; if Brazil can better meet its own needs, there will be less demand for U.S. ethanol and corn.

Although prices have climbed almost 20% in the last five months, sugar is still exceptionally cheap compared to its recent high of over 35 cents per pound reached in 2011, a realization that should bring cheer to bakers everywhere.

Cheapest Thanksgiving in Five Years

A traditional Thanksgiving feast for 10 should be under $5 per person this year, according to the American Farm Bureau Federation. Prices fell from last year especially for turkey, which is dropping due to low feed costs and increased supplies. Other staples like sweet potatoes, milk, dinner rolls, and pie crust are cheaper as well.

For non-traditionalists who prefer ham or roast beef, prices will likely be higher, as cattle and hog futures are higher this year than last.

As you sit down to eat next week, please remember to take a moment to give thanks for the farmers who produced the bounty on your table.

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About the author

With a degree in Grain Science / Management from Kansas State University, Mr. Haverkamp has worked directly with and for several corporations in research, logistics, and origination of commodity products. Among these are Continental Grain, Kansas Wheat Commission, National Livestock Association, Kice Industries, and Land 'O Lakes. Mr. Haverkamp is a regular guest analyst on both radio and television programs throughout the Midwest and also provides fundamental and technical research for Bloomberg, DTN, Dow Jones, The Wall St. Journal, CNN and CNBC as well as several other local and regional news syndicates. Mr. Haverkamp sat on the board of directors for the NIBA (National Introducing Brokers Association) in Chicago for five years and on the National Futures Association's nominating committee for one year. Mr. Haverkamp began trading in 1987 and founded Paragon Investments in 1996. 

  Mr. Haverkamp continues to provide consulting services for individual investors, livestock operations, grain processors, and individual producers as well as holding the title of CEO for Paragon.

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