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Paragon Investments' Futures File: Coffee, Silver & USDA

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Coffee Crash

Coffee prices dripped to a three-month low on Friday, trading under $1.03 per pound.

The commodity has been extremely wild during the COVID-19 pandemic, with five moves of 20%+ so far this year.

Demand and prices surged as Americans hoarded groceries, including their daily caffeine fix, pushing prices near $1.30 per pound in March. Over the last few months, demand has been falling as consumer use up supplies at home.

Meanwhile, the Brazilian currency, the real, has fallen to record low prices. Brazil is the worlds second largest coffee grower, and as its currency collapses, it pulls down prices of Brazilian-produced commodities, like sugar, soybeans, and coffee.

Despite the current low levels, economists warn that market jitters could send coffee flying high again. Brazils currency is tanking due to a worsening coronavirus outbreak that could threaten coffee supplies.

Silver Linings

In the midst of a general market malaise, silver recently became one of the few commodities to reach a breakeven for the year, topping $18 per ounce on Wednesday.

Prices are now up more than 50% from their mid-March lows, a sign of how drastically investor sentiment has surged during the last two months.

The silver rush has proven more urgent than the gold buying as investors seek both safety and profits during economic uncertainty. Silver is both a safe haven and industrial commodity, helped by low interest rates, speculators and conservative investors, alike. As of midday Friday, July silver futures traded for $17.65.

USDA Announces Farm Aid

The U.S. Department of Agriculture announced the details of a much-anticipated farm aid program this week. Under the Coronavirus Food Assistance Program, U.S. farmers stand to receive compensation for market losses they took due to the coronavirus outbreak and supply chain disruption. Payments are available across a wide range of crops and animals, with amounts varying by the size of market losses.

In this column, weve highlighted hard-hit markets that are now seeing support. Dairy farmers can receive over 6 cents per pound for milk produced during the first quarter. Livestock producers may receive funds for each animal they sold during the crisis, amounting to over $100 per head for cattle and $18 per head for hogs. Row crop farmers stand to receive $0.67 per bushel for corn and $0.95 per bushel for soybeans they sold during the downturn.

Producers can reach out to their FSA office for more details.

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About the author

Alex Breitinger is Paragon's Director of Business Analytics. He has more than 10 years of experience serving agricultural producers and end users.

Alex’s data-forward approach delivers meaningful analysis to clients looking to more deeply understand their complex operations. His expertise is helping agribusinesses manage agricultural commodity price risk, but he also has specialized knowledge of hedging other financial risks like metals, energy products, stock portfolios, and foreign currencies.

Before venturing into the world of commodities, Alex carried out analytical research for the National Oceanic and Atmospheric Administration (NOAA), the governmental organization that oversees the National Weather Service.

In addition to his work with clients, Alex authors the weekly syndicated column ‘Futures File’ about commodities markets. It appears in newspapers across the country and reaches more than a million readers weekly.

He can be reached by phone at 785-338-9611

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