OPEC cuts, oil gushes higher

Oil prices jumped to a one-month high this week after the Organization of the Petroleum Exporting Countries (OPEC) announced a plan to reduce oil output. While the cut would be rather small at about 1 percent, this would be the first time that OPEC has reduced its output in eight years.

OPEC accounts for approximately 40 percent of global oil production, giving the bloc substantial control over the oil market. But that control only works if the 14 member nations work together. Recently, numerous countries have exceeded their agreed-upon quotas, undermining the cartel’s influence.

Details of the agreement will be hashed out at the next OPEC meeting on Nov. 30, but many market watchers are skeptical that the group will actually reduce its output from the current level of 33.2 million barrels per day.

For now, the market is pricing in the production cut, which has sent oil over $48 per barrel for the first time since late-August and dragged gas prices 11 cents per gallon higher this week.

USDA shows grain surplus

On Friday, the USDA released its quarterly grain stockpile estimates, tallying U.S. inventories of corn, wheat and soybeans.

Nationwide wheat stockpiles on Sept. 1 were higher than expected, surpassing 2.5 billion bushels, almost 20 percent higher than last year. Meanwhile, corn and soybean stockpiles were only slightly larger than last year, but this fall’s crop is expected to be a bin-buster, breaking production records for both crops. As a result, prices for corn, wheat, and soybeans are all still near multi-year lows.

Meat markets butchered

The bloodbath in the cattle and hog markets continued this week, with both markets falling to multi-year lows. Live cattle prices collapsed under $1 per pound for the first time since 2010, and lean hogs fell under 50 cents per pound for the first time in almost seven years.

Prices are tumbling as the supply of meat is outpacing demand, a problem that could linger for a long time. Though the drop has been devastating for livestock producers, meat-lovers will welcome bargains on steaks, burgers and hot dogs.

On Monday, traders will have more news to digest, as the USDA released its quarterly Hogs and Pigs Report Friday after the market closed.

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Opinions are solely the writers’. Walt and Alex Breitinger are commodity futures brokers with Paragon Investments in Silver Lake, Kan. They can be reached at (800) 411-3888 or www.paragoninvestments.com. This is not a solicitation of any order to buy or sell any market.