Cotton, Copper, Steel, Coal, and Natural Gas, What’s Going On?

Cotton futures courtesy of Trading Economics. 

Cotton hit a high in May of 158. It’s now down to 102 and the subject of financial debate on Twitter, some of them funny.

Suggested Answers 

  • Has anyone checked to see if cotton is a stablecoin?
  • Speculators bid up cotton futures due to misguided conclusions about inflation and availability and are now unwinding en masse.
  • Spandex is back?
  • National Nude Day
  • Clothing retail stores have way too much supply and no longer ordering more is my guess

Spandex is Back

Correct Answer 

As much as I would love to attribute this to National Nude Day or spandex, the answer is over-ordering followed by demand destruction of a recession and a good crop forecast on top of it. 

Copper

Iron Ore

Steel 

Lumber

Unleaded Gasoline 

Natural Gas EU

Coal 

Economic Messages

  • Copper, iron ore, steel, lumber, and cotton all inputs to discretionary spending and housing. Demand is falling off a cliff.  A recession is coming.
  • Unleaded gasoline tells us that gasoline is mostly not a discretionary item and remains in short supply. 
  • Coal is a sad story of major economic incompetence by global leaders.

In an effort to punish Russia, the US and EU attempt to reduce Russia’s output of oil and natural gas. 

The result has been more money to Russia, a rising Ruble, and higher prices for energy across the board.

The EU is resorting to burning more coal for energy as a result. 

In irony of ironies, not even the German Greens complain about more coal use.

Spotlight Biden

Next month, Biden will travel to Saudi Arabia hoping for a commitment for them to pump more oil.

Last week I noted Biden Skips Meeting With Oil Executives to Meet With Wind Energy Executives

Priorities, Priorities

There are about 130 million US households.

Biden called a meeting to do something about gas prices but failed to show up for his own meeting.

Instead, Biden is working on a plan to supply wind energy to 10 million households by 2030. 

A couple people objected to my wording because Biden never planned to attend the oil meeting. So what? He called a meeting then went off on a wild goose chase in search of wind. What’s the message here? 

Biden also antagonizes Elon Musk. No matter what one thinks of Musk, he does produce more EVs and batteries than anyone else.

Even the liberal New York Time complains about President Biden’s misguided feud with Musk

Biden’s beef with Musk seems to be a big missed opportunity — politically. By ignoring or poking fun at Musk, he has helped turn the most famed entrepreneur of our time, even if erratic, from being a Biden supporter — Musk voted for him — to a vocal backer of Republicans.

Musk, who has become increasingly polarizing as he has publicly switched allegiances, last month tweeted that he’s moving right, at least for the midterms, because “this administration has done everything it can to sideline & ignore Tesla.” ​​​​

Biden has seemingly pushed aside someone who should have been a natural ally. 

Biden went so far as to push a provision in a bill that would benefit electric-car makers that are unionized at the expense of those that are not, namely Tesla. He frequently touts hiring figures by the likes of Ford, which last week said it was hiring 6,000 workers, without ever mentioning that Tesla hired nearly 50,000 people around the world in the last two years.

The same applies to solar panels. Rather than eliminating tariffs and promoting more use, Biden is more interested in protecting a few hundred US manufacturing jobs than creating thousands of installation jobs and promoting clean energy. 

For more discussion, please see Why Are Energy Prices High? Blame President Biden

Spotlight G-7, EU

In my previous post, I noted G-7 Agrees to Cap the Price of Russian Oil Using a Buyer’s Cartel

This is true economic madness. As a direct result of US and EU sanctions the EU will burn more coal. 

Sanction madness is driving up prices of energy more than the war itself and the world is burning more coal as the solution. 

High energy prices compound the difficulties of the Fed while making matters worse for the environment.

The G-7 leaders have collectively gone mad.

This post originated at MishTalk.Com.

Thanks for Tuning In!

Please Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

If you have subscribed and do not get email alerts, please check your spam folder.

Mish

Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

This post originated on MishTalk.Com

Thanks for Tuning In!

Mish

Subscribe
Notify of
guest

82 Comments
Newest
Oldest Most Voted
Inline Feedbacks
View all comments
jagvocate
jagvocate
1 year ago

If Biden is smart he’ll scrap the oil request to Saudi Arabia and beg them not to crash the petrodollar system.

JRM
JRM
1 year ago
UAE just announced they have no excess capacity for oil increase!!!
MrSkeptical
MrSkeptical
1 year ago
So. Why have coal stocks sold off? They are VERY cheap.
honestcreditguy
honestcreditguy
1 year ago
Biden is not potus, he is just a meme puppet of new world order, selling America out like he has done for long time. Govt. hack living off taxpayers….
Captain Ahab
Captain Ahab
1 year ago
I am only putting up one chart, yet it tells the story:
Draw the line of best fit–that is the mean–highs and lows ‘regress’ to the mean.
MPO45
MPO45
1 year ago
Reply to  Captain Ahab
I don’t think drawing a mean line is realistic. In 1960 the world population was 3 billion; Today it is 8 billion. Unless people suddenly decide to forsake electricity, the demand for copper will only go up from here. The same holds true for all commodities and the worse part is with an aging global population, labor to do hard work like mining and construction will be scarce.
The price is right where it should be and it may go down in a recession but it will rocket back up at some point and continue to climb unless a way to make copper out of thin air is developed.
Captain Ahab
Captain Ahab
1 year ago
Reply to  MPO45
I think you miss the point. That ‘best fit line’ incorporates population growth and expanding infrastructure, and technological change–such as plastic pipes in lieu of copper pipes for plumbing. BTW, the line is NOT STRAIGHT since the 1960s.
Drawing the line is crucial. It allows you to see the cycles at work, and invites questions about what caused them. With that knowledge you can forecast fundamentals driving demand and supply with surprising high accuracy, until uncertainty enters. Then, all bets are off.
Captain Ahab
Captain Ahab
1 year ago
Reply to  MPO45
“… labor to do hard work like mining and construction will be scarce…”
Um, robots?
MPO45
MPO45
1 year ago
Reply to  Captain Ahab
yes, robots have been promised for decades now. I can certainly understand “fixed robots” manufacturing cars but mining and construction requires thought and adaption.
Captain Ahab
Captain Ahab
1 year ago
Reply to  MPO45
Smart robots have been around for decades. Until recently, humans have been cheaper labor.
MPO45
MPO45
1 year ago
Reply to  Captain Ahab
So are we putting those lithium batteries in cars or robots? Can’t have both.
Deficit
Deficit
1 year ago
What is clean energy?
Captain Ahab
Captain Ahab
1 year ago
Reply to  Deficit
Energy after it had a bath?
MPO45
MPO45
1 year ago
Reply to  Deficit
Eating only plants and animals, it is the simplest and purest form of energy for humans. Everything else is dirty.
Captain Ahab
Captain Ahab
1 year ago
Reply to  MPO45
LMAO. Now add in all the chemical plants, farm equipment, diesel tractors, trucks, warehousing, refrigeration, retailing, cars driving to the supermarket… Our basic needs for food and shelter cause the vast majority of pollution and energy usage.
MPO45
MPO45
1 year ago
Reply to  Captain Ahab
Exactly, you make my point for me. I was referring to hunter-gatherer notion of long ago ancestors. You expect food to come to you instead of you going out to get it and that is the core problem. People have become ultra lazy.
Lisa_Hooker
Lisa_Hooker
1 year ago
Reply to  Deficit
Clean energy is energy that has not been unwrapped yet.
Captain Ahab
Captain Ahab
1 year ago
Yep, still a ways to go, but regression to the mean works.
prumbly
prumbly
1 year ago
Reply to  Captain Ahab
reversion
Captain Ahab
Captain Ahab
1 year ago
Reply to  prumbly
FYI “In statistics, regression toward the mean (also called reversion to the mean, and reversion to mediocrity)” see wikipedia.
For the Brits among us, “regression to the mean (RTM), a widespread statistical
phenomenon that occurs when a nonrandom sample is selected from a
population and the two variables of interest measured are imperfectly
correlated. The smaller the correlation…” Britannica
Six000mileyear
Six000mileyear
1 year ago
I usually don’t follow commodities. Those charts show price spikes that will return to pre-COVID levels by the end of the year. This is yet another central bank bubble in the current financial cycle. With nearly everything in a leveraged bubble, the only safe choice is cash. The winner is the one who loses the least purchasing power.
8dots
8dots
1 year ago
Inflation downtrend channel : bubble down // bubble up and back to the channel boundaries. Since L2 entered negative territory
a decade ago. 2009 low might be breached. We don’t know why/ when.
JackWebb
JackWebb
1 year ago
Reply to  8dots
It would help if you did two things. First, define L2 for those of us who don’t know every acronym in the world. Second, post that chart.
8dots
8dots
1 year ago
Inflation downtrend channel weekly, linear: L1 : Oct 1990 to June 2008 highs / L2 : a parallel from Jan 1987 to Feb 2015 lows. Within a quarter or two inflation might get back in the channel. Bubble down May 2009 low// Bubble up May 2022 high. L2 penetrate negative territory. (Tradingview, economics)
Captain Ahab
Captain Ahab
1 year ago
Reply to  8dots
Right; the past predicts the future, got it! This way we don’t need to worry about causation.
MPO45
MPO45
1 year ago
The two things that really matter are labor and energy. Energy still high but where’s the labor chart? Airlines now paying triple, up from double a few weeks ago.
There is also a big shortage of air traffic controllers but that’s not the only thing that has labor shortage. Head over to news.google.com and type “labor shortage” and you’ll see still many labor problems everywhere.
I don’t think the price of cotton or lumber coming down will make much of a difference if labor and energy are still high. Maybe we’ll get down to 6% inflation instead of 8% and that’s some progress but not enough.
Doug78
Doug78
1 year ago
Musk said that Biden doesn’t like Tesla because it is a non-union shop and Biden is beholden to the car unions in a big way.
TexasTim65
TexasTim65
1 year ago
Reply to  Doug78
At some point as a leader you have to stop antagonizing or trying to put out of business everyone who isn’t unionized or doesn’t vote Democrat.
People complained about Trump doing much the same thing via his Twitter outbursts and Biden claimed during the election he’d be way more moderate and unifying for the country. Unfortunately he’s just Trump without twitter.
worleyeoe
worleyeoe
1 year ago
Reply to  TexasTim65
Please, Joe Biden is WAY worse than Trump. Joe Biden is a senile old man. While I don’t particularly want Trump to win the GOP nomination, Joe Biden & his administration is an absolute embarrassment to this country. We’re the laughingstock of the world right now.
JackWebb
JackWebb
1 year ago
Reply to  Doug78
Does anyone in Biden’s “administration” know how to read 10-Ks? I know how, and the other day I did a medium-depth dive into Tesla and Ford Motor Co.’s 10-Ks for 2021. Quite the eye opener. The numbers below; first Tesla, then Ford’s automobile segment.

– Sales growth +79% v +9%
– Operating CF margin 21% vs. 0.01%
– Gross margin 21% vs. 6%
– Tesla was one-seventh the size of Ford by car sales in 2019. By 2021, they were 36% the size of Ford.
– Cap-x 18% of sales vs. 5%.
– Free cash burn was about 10% vs 56% if Ford’s sale of its Rivian shares are excluded

Yes, of course Senile Joe hates Tesla. When did a Democrat ever favor success?

JackWebb
JackWebb
1 year ago
Reply to  JackWebb
p.s.: Ain’t it great that Musk fired the “inclusion” staff, moved the HQ to Texas, and got rid of the Space-X wokesters who signed that “open letter?” Now all he has to do is jam Twitter’s ask to $20, then move the HQ to Huntsville, Alabama to solve the entitled white playtime communist employee problem. LOL
Doug78
Doug78
1 year ago
Reply to  JackWebb
Most car companies don’t make cars. They just assemble the parts sent to them by their furnishers and by doing so they give away margins and flexibility. Tesla builds it all. Raw materials go in one end and cars come out the other. Musk’s genius is in manufactoring.
JackWebb
JackWebb
1 year ago
Reply to  Doug78
So you never took the tour of Ford’s River Rouge plant, then?
Doug78
Doug78
1 year ago
Reply to  JackWebb
Never saw it. How much of the content is made on site as opposed to made elseware and shipped in? The way Tesla handled the ship shortage is telling.
JackWebb
JackWebb
1 year ago
Reply to  Doug78
I recommend it. Spoiler alert: They make their own steel.
Doug78
Doug78
1 year ago
Reply to  JackWebb

Maybe they are learning.

Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  JackWebb
Really?
That would account for the poor results.
What baffles me is the miniscule US car production, by statistics. This is hard to believe.
JackWebb
JackWebb
1 year ago
River Rouge isn’t what it once was. I toured it when I was a kid. Best factory tour ever.
Captain Ahab
Captain Ahab
1 year ago
Reply to  Doug78
Maybe the car companies know where the value is added, or used to before the bean counters took over. Now that Musk has competition, he will soon learn that the fundamental price=cost relationship–no excess profits and slower growth as the market matures.
MPO45
MPO45
1 year ago
Reply to  JackWebb
“Yes, of course Senile Joe hates Tesla. When did a Democrat ever favor success?”
Tesla’s “success” came from large tax subsidies largely passed by democrats. Can you do any critical thinking at all?
PapaDave
PapaDave
1 year ago
Those charts show that inflation is peaking. Though it will take time for it to show up at the retail level.
I don’t expect prices for food and energy to moderate much. Not enough supply to meet demand. It will take higher prices to cause much demand destruction in food and energy.
A recession might cause a bit of demand destruction in food and energy as well.
JackWebb
JackWebb
1 year ago
Reply to  PapaDave
No they don’t. Commodity prices swing widely and aren’t necessarily a big share of the final price, except for energy.
Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  JackWebb
What about lithium?
JackWebb
JackWebb
1 year ago
I don’t know enough about the proportion of a lithium battery’s contents to say.
Captain Ahab
Captain Ahab
1 year ago
Battery technology is developing rapidly. How long before lithium is replaced? And while we are all celebrating that technology, fuel cells are moving right along.
Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  Captain Ahab
Lithium replaced by what?
Charge density matters, and lithium is the tiniest metal atom out there.
Captain Ahab
Captain Ahab
1 year ago
Are you saying the best battery will always be lithium?
I do know that when intelligent people are put to the task, innovation tends to result.
Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  Captain Ahab
Never say never, but there are limitations to technology based on chemistry and physics.
Heard rumours of rare earth replacements for magnets, but still waiting.
Fusion reactors have always been ten years in the future.
Lisa_Hooker
Lisa_Hooker
1 year ago
Lithium obviously could help a lot of the folks here.
But you do need to have your blood tested regularly.
Esclaro
Esclaro
1 year ago
By now I am only reading the comments of about five people who are not fascists or fascist apologists. This place is worse than ZH.
CRS65
CRS65
1 year ago
Reply to  Esclaro
Did you notice this too??
I read this blog because Mish does provide some very timely and thought provoking information, but it has become quite “Alt-Right” in its isolationism and nationalistic views.
Zardoz
Zardoz
1 year ago
Reply to  CRS65
It’s fun. Usually they hang out in safe spaces where dissent is instantly banned. Here they can be ridiculed.
JackWebb
JackWebb
1 year ago
Reply to  Zardoz
I see that “Vice” is mad because Facebook’s artificial stupidity blocked posts offering to send people abortion drugs. Censorship, they whined. Gee, I thought the crypto communist “progressives” were all for that. LOL
Zardoz
Zardoz
1 year ago
Reply to  JackWebb

Are you a bot, or just so far up your own butt you can’t follow a conversation?

RonJ
RonJ
1 year ago
Reply to  Zardoz
You are entertaining.
MPO45
MPO45
1 year ago
Reply to  Esclaro
It’s easy problem to fix. Click on the name/handle and select IGNORE. It works wonders allowing you to only see the comments you agree with so you don’t ever have to do any critical thinking and just enjoy your group think.
Captain Ahab
Captain Ahab
1 year ago
Reply to  MPO45
Nothing like having a closed mind to expand one’s understanding. Your comment is actually indicative of what you criticize. My advice, respond with a critical review of the offending comment, understanding that some issues are already partisan. I respond to your comments quite often, usually resorting to theory and historical examples.
MPO45
MPO45
1 year ago
Reply to  Captain Ahab
I do enough mushrooms to have my mind in alternate realities and higher dimensions. How about you Ahab? Every go beyond the edge of the known universe?
Captain Ahab
Captain Ahab
1 year ago
Reply to  MPO45
Now there is a telling admission. Do you even know the difference between a mushroom and a toadstool? Hint: there isn’t one.
To answer your question, I have enough interesting things in my life to sustain curiosity and creativity without needing artificial stimulation.
JackWebb
JackWebb
1 year ago
Reply to  Esclaro
Well, then I’m sure Rachel Maddow, Don Lemon, and Michael Avenatti can help! LOL
Doug78
Doug78
1 year ago
Reply to  JackWebb
Is that a Ménage à trois?
JackWebb
JackWebb
1 year ago
Reply to  Doug78
You trying to make me puke? LOL
Maximus_Minimus
Maximus_Minimus
1 year ago
The German “greens” now like coal, and even nuclear.
I have been amazed how Europe shuttered her coal mining. If I am correct, there is no single working mine in the UK, France, or Germany, once major coal producing countries. There is no fallback strategy, once the miners are gone, they’re gone.
If they turn to coal, it will be necessarily imported. China is a major producer.
Mish
Mish
1 year ago
German Greens most assuredly still do not want nuclear.
It’s part of the madness.
Zardoz
Zardoz
1 year ago
Reply to  Mish
I kind of get it… nuclear is great tech if not operated by lying idiots like Chernobyl was. Once it’s built, you don’t know who’s gonna run it.
Stupid people screw things up for everyone.
Captain Ahab
Captain Ahab
1 year ago
Reply to  Zardoz
Transitioning to other forms of energy will happen as we move forward. The issue is how to do it efficiently and effectively, with minimal damage. Powering entire cities with solar and wind (alone) makes little to no sense. With current technology, the grid would be enormous. With superconductors, the grid is minimal–yet still far away. The only effective solution is nuclear, at this point. Ergo, the effective role for the gov’t is to advance reactor technology… entertain new approaches, motivate research, set and monitor standards, etc.
Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  Mish
I believe, the greens agreed to delay the shutdown of two nuclear reactors.
Quite a sobering up from the youth.
Doug78
Doug78
1 year ago
Lots of countries produce coal. Germany actually mines lignite in several places in their territory. The Greens still don’t like coal or nuclear but see it as a necessary evil to get out from Russia’s blackmail so they will support it till they are free of Russian energy imports.
Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  Doug78
Lignite, the dirtiest coal of all.
The deep mines have been closed. My calculation is, coal will be imported, mostly across the ocean.
Doug78
Doug78
1 year ago
Germany still mines a nice amount of the lignite coal. It is dirty coal but it burns and heats just the same. The Greens are ok to use it till other energy supplies are found and developed. The deep mines would take much longer to open so they will stick with the lignite. Importing hard coal from overseas should not be a big problem. Coal producers in several countries are expanding production because the market prices are really good and will probably remain good enough for a while.
TexasTim65
TexasTim65
1 year ago
Reply to  Doug78
Can power stations burn other types of coal? Just asking because I know they are quite different so I’d expect a power plant would have to be setup to burn a specific type and not be able to burn a different type (temperature too high type thing).
Doug78
Doug78
1 year ago
Reply to  TexasTim65
I can’t answer that question but I know that Germany these last few years limited the coal burning power stations to only use 35% of capacity to keep emissions down. Now I assume they will go to 100% and above if necessary. That should help a lot.
FromBrussels
FromBrussels
1 year ago
Reply to  Doug78
ooh… ‘lignite’ , nice scientific name for Braunkohle, dirtiest coalsh*t on earth….Long live climate change I d say , it s here to stay and get worse …..well, if climate change really is a consequence of human activity that is, which remains to be seen and confirmed ….
Maximus_Minimus
Maximus_Minimus
1 year ago
Reply to  FromBrussels
I believe, there is lignite -> bituminous coal -> anthracite.
The best coal, anthracite, doesn’t have the energy content of oil, nor the clean burning of natural gas, but you are going back to Middle Ages anyways.
Counter
Counter
1 year ago

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is 0.3 percent on June 27, up from 0.0 percent on June 16. After recent releases from the Federal Reserve Board of Governors, the National Association of Realtors, and the US Census Bureau, the nowcast of second-quarter real gross private domestic investment growth increased from -9.0 percent to -8.1 percent.

The next GDPNow update is is Thursday, June 30.

Bam_Man
Bam_Man
1 year ago
“The G-7 Leaders have collectively gone mad.”
I don’t think so.
They were already mad the entire time – it’s just in plain sight for all to see now.
JackWebb
JackWebb
1 year ago
Reply to  Bam_Man
Maybe I’m wrong, but I read that “buyer’s cartel” as capitulation with a figleaf. First they banned oil imports. Now they want the oil at a price they think they can dictate. If I were Putin, I’d shut off all gas and oil to Europe and tell ’em they can shove that buyer’s club where the sun don’t shine.
Captain Ahab
Captain Ahab
1 year ago
Reply to  JackWebb
I’ll tell Vlad the next time I’m at the Fisherman’s Hut. I might leave out the ‘sun’ part.
fibsurfer
fibsurfer
1 year ago
First thing I look at every morning is the broader commodities market. Have you seen the potato chart?
Bam_Man
Bam_Man
1 year ago
Reply to  fibsurfer
“I
know sh*t’s bad right now, with all that starving bullsh*t, and the
dust storms, and we running out of french fries and burrito
coverings.
Zardoz
Zardoz
1 year ago
Reply to  Bam_Man
Camacho was a moron,but he cared about his people… a major improvement over what we’ve had the last 40 years.
Doug78
Doug78
1 year ago
Reply to  fibsurfer
Is the chart boiling or is it mashed?

Stay Informed

Subscribe to MishTalk

You will receive all messages from this feed and they will be delivered by email.