Active 2008 Hurricane Season May Send Some Commodities to Record Highs

In 2005 there were four category five hurricanes. Hurricanes Katrina, Dennis, Rita and Wilma all hit the US shorelines and caused tremendous amounts of destruction to ports, refineries, oil and gas platforms, infrastructure and oil and gas pipelines. An estimated 113 oil and gas platforms were damaged or destroyed and 400 various pipelines were damaged or destroyed during the 2005 hurricane season. "Any significant disruption in the flow of a commodity from point A to point B can have violent affects upon futures prices". Hurricanes can have a significant impact on certain commodities depending upon where they hit. However, keep in mind that the commodity markets usually have factored in potential hurricane damage before the hurricane hits. Past commodity futures market reactions to hurricanes are no guarantee of similar responses to hurricanes in the future. Visit www.tkfutures.com/education.htm to learn more.

Hurricanes in the Gulf of Mexico can cause the various crude oil and natural gas platforms to be evacuated. This lack of oil and natural gas production and potential hurricane damage can send crude oil futures, unleaded gas futures, heating oil futures and natural gas futures violently higher. In fact, the all time record high natural gas futures price happened because of the Hurricane Katrina disaster. Hurricanes that threaten the actual refineries in Mexico, Texas and Louisiana can also cause huge price volatility in the distillate markets, especially heating oil futures and unleaded gas futures. The US is already struggling with a limited refining capacity because a new refinery has not been built in over 30 years. Therefore any disruptions in the production of heating oil and unleaded gas can have major price consequences. Visit www.tkfutures.com/natural_gas.htm and www.tkfutures.com/crude_oil.htm to learn more.

If a hurricane hits a major shipping location such as the Mississippi Delta where there are many commodities that are being stored or shipped, commodity futures prices may be affected. Soybean futures, corn futures, wheat futures, coffee futures and cotton futures prices are sometimes affected by damage to the storage facilities or shipping delays caused by hurricanes near the Mississippi Delta.

Extreme precipitation volumes typically accompany a hurricane. This excessive precipitation can head up into the grain belt flooding crops and hindering planting or harvesting progress by farmers. Soybean futures prices, corn futures prices and wheat futures prices are especially vulnerable to extreme volatility in relation to an overabundance of moisture during planting and harvest. Visit www.tkfutures.com/soybeans.htm and www.tkfutures.com/corn.htm to learn more.

Potential hurricane damage to Florida can affect orange juice futures, sugar futures and lumber futures prices. Orange juice futures prices are especially susceptible to any weather related problems because it takes orange trees many years to bear fruit. Three hurricanes hit Florida in 2004 which decimated the orange groves in Central and South Florida and sent orange juice prices to 18 year highs.

The author of this article is a 14 year veteran of the commodity futures and options markets and the President of T & K Futures and Options, Inc. Futures and option trading is very risky and only risk capital should be used. Past performance is not indicative of future results and commodity future trading and future option trading may not be suitable for all investors.