U.S. dollar weakness boosted the commodity sector overnight

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Dollar weakness seemingly boosted commodities Wednesday night. The federal government shutdown ended late Wednesday evening, which seemingly caused a surprising drop in the value of the U.S. dollar. The commodity sector generally rallied in response, with corn futures moving modestly higher. Bulls were also encouraged by a private report that China bought over 1.0 million tonnes during early October. December corn futures rose 2.25 cents to $4.45/bushel early Thursday morning, and May added 2.0 cents to $4.655.

Chinese news and dollar slippage also boosted soybeans. Chinese officials announced had sold 281,783 tonnes of soybeans from reserves, which represented over 56% of the total offered. That seemingly implies robust demand. When combined with the bullish aspects of the dollar breakdown and the recent palm oil rally, it wasn’t terribly surprising to see the soy complex rise overnight. November soybeans gained 2.5 cents to $12.79/bushel around dawn Thursday, while December soyoil surged 0.13 cents to 41.50 cents/pound, and December soymeal crept up $0.8 to $404.6/ton.

Wheat futures joined the general commodity advance. The overnight U.S. dollar decline also encouraged wheat buying. Traders seemed to think Wednesday’s losses were overdone. December CBOT wheat rallied 4.75 cents to $6.8625/bushel in early Thursday action, while December KCBT wheat bounced 4.5 cents to $7.4925, and December MGE futures ran up 4.25 to $7.4675.

News of higher cash prices could spark larger cattle gains today. Bullish cattle traders were probably encouraged by the Wednesday drop in the value of the dollar, but the main driver of overnight gains was almost surely news that Southern Plains cattle prices had risen $1.00 to $129.00/cwt (cents/pound) Wednesday evening. December cattle futures advanced 0.07 cents to 133.32 cents/pound as CME trading accelerated Thursday, while April added 0.02 to 135.70. Meanwhile, November feeder cattle lifted 0.30 cents to 168.02 cents/pound, and January inched up 0.02 to 167.60.

The hog market proved the exception to the Wednesday night rally. Nearby hog futures rose strongly on Tuesday and Wednesday on ideas they were too heavily discounted versus cash values. We suspect yesterday’s late cash and wholesale news proved less supportive than bulls were hoping, which would explain the market’s overnight slide. December hog futures dipped 0.05 cents to 88.75 cents/pound, while April slid 0.22 cents to 90.42.

Cotton joined the general commodity advance. There was apparently very little news pertinent to cotton supply/demand conditions overnight, which allowed traders to focus upon the broader outlook. The slight equity market reaction to U.S. government news probably limited the bullish reaction to the dollar decline. December cotton edged 0.09 cents higher to 83.25 cents/pound around sunrise Thursday, while March moved up 0.19 to 84.47.



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