Dollar Down . . . Grains Up
Oct 26, 2010
It’s the same old theme. The dollar is down and grains are up. The pattern seems to be too simple but its the dominate force right now. The holders of the dollar don’t like what’s happening with our economy and the government trends towards inflation. They know they are better off holding “things” rather than paper. Subsequently, I see no slow down in exports and demand will be the last thing rationed not the first.
As for the supply side of the equation, harvest is essentially done. The bid doors are going to shut and limited product movement is expected until after the first of the year. Basis levels should improve rather quickly and even present some excellent. This means as producers you need to keep your eyes open to the potential of some good basis improvement bids going into the end of December that you will not be getting in Jan to March time period when producers normally move cash inventory for needed payments.
As to upside price potential I really believe most of the bullishness of this year’s supply reduction will be factored into the markets before the January reports. So producers need to be getting prepared, we are putting the finishing touches on our selling article. It’s will be free to brokerage clients but a $75 cost for non-clients, call 1-800-832-1488 for details.
While corn export and ethanol demand is showing no signs of weakness the hog sector is going to show big drops really soon. The current hog slaughter is way above normal and I would suggest indicating strong culling of gilts. Bottom line: By Thanksgiving, we should have most of the big slaughter worked into the market and setting the stage for stronger prices as we move into 2011. I suggest hog producers who are short to consider puts over short futures or cash contracts. Second, for speculators you may want to consider selling second half of 2011 out of money puts on oversold conditions.
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