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More on the Dollar

00:00AM Aug 08, 2008

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

No Bullpen on Monday, but I'll be back on Tuesday to give you pre-report expectations ahead of the August Crop Production and S&D Reports.

Follow-up on dollar... I thought I'd make some more comments on the dollar after yesterday's comments about it needing to move above the spring high. Because, the dollar index moved above the June high Thursday to signal a low is in place. Now to "confirm" a low, the index must find support around the June high. Longer-term, if confirmed, this is a bearish development for the grain markets, as it threatens to slow demand unless prices drop to remain competitive.

Yesterday's floor comments signaled the dollar wasn't improving because of better U.S. economic news, but instead of weakening news overseas. The head of the European Central Bank yesterday said mid-2008 economic growth is likely to be substantially weaker than the first quarter.

In overnight trade, the U.S. dollar surged again. With the U.S. dollar index at its highest level since late February, commodities faced widespread heavy selling overnight. I just think we need to keep a very close eye on the dollar. If it continues to strengthen it could be a sign of more air coming out of the commodity world. But if the dollar retreats, it could bring some life back to the grain markets.

Keep your comments coming. Always good to have conversation with you and input on what you'd like to talk about. E-mail your comments/question to me by clicking here. Please include your location.

Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 9 to 12 cents lower. Futures were lower overnight on profit-taking pressure following yesterday's gains. Futures closed mostly around 14 cents higher, supported by short-covering on ideas recent losses have been overdone, as well as price gains in the crude oil market and the EPA ruling on the Texas RFS request. Upside potential was limited by non-threatening weather forecasts, as moderate temps are expected to continue near-term.

Soybeans: 20 to 30 cents lower. Futures were sharply lower overnight on fresh speculative selling. Futures were 15 to 22 cents higher yesterday, seeing short-covering support and spillover from strong crude oil gains. November beans posted an inside day of trade on the charts and must respect support at Wednesday's low of $11.99 to avoid triggering another round of sell stops and do more technical chart damage.

Wheat: 12 to 16 cents lower. Futures were sharply lower overnight on spillover from neighboring pits. Futures were sharply higher yesterday, closing 50-plus cents higher in Chicago. Early support came on ideas Wednesday's losses were overdone and on spillover from short-covering in the corn and soybean markets. Additional support came from strong gains in the crude oil market and this morning's strong weekly export sales report.

Cash cattle expectations: At least $1 higher. Given this week's improvement in beef prices and movement, the cash market is expected to be at least a dollar higher between $98 and $99 - and possibly topping the century mark! Choice beef values rose $1.06 yesterday and Select was up 31 cents on still-strong movement of 321 loads.

Futures call: Mixed. Futures are called mixed, but are vulnerable to spillover from yesterday's late-session sell off. Traders are waiting on cash trade to develop, so price action will likely be choppy today. Yesterday, October live cattle penetrated resistance at the previous day's high but closed sharply lower. Futures, however, respected support at the previous day's low and remained within the boundaries of the recent uptrending channel.

Cash hog expectations: Steady to firmer. Early expectations are for steady to stronger bids again this morning as packers are working on securing supplies for next week and still need additional loads for Saturday's kill. Over the past six days, pork cutout values have posted new record highs, helping to keep packers' margins profitable. Pork cutout values rose more than $2 yesterday on strong movement.

Hog futures: Mixed. After yesterday's strong gains, futures are called mixed as traders focus on spreading. Nearby contracts were supported by continued cash strength, while deferred contracts found support from short-covering on ideas recent losses have been overdone. The high-range close opens the door to spillover support this morning. If realized, it could signal near-term lows in place for deferred futures.