Dollar Strength Weighs on Commodity Markets

February 21, 2013 12:32 AM

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Overnight highlights. Following are opening grain and livestock calls at 6:30 a.m. CT:

Corn: 1 to 3 cents lower. Strength in the dollar index on indications from the FOMC that the Fed could begin backing off from its quantitative easing actions is pressuring grain futures this morning. With little other fresh news for the corn market to digest and the weekly export sales report delayed until tomorrow morning, traders are hesitant to rebuild long positions. Corn remains within its week-long consolidation range.

Soybeans: 1 to 9 cents lower. Deferred futures are leading losses amid profit-taking spurred by strength in the dollar index. The dollar has seen trade above the November high, which is also weighing on crude oil and gold futures. But pressure is being limited by tight supplies and indications the U.S. export window could be left open a bit longer due to the possibility of shipping delays out of South America.

Wheat: 3 to 5 cents lower. Futures at all three exchanges are weaker this morning on spillover from neighboring pits and negative outside markets. Indications that demand for U.S. wheat was rising lifted wheat earlier this week, but a stronger dollar renews concerns about demand. Also adding to the negative tone is the bigger-than-expected winter storm that dumped snow on Kansas. Like corn, Chicago wheat futures remain within a week-long consolidation range.

Live cattle: Mixed. Following yesterday's sharp losses live cattle are due for a corrective bounce. Adding to this expectations is the fact futures came well off session lows late yesterday. But attitudes remain bearish toward the market near-term due to demand concerns. Traders are concerned about possible meat inspector furloughs and slowed export demand. Cash cattle trade began yesterday at steady money with last week's $123 trade. February live cattle still hold a premium to that level.

Lean hogs: Mixed. Futures are expected to be mixed following yesterday's choppy performance, although buying will be limited to short-covering due to concerns about demand. News yesterday that China is considering testing imports for ractopamine raised concerns about export demand, as China is a top customer of U.S. pork. Meanwhile, the cash hog market is expected to be steady to weaker today as packers work to finally get cutting margins back into the black.


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