The U.S. dollar hit a 14-year high in 2016 and the momentum could be felt into 2017.
Overall, 2016 was a strong year for the stock market, even after a sharp drop in oil prices kicking off the year. This caused Wall Street to have its worst start in its history.
Volatility proved to be the case with the Dow on a bullish run chasing 20,000, oil hitting its highest close in 17 months, and natural gas increasing to a 2-year high.
The strong U.S. dollar slightly faded in the final week of 2016, but it could still be a wet blanket on agricultural exports in 2017, and it’s impacting some commodities more than others.
“Wheat is already struggling on the export side of things,” said Brian Grete of Pro Farmer. “The stronger dollar doesn't help any. The meats, they surprisingly haven't slowed down on the export front yet. Corn, I think that comes into play as well. Soybeans, [it’s not impacting] so much. That's more of a seasonal play with the South American crop.”
“Soybeans, there's not a lot of places to buy,” said Tommy Grisafi of Advance Trading, Inc. “Wheat, it's obviously hurting us. Corn, it's hurting us.”
Some analysts believe beef should stay competitive despite the higher dollar.
"I think the demand for beef overall is going to stay strong,” said Joe Vaclavik, president and founder of Standard Grain. “Even though we've had a nice rally back in the cattle market, we're still fairly cheap compared to where we've been here over the last say five years.”
The dollar isn’t hampering beef exports as much as it could, according to Ted Seifried of Zaner Ag Hedge.
“With the strong dollar, we’re seeing more exports than we thought we would see [despite] a lack from China,” Seifried. “The Chinese Minister said a few months ago that they were going to import U.S. beef during the calendar year 2016. That didn’t happen. So, there’s still hope that could pick up at some point, but that dollar being higher again and again is sort of making it seem further and further away.”
Despite China, USDA’s December Cold Storage Report shows beef in the freezer is down slightly from the previous month, but up from last year. Analysts say we’re slowly chewing through it, for now.
“Things may be better in demand and tighter with supply over the next three or four months,” said Vaclavik. “Once we get into the spring and June, which we see big discount in the cattle futures; that’s when things could open up a little bit. We can maybe expect lower prices. It doesn’t mean demand is going anywhere. It just means we’re going to have a bigger supply base.”
Some analysts say gold is also seeing a boost thanks to the very ‘slight’ retreat in the U.S. dollar. The metal has been rebounding from an eleven month low.