Earlier this month, the Federal Reserve made the decision to raise interest rates. While this was baked into the price, it will have an impact on commodities.
The advantage the U.S. enjoyed most of 2015 has been “largely washed away,” according to Brian Roach of Roach Ag Marketing on U.S. Farm Report.
“From a currency purchasing standpoint, we’ve lost an advantage that the currencies were bringing,” said Roach. “China is still eager to buy, even where we are today. Part of they might be they see big demand, but they also see further rate hikes next year, a bigger disadvantage.”
With the dollar sitting at a 14-year high, some analysts believe there could be as many as three rate hikes in 2017. Joe Vaclavik of Standard Grain said while the value of the dollar has increased, it hasn’t hurt the soybean demand.
“China continues to buy and it seems like the price is really insignificant when it comes down to it,” said Vaclavik. “They’re going to buy from us or they’re going to buy from Brazil. It might be a bigger deal for the wheat market or the corn market.”
Watch Roach and Vaclavik discuss ethanol demand and what it will take to move corn prices on U.S. Farm Report above.