It’s no news the U.S. has a strong dollar. The currency's might has hampered export sales, placed downward pressure on the commodity markets and crushed manufacturing. Official commentary could be the first indication the dollar will begin to soften.
“I’d watch for rhetoric out of the Fed or Goldman Sachs that would suggest the dollar is toward the high part of what it is and that we might see some restructuring,” says Andy Shissler, a market analyst with S&W Trading, in an "AgDay" interview with host Clinton Griffiths. “I’d also look for if Goldman Sachs thinks it’s a good idea to own oil because that’s going to be our indication the ag markets will turn around.”
Crude oil and energy are the main players when it comes to the dollar’s strength.
“Whether politically we’re trying to punish people around the world, Russia or countries in the Middle East, with a low oil price, I don’t know," Shissler says. "I think that’s probably a lot of what’s going on.”
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Shissler said it doesn’t appear the U.S. minds having a high dollar, and he notes the Federal Reserve supports a high dollar with the interest rate.
“Everyone else around the world, including China, is devaluing their currency, and it is crushing manufacturing,” he said. “It’s hurting our ag side as well. We’re taking the bulk of the beating on this deal.”
Meanwhile, the recent announcement that Argentina’s new government will remove cattle taxes essentially "killed cattle," Shissler and other analysts argue. They're referencing the dramatic downturn of the beef markets. The country is now considering devaluing its currency 20% to 40%. That's bad news for commodities.
“You couldn’t ask for a worse thing to happen to corn, beans, wheat and cattle during that period,” Shissler says.
Farmers should watch currencies more than anything over the next few months, Shissler advises. Although it would be great for the value of the dollar to ease lower, he says, that isn't likely to happen anytime soon.