Weak Dollar

November 24, 2009 06:00 PM
 

The following information is bonus material from Top Producer. It corresponds with the article "Ailing Greenback Takes a Toll” by Charles Johnson. You can find the article on page 22 in the December 2009 issue.


Information provided by Rich Nelson, Allendale.
 
Scott Donarski asked "…what if the US dollar falls to 72. What does that mean for corn prices?"
 
Here's a list of how crude, corn, and the dollar have been correlated each quarter. A POSITIVE correlation means they both go up or down together. A NEGATIVE correlation means they move opposite. A chart of those correlations has been attached.
 
I cherrypicked the quarters which worked and will assume the US dollar has a strong negative correlation (-73%). This means, if the US dollar falls 10% then corn prices should rise 7.3%. A fall in the dollar to 72 would imply a rise in December corn to 418. A retest of the 2008 lows (70.805) would equal corn at 423.
 


(click to enlarge)
 

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