The US Dollar and Corn

Published on: 11:57AM Oct 31, 2008
The US dollar and corn markets are other examples of the recent financial market turmoil’s impact on the commodity markets.  The US dollar and corn have a tendency to trade inversely to one another.  Why? Well because when our dollar depreciates it makes US products more expensive abroad. Of course the opposite is true when our dollar depreciates. And given that roughly 20% of the US corn crop is typically exported it makes corn especially reactionary to the movement of the dollar. Back to the economic challenges we are facing and corn. Since roughly mid September there has been a flight to safety for investments that has influenced the value of the US dollar higher. The future direction of the dollar is ambiguous but if the recent action of the dollar shaking off the fed interest rate cut is a clue, further dollar appreciation could occur. And that could be bearish for the corn market. Why is this important? Because corn is a major feed ingredient for cattle, chickens, dairy cows, and hogs and corn price levels will play a big part in forthcoming protein and dairy production levels.

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