Grains end lower for a third day, with livestock mixed.
Shawn Hackett of Hackett Financial Advisors says the weakness in grains is coinciding with the parabolic strength in the dollar in what he calls the “Trump Effect”.
“It’s the same thing that happened the last time Trump was President, everyone figuring if you raise tariffs its going to force investment and capital into the country and increased manufacturing. If you’re doing that companies have to sell the currencies overseas and buy the U.S. dollar. That’s what the speculators are doing right now, they’re betting that is what is going to happen,” he says.
The dollar index has been rising since the election and made new highs Wednesday and that is overshadowing any other news including demand.
“I think its mostly due to that. When the dollar is rising fast like we’ve seen where its going straight up the market just isn’t able to adjust and its a huge headwind you can only overcome if you have extreme weather or extreme tightness, which we don’t have,” he explains.
News of Trump’s cabinet nominees have already been having an effect on the market with soybeans falling in response to tariff supporter and USTR nominee Robert Lighthizer and corn and especially soybean oil tumbled on word of Lee Zeldin for EPA Administrator.
Hackett says as the markets sort through all of this the volatility will increase similar to the first Trump Administration.
“Remember we would have soybeans up 35 cents overnight only to end sharply lower the next day on Trump’s tweets regarding trade,” he says.
Hackett thinks Trump will use tariffs as a negotiating tool to help agriculture through trade deals, rather than as a way to fund the government or his tax cuts.
Corn failed to rally despite private exporters reporting another 27.3 million bu. of flash sales of corn to Mexico and unknown destinations on Wednesday morning.
Hackett says the market perceives this demand as front loading ahead of possible tariffs and that its not sustainable after Trump takes office, so that is why it is failing to rally the market.
Weather is playing a secondary role with favorable conditions in South America and winter wheat areas of the U.S. giving the market another reason to slide especially as ratings improved 3% to 44% good to excellent.
Wheat futures made new lows for the move in the process triggering technical selling.
Cattle futures ended mixed and may stay sideways through November as seasonals are bearish according to Hackett.
Meanwhile, lean hog futures ended mixed after making new contract highs Tuesday and he thinks the market is in the process of topping but may have also started to see some hedge pressure at these levels.
