New highs again overnight for the trending US dollar.
Grain futures are lower across the board this morning as the US dollar continues to bolt to new multi-decade highs. Overnight the British pound slid to record lows, pushing the US dollar for a moment to $114.44, the highest level since May 2002, before settling back to just up $0.37 at 113.33. The strength in the US dollar continues to be an albatross on all commodity valuations, pushing the US back to the supplier of last resort, as countries with remaining products still have the selling advantage with their cheaper currencies.
Wheat values initially rose in the evening session as the referendum continued across the Russian-held areas of Eastern Ukraine. Yet after the US dollar burst higher by 1% at 8 PM CT, the wheat market lost its legs due to its lack of competition ability with such a firm dollar. The grain markets will closely watch Pres. Putin and what he does across Ukraine if the referendum goes his way, and they annex the captured portions. He has threatened tactical nuclear weapons to protect what would then become the new Russian front and homeland.
The NASS Final Small Grain report and September Stocks report is out this Friday at 11:00 a.m. CT. This report can come with surprises, and with this year’s premium cash markets running so late in the year, the potential for the USDA to lower old crop stocks, which transfer into new crop status, could be a surprise. With this potential ahead, this may bring about midweek buying as short-sold traders lighten up their positions.
A Ridge of high pressure will dominate most of North America over the next ten days, with the forecast models agreeing that the first Gulf hurricane of the season impacts W Florida. The European model takes a storm across SW Florida late Thursday/Friday, while the GFS has a store making landfall across the Eastern Florida Panhandle. Both models tend to agree that landfall will occur near Sarasota. A below-normal rainfall forecast is offered for the Central US, with harvest operations becoming widespread. This below-normal rainfall trend lasts into mid-October and should push the harvest to a fast conclusion. The Plain’s drought continues to worsen amid its dryness.
Cattle futures closed lower last week, and a steady/soft outlook is offered for this morning with the weak outside markets and the Cattle on Feed report that was slightly bearish for feeder cattle. The seasonality of box beef prices projects a low in early October. With the outside financial markets remaining sour, rolling into what typically is a negative window for stocks, December live cattle could challenge the 146-147 major support values. December cattle typically carry a much stronger spread valuation when compared to the October cash cattle market unless the Federal Reserve creates a hard-landing recession.