Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Commodities Rebound on Higher Oil Prices – Weaker Dollar
To say that the past week was on the hectic side for commodity markets would be the under statement of the year. Nevertheless, amidst the liquidity problems the financial district is experiencing, the commodity markets have managed to rebound in Wednesday’s day and overnight trade from a major decline experienced on Monday and Tuesday of this week. The U.S. dollar index, that was strengthening through the beginning of the week, has now backed off from recent highs by two points, currently at 78.09. Besides the uncertainty impacting the markets from hurricanes Gustav and Ike, heavy noncommercial liquidation is said to have subsided allowing commercial buying to rally the market. Other uncertainty that will play into trader activity over the near term will be deciphering the actual size of the 2008 U.S. corn and soybean crop, additional financial news stemming from Wall Street, and crude oil prices (currently $10.00 per barrel higher than the Tuesday’s low of $90.00 per barrel).
The weekly export sales report released this morning was bearish for corn, neutral for soybeans, and bullish for wheat. Corn and soybean sales were behind the amounts needed to keep pace with USDA projections after completing one week of the new marketing year that began September 1. Wheat exports, having completed the 14th week of the marketing year, are currently ahead of the pace needed to meet USDA projections. Commodity traders will be keenly interested in the pace of U.S. export sales in the weeks ahead. The interest lies within keeping tabs on world demand and how well demand keeps pace with projections in light of the extreme volatility from outside sources (currency exchange values, energy prices, etc.).
Marketing Strategy
It is going to take some time before all of the repercussions from the financial crisis and the resulting impacts upon commodity prices are known. It could be that the commodity markets can weather this storm better than the stock market in the near term. The reason being that the Dow could yield a 50%(+) retracement from the 14,190 level before things begin to improve. Currently, Dec ’08 corn futures are trading at $5.44; Nov ’08 soybean futures at $11.38; with Dec ’08 SRW wheat futures at $7.20 per bushel.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.
Editor’s Note: The Weekly Crop Update is ending for the season but Carl German writes his Grain Marketing Highlights year-round and you can receive them by email. Contact Carl at clgerman@udel.edu to be placed on the distribution list.