Harvest Pressure Ensues Alongside a Strong US Dollar

Harvest pressure continues to push corn prices as the Dec contract fell to six-week lows this week. Positive demand fundamentals are unable to combat the record yields and excessive stocks. While there remains nearly one billion bushels out in the fields, weather looks to be non-threatening on the 6-10 day outlook with much of country seeing above average temperatures and normal rainfall.

South American crops are also massive with Brazil approximately 75% planted with an estimated crop size of 83.50 million MT, a 16.5 million MT gain (+25%) from the 2015/16 crop. The USDA has Argentina’s crop pegged at 36.5 million MT, up 7.5 million MT (+26%) from prior year. There remains an ongoing shortage of corn in Brazil which has prompted livestock producers to import corn but a majority of the grain will be chipped in from Argentina and Paraguay, not the U.S. The shortage has lead to very slow cash sales from producers with only 24% of the total crop forward contracted versus 70% during the same time last year. Their currency has also endured a Trump-driven slump and posted its worst three-day loss since 2008 following the election.

Strength in the US dollar is expected to hamper the U.S. competitiveness in the world market as the U.S. dollar index touched a near 14-year high mid-week. Mexican demand for U.S. grain imports has slumped along with the country’s sinking peso as buyers withdrew from the market amid soaring costs in the week since Donald Trump won the presidential election, traders and industry analysts said. Corn prices in pesos jumped more than 10% overnight for the top U.S. customer as the surprise election result sent the currency plunging to an all-time low against the dollar, they said.

WRITTEN BY Alyssa Badger

Alyssa started her career in 2008 at the Board of Trade managing a firm that had a primary focus in grains. The nucleus of her position centered around order entry and research development; from there, Alyssa's enthusiasm for commodities continued to grow and expand. This enthusiasm lead her to move to West Texas and assist in hedging for the largest originator of U.S. cotton to textile mills worldwide. Alyssa has now settled back in Chicago as a Trading Consultant for Highground Trading, Inc. Contact Alyssa