CBOT weekly: Bullish U.S. dollar seen pinning grain futures

(Lisa Guenther photo)

CNS Canada — Chicago Board of Trade corn and soybean futures remained largely unchanged over the past week but a bullish U.S. dollar, currently outperforming many of the world’s other currencies, will keep the long-term bias pointed lower, according to a U.S. analyst.

“We’re going to need a weather event, we’re going to need a drought; only way we’re going to see a good rally,” said Scott Capinegro of Barrington Commodity Brokers in Barrington, Ill.

The March contract comes off the board on Friday, when it will be replaced by the May contract, he noted. However, he doesn’t expect it will do very much to spark upward action.

“It will have some problems up there too,” he said.

Although both corn and soybeans are essentially seeing sideways trading action right now, Capinegro is higher on corn than beans — especially new-crop.

“If there is a wet spring it won’t take away from bean acres, it will increase it even more,” he said, adding some corn had already been planted in the Delta, with conditions on the wet side already.

The U.S. Federal Reserve is scheduled to meet next week to discuss the thorny issue of whether to raise interest rates in the U.S.

Though many feel a hike is coming sooner rather than later, Capinegro doesn’t believe either option will do much to alleviate pressure on grains.

“That won’t make the dollar break, either way,” he said, noting the U.S. greenback will encounter some corrections as part of its natural movement but still looks quite strong.

The plunging price of crude oil is also pressuring ethanol, on which most corn farmers rely, he said. “If we didn’t have an ethanol program that uses 40 per cent of our corn production, we would be under US$3.”

Some corn farmers have break-even prices of US$4.44-$4.50 a bushel, which wouldn’t likely be met anytime soon, he said.

“Look at the corn charts: for the past four to six weeks we’ve been hanging in a 25-cent trading range; we don’t move.”

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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