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Pressure from financial markets

Agriculture.com Staff 02/12/2016 @ 12:15pm

The collapse of some and the potential collapse of more major Wall Street firms sent a shock wave through the financial markets.

On the commodity side, liquidation through heavy fund selling pressured nearly all commodities, especially agricultural. Traders large and small were exiting in droves in order to avoid further losses. Yet by the end of last week, Friday, September 19, prices managed to actually stage a comeback with both grains and livestock finding support from traders who felt commodities were a value.

We see two potential scenarios in the weeks and months ahead. First, barring any weather that could yet affect this year's grain and oilseed crops, it is likely that the market will focus its attention on supply. As harvest gets underway, yield results will dictate price movement. Our bias is that both corn and soybean prices have potential to move downward, but to a limited degree. On the other hand, if yield results are less than expected, prices will hold or move higher. Corn futures could move as much as 50 cents to $1 while soybeans could gain back $2 to $3.

From a long-term perspective, supply numbers remain critically tight both domestically and world wide. Demand, while likely to diminish some in the year ahead due to livestock liquidation and less exports, will still be historically strong.

For the livestock sector, higher feed prices this past year have created some tightening of inventory as indicated by increased cow and sow liquidation. Speculative buying interest, as well as tighter supply, will be supportive. Expect live cattle futures to hold above 100 and likely move to the 105 to 110 area by midwinter. Hog prices could recover trade the 2009 summer months in the upper 80s or low 90s.

If you have comments or questions, contact Top Farmer at 1-800-TOP-FARM ext. 129.

The collapse of some and the potential collapse of more major Wall Street firms sent a shock wave through the financial markets.

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