Equity strength, dollar weakness generally supported commodities

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Dollar weakness supported commodities Thursday. The federal government shutdown ended late Wednesday evening, but the easing of restraints on the debt limit and a Chinese downgrade of U.S. debt apparently sank the U.S. dollar. The commodity sector generally rallied in response, but corn futures proved able to rise only slightly. Improved harvest conditions may have weighed upon prices once again. December and May corn futures inched up 0.25 cent to $4.43 and $4.6375/bushel, respectively, at Thursday’s close.

Chinese news and dollar slippage also boosted soybeans. Chinese officials announced they had sold 281,783 tonnes of soybeans from reserves, which represented over 56% of the total offered. That seemingly implies robust demand. When combined with the bullish aspects of the dollar drop, it wasn’t terribly surprising to see beans and meal rise this morning. Conversely, a setback in the Asian palm oil market depressed CBOT soyoil. November soybeans jumped 16.75 cents to $12.9325/bushel at Thursday’s settlement, while December soyoil declined 0.25 cents to 41.12 cents/pound, and December soymeal advanced $9.2 to $413.0/ton.

Wheat futures joined the general commodity advance on dollar weakness. The overnight U.S. dollar decline encouraged wheat buying, especially since export prospects already appeared robust. Traders seemed to think Wednesday’s losses were overdone, especially with the nearby contracts settling just above previous technical support. December CBOT wheat surged 4.5 cents to $6.86/bushel in late Thursday action, while December KCBT wheat bounced 4.25 cents to $7.49, and December MGE futures moved up 2.5 to $7.45.

Bullish Profit-taking seemingly sparked the late cattle breakdown. Reports that Nebraska cattle prices had reached $130.00/cwt (cents/pound) apparently fulfilled the expectations of many cattle market bulls Thursday. Their collective decision to take profits on long CME positions seemingly sparked the subsequent drop, with many sellers likely jumping on board as prices fell. December cattle futures plunged 1.47 cents to 131.77 cents/pound Thursday afternoon, while April dove 1.05 cents to 134.62. Meanwhile, November feeder cattle tumbled 0.82 cents to 166.90 cents/pound, and January fell 0.98 to 166.60.

The hog market followed cattle prices downward Thursday. Nearby hog futures rose strongly Tuesday and Wednesday on ideas they were too heavily discounted versus cash values. However, the latest cash and wholesale news seemingly proved less supportive than bulls were hoping. Thus, it wasn’t terribly surprising to see CME swine prices weaken as cattle futures tumbled. December hog futures closed 0.35 cents lower at 88.45 cents/pound, while April slid 0.45 cents to 90.25.

Late equity strength probably boosted cotton futures. The lack of news pertinent to the cotton market seemingly allowed traders to focus upon the overnight U.S. dollar decline and its bullish implications for commodities. Moreover, the equity markets rallied strongly later in Thursday’s session, which was encouraging for apparel demand. December cotton surged 0.66 cents to 83.82 cents/pound as ICE trading wound down Thursday, while March climbed 0.67 to 84.95.

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