February 5 – Commodities are under pressure this morning as the dollar pushes sharply higher. The markets were generally quiet overnight as traders waited for the U.S. monthly jobs report. Wall Street focused on the sharp rise in wages, up 0.5% on the month, likely influenced as minimum wage hikes were implemented at the first of the year. That was seen as inflationary, opening the door once again for another Fed rate hike. Fed fund futures trade now puts 50-50 odds on another rate hike by the end of the year, providing support for the dollar.
The stronger dollar spurred selling in the broader commodity indices. The Ags simply do not have a sufficient fundamental story at this point in early February to counter the momentum. As such, we’re seeing modest selling across the board as the net negative money flow continues for the commodities on global economic concerns. Pork product prices were generally firmer this morning, other than weaker hams, while beef product prices were softer. Packers have raised bids to $138 for cattle in the Southern Plains, matching last week’s trade, suggesting firmer cash trade later today as feeders hold out for $140. The Ag markets are also positioning for Tuesday’s USDA crop report, which is expected to hold modest adjustments to global production.
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