• Skip to primary navigation
  • Skip to content
  • Skip to footer
StoneX®

Trade Futures, Spreads and Options with Confidence.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • Technical Ag Knowledge
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • CME Group Offers
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • Apply
    • Access My Account
    • Funding
  • Contact
 

Will a Lagging USD Send Ag Futures Prices Higher in 2021?

July 8, 2021 by Daniels Trading| Ag Marketing

The first half of 2021 brought a series of historical financial events. An epic rally in cryptocurrencies, a more-than-25-percent spike in crude oil, and exploding ag futures prices made headlines as traders evaluated the current state of the world. Ultimately, one market driver can be tied to each of these phenomena: a sluggish U.S. dollar (USD).

The Lagging Greenback

During the March 2020 onset of COVID-19, it quickly became obvious that the U.S. Federal Reserve (Fed) and the U.S. government were going to spare no expense in fighting economic fallout. The Fed adopted a policy of unlimited QE, and the federal government injected trillions of dollars in direct stimulus into the economy. The results were a 12-month restoration of industrial growth, a lagging USD, and an explosive 2021 ag futures bull market.

Gain a competitive advantage in today’s markets. Check out our guide The  Ultimate Guide to Hedging: How to Reduce Risk >>

During the initial stages of the COVID-19 pandemic, the USD became a safe-haven asset and was bid to multi-decade highs. However, by late May 2020, the shine was off the greenback. In roughly 12 months (May 2020 to May 2021), the USD Index plummeted from 99.52 to 90.26—a loss of 9.3 percent. One thing appeared certain: Inflation was on the way. And, by late spring 2021, the USD saw a marked decrease in its purchasing power:

  • April’s core personal consumption expenditures (PCE) rose 3.1 percent year-over-year.
  • April’s consumer price index (CPI) rose to 4.2 percent, outperforming consensus expectations of 3.6 percent. This figure was the fastest CPI leap since 2008.

When April’s inflation data was released, the Fed stated that the uptick was temporary. Accordingly, QE unlimited’s 0.0 percent to 0.25 percent federal funds rate and $120 billion in monthly debt purchases were to remain intact. As a result, early June readings of the CME FedWatch Index estimated the likelihood of a ¼-point rate hike by year-end 2021 to stand at 7 percent. This figure was down from the 14 percent projection made one month earlier, just ahead of April’s inflation data releases.

Are Ag Futures Headed Higher in H2 2021?

As a general rule, a fading greenback is a bullish underpinning of the ag futures markets. This was certainly the case through the first half of 2021, as several CME ag contracts reached lofty heights. Here’s a brief look at the key moves from Jan. 4, 2021 to June 1, 2021:

  • 2021 December CME corn futures (ZC) rallied from 435’2 to 558’2 (+28.26 percent). The May spike in corn brought the highest prices in nearly a decade.
  • 2021 November CME soybean futures (ZS) moved from 1117’2 to 1387’6 (+24.2 percent). This rally extended soybean prices to the highest since 2012.
  • 2021 December CME live cattle futures (LE) rallied from 120.05 to 126.25 (+5.1 percent).
  • 2021 December CME lean hog futures (HE) moved from 65.725 to 83.975 (+27.7 percent).

As you can see, H1 2021 was extremely bullish for ag futures. Prices rallied across the board, extending the sharp gains of late 2020. Will the second half of 2021 be any different? Not likely. Ag commodities are poised to continue their uptrend for two primary reasons:

  1. Inflation: As of this writing, the Fed remains committed to its policy of unlimited QE. Economists aren’t anticipating any debt purchase tapering until 2022 or interest rate hikes until late 2022. Subsequently, the Fed is in position to let inflation run significantly above the 2 percent average benchmark for an extended period.
  2. COVID-19: The introduction of vaccines has brought optimism toward a full post-COVID-19 economic reopening. If such an event does occur, then demand for energy and ag products is likely to surge.

In short, the combination of inflation and a post-COVID-19 reopening will place pressure on commodities. Higher fuel costs will also contribute to rising ag futures prices, as operational expenditures for producers are poised to rise substantially. For the back half of 2021, it appears that grains, oilseeds, and livestock are headed higher.

Maximize Your Market Share

Without question, 2021 is turning out to be one of the most complex financial years on record. If you’re interested in becoming active during this exciting time, then ag futures are worth a look.

To learn more about how to maximize your profitability while limiting risk, check out Daniels Trading’s e-book The Ultimate Guide to Hedging. In it, you’ll find valuable insights into how to build a rock-solid ag trading and marketing plan.

The Ultimate Guide to Hedging: How to Reduce Risk

Filed Under: Ag Marketing

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

Subscribe To The Blog

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

StoneX Financial Inc.
Daniels Trading Division
230 South LaSalle Suite 10-500
Chicago, IL 60604
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot
Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top