Since late September, a remarkable surge has been witnessed in the U.S. dollar, with it gaining an impressive 8% in value. This upward movement can be attributed to various factors, often intertwined with expectations of stronger interest rates or enhanced confidence in the U.S. economy. In this particular scenario, it seems that the latter factor is playing a significant role. Despite interest rates moving lower in 2024, the renewed confidence in the U.S. economy, and perhaps even in the new administration, has fueled the desire to hold U.S. dollars.

Why This U.S. Dollar Surge Matters

From an agricultural exports perspective, a rising dollar leads to an increase in the cost of imports for foreign countries. Just like raising the price of a commodity, it has a direct impact. However, for U.S. producers, the price of the commodity typically shows a downward trend. Wheat prices, for instance, tend to have an inverse relationship with the value of the dollar. Wheat futures reached their peak in price on Oct. 3 and have been on a downtrend ever since. The same holds true for the soybean market this fall, where a rally peaked on Sept. 30, which coincided with the day the dollar index bottomed.In the absence of other external influences on price, it becomes evident that the movement of both wheat and soybean prices in the past seven weeks clearly demonstrates the inverse relationship between the trend of the U.S. dollar and the value of these commodities. The weather conditions in South America continue to remain favorable. Without any significant concerns about supply disruptions due to challenging crop conditions, the argument that traders have positioned themselves contrary to the dollar indeed holds weight.

What Actions Can You Take?

Both buyers and sellers of commodities should closely monitor the trend of the dollar and be on the lookout for potential signals that a trend might be changing. Have an open conversation with your advisor and encourage them to share their thoughts on the dollar and various "what if" scenarios. Hindsight is always clear, but an oversold dollar and over-bought conditions in the wheat and soybean markets could have been early indications that a change in the price trend was on the horizon.

Finding the Right Approach for You

Work with a professional to identify the strategy or strategies that are most suitable for your specific operation. Communication is of utmost importance. Ask critical questions and gain a comprehensive understanding of the consequences and potential rewards before taking any action. The goal is to make well-informed decisions for your operation rather than being driven by emotional responses to market movements, which are constantly in flux.Editor’s Note: If you have any queries regarding this Perspective, feel free to get in touch with Bryan Doherty at Total Farm Marketing: 800-334-9779.Disclaimer: The data presented here is believed to be sourced from reliable channels but cannot be guaranteed. Individuals relying on this information are responsible for their own actions. Commodity trading may not be appropriate for all recipients of this report. Futures and options trading involve a significant risk of loss and may not be suitable for everyone. Hence, carefully assess whether such trading aligns with your financial situation. Examples of seasonal price movements or extreme market conditions are not intended to suggest that such events are common or likely to occur. Futures prices already incorporate the seasonal aspects of supply and demand. No representation is made that scenario planning, strategy, or discipline will guarantee success or profits. Any decisions you make regarding buying, selling, or holding a futures or options position based on this research are entirely your own and not in any way endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of the National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise stated, and the services mentioned are those of Stewart-Peterson Group Inc. Presented for solicitation.About the Author: With 30 years of experience at Total Farm Marketing and a wide network across the Grain Belt, Bryan Doherty is highly passionate about his clients, their achievements, and building long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty is deeply immersed in farm marketing. He has an in-depth knowledge of the tools and markets, listens attentively, and communicates with purpose and clarity to ensure that clients feel confident in their decisions.