COVID stimulus likely to have short and longer-term affects on commodity prices
A market analyst sees the latest coronavirus relief package and its influence on the U.S. Dollar having both short and longer-term impacts on crop and livestock prices.
Mike Zuzolo with Global Commodity Analytics tells Brownfield the prospect of $2,000 stimulus checks to Americans has jolted the currency markets and pushed more inflation expectations.
“And therefore a risk-on rally into the equities, into the currencies, and into the commodities as well. So you do have fresh news and fundamental factors that are feeding the bull.”
He says with an inflationary injection of stimulus checks going into the economy at a time when grain prices are strong, the livestock sector could respond with lower weights, higher prices, and demand rationing during the first half of 2021.
“So that maybe by the time we get to the middle of the summer, if there’s no big weather event for the U.S. crops, we have a topping pattern and the peak in grains is in place. But then that also brings with it maybe a bottoming price action in the livestock market, especially the cash livestock.”
But Zuzolo says with USDA lowering its breeding herd estimates for both cattle and hogs, there should be better pricing opportunities for livestock producers in the second half of the year.