Grains, Beans Lower Overnight; Fed Again Raises Key Interest Rate Quarter-Point

(Agriculture.com) – GRAINS, SOYBEANS LOWER OVERNIGHT AFTER DOLLAR JUMPS ON INTEREST RATE HIKE

Grains and soybeans were lower overnight after the dollar jumped, making U.S. products less attractive to overseas buyers.

The value of the greenback rose 0.4% in overnight trading after the Federal Reserve yesterday again increased its Federal Funds interest rate.

That, in turn, pushed down the price of dollar-denominated commodities across the board including oil and agriculture futures. Still, the dollar has been steadily declining since the start of the year, so the jump overnight likely won’t have a lasting effect on grain and soybean prices.

Weather forecasts are calling for rainfall in parts of the Midwest where it’s needed, but it’s hard to know exactly where the precipitation will occur, according to Commodity Weather Group.

Corn futures for July delivery fell 2¼¢ to $3.74¾ a bushel overnight on the Chicago Board of Trade.

Soybeans lost 4¼¢ to $9.27½ a bushel in Chicago. Soy meal declined $1.30 to $300.50 a short ton, and soy oil dropped 0.05¢ to 32.04¢ a pound.

Wheat futures for July delivery fell 1½¢ to $4.41½ a bushel overnight, while Kansas City futures declined 1¾¢ to $4.55¾ a bushel.

FED HIKES BASE INTEREST RATE A QUARTER POINT, MAKES BORROWED MONEY MORE EXPENSIVE

The Federal Reserve on Wednesday increased its base interest to 1% to 1.25% from the previous target range of 0.75% to 1%, a widely expected move as the economy continues to show strength.

The Federal Open Market Committee (FOMC), the governing body that sets the Federal Funds rate, said in a statement that indicators including a strengthening labor market and improving economic activity led to the increase.

“Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined,” the Fed said. “Household spending has picked up in recent months and business fixed investment has continued to expand.”

The FOMC said it expects inflation that’s below its target to stabilize somewhere near 2% in the medium term. Near-term risks to the economy are “balanced,” and the FOMC continues to monitor inflation developments closely.

So what does this mean for farmers?

Simply put, if you buy land or large equipment and finance it through your bank, you’re likely going to pay more. The Federal Funds rate generally affects large-ticket items whose loan terms last more than five years.

The Fed last raised interest rates in March and prior to that in December. Market-watchers said the next best chance for another rate hike will be in December. The CME Fed Watch Tool gives a 41% chance that the agency will again increase rates in the last month of the year.

MORE RAIN MAY FALL IN IOWA AFTER MUCH-NEEDED PRECIPITATION YESTERDAY

Some much-needed rain fell in parts of Iowa and Nebraska yesterday and more may fall today.

There’s a chance thunderstorms will return today and tonight in Iowa with some storms strong to severe, mostly south of Interstate 80, according to the National Weather Service. Hail and strong winds are the biggest threats, the agency said.

More storms are possible Friday and Saturday, though the NWS didn’t say how good a chance there is that the area will see rain.

Farther east, some isolated and scattered showers that formed overnight in parts of Illinois and Indiana will diminish. The area has a “limited” chance of thunderstorms tomorrow, but a more “elevated” chance on Saturday, according to the weather service.

Heat indexes are expected to stay in the mid-90s today in the eastern Midwest