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Interest rate cut might create more market activity

A market analyst says the Federal Reserve’s recent 50-point cut in the interest rate might bring more investors into the commodities markets.

Mike North with Ever.ag tells Brownfield current conditions might invite more investment funds back into ag commodities. “It’s not an automatic lay-up that they’re just going to rush back in but it invites more potential participation, and so what that means is it could enhance our volatility which may in fact allow markets to move a little bit farther than what the logical response would be.”

North says the funds have been able to participate in the market with less cost, even though many had a sizable position on the short side of the market. “We haven’t seen them carry this all the way in the other direction, and I don’t think we should expect that, but we’re seeing a little amplification of volatility here, and so if I’m a producer, I invite that and these rallies, if I’m a grain farmer, are a great opportunity.”

North says dairy producers who have been slow to purchase feed expecting even lower prices should be very careful because export markets have responded well when prices went down.

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