Commodities Report

2013 In Review

Dec 31. 2013

 

Dec 31, 2013

Dec 31 2012

Yearly Change

Yearly % Change

Corn

4.23

6.98

- 2.75

- 39.4

Soybeans

13.23

14.19

- .96

- 6.8

Wheat

6.00

7.78

- 1.78

- 22.9

Hogs

84.75

85.75

- 1.00

- 1.2

Cattle

135.30

132.30

+ 3.00

+ 2.3

Cdn $

93.89

100.37

- 6.48

- 6.4

US $ Index

80.16

79.87

+ .23

+ .3

Crude Oil

98.48

91.82

+ 6.66

+ 7.3

Gold

1186

1676

-490

- 29.2

US 10 Yr Notes

123-04

132-24

-9-20

- 7.3

TSX Stocks

13581

12540

+ 1041

+ 8.3

 

2013 was mostly a deflationary year for commodities. Grains and metals took the biggest hits, while livestock markets closed little changed. Energy and stock markets were mostly higher. In currencies, the US $ index was flat, while our dollar lost some ground.

In grains, corn lost the most, as US farmers planted record acres. The spring turned out to be wet and late, and a mild drought hit the heart of the Midwest late in the growing season. However, final yields turned out to be better than expected, at 160.4 bu/ac, the second highest ever. Carry outs (CO) are predicted to more than double to 1.8 bln bu..

The US soybean yield ended right at trend line at 43 bu/ac., rising with each USDA report through the summer. Despite the third highest production ever, the CO is predicted to only rise marginally, as demand is very strong, especially from China. Logistical problems in South America were severe, compounded by their large increase in corn production.

Wheat prices eased 23 percent, despite the fact the US CO will drop for the fourth year in a row. Much of the drop in price occurred in December after Stats Canada added 4 mln mt to the Canadian wheat crop. A lot of wheat was fed in 2013, but is now pushed out of rations by the lower corn price since harvest.

Locally, planting was also later than normal. Generally, there was no extreme heat and rainfall was adequate during the summer. Harvest was a challenge, as rainfall was much above normal through October and November. Yields in most areas ended up above average, but were highly variable even within a small area. Too much rain hurt yields more than too little.

The weaker Chicago markets are obviously hurting incomes now, but it would be even worse except for the weaker Canadian dollar. This helped basis levels for both grain and livestock markets. Meanwhile, the US dollar index was flat. Most of our dollar weakness had to do with an improving US economy, while our economy underperformed.

Evidence of this is the relative performance of our stock markets. While the TSX in Toronto gained 8 percent, the S&P in the US soared over 29 percent. This resulted in a drop in US bond prices, taking the yield from 1.76 percent at the start of the year to 3 percent now. The Federal Reserve continued with their very accommodative monetary policy all year.

One could argue 2013 was the year speculative and managed money (which are having an ever increasing effect on markets) flowed from commodities to equities. This is likely to continue into 2014, as the “funds” use trend following systems for their decisions. As long as deflation persists, there is no reason for them to change their course.

2014 will be a more challenging year for farming with the lower prices. However, agriculture will continue to be a strong industry and contribute substantially to local economies. And like the saying goes; if you’re not hungry, thank God and a farmer! 

 

- Frank Backx, HDC Forest Location Manager