Commodities Report

April 2, 2014

 

Close April 2

March 19

2 week change

May Corn

4.96

4.88

+ .08

May Soybeans

14.62

14.31

+ .31

July Wheat

6.75

7.17

- .42

June Hogs

124.80

132.60

- 7.80

June Cattle

136.95

138.35

- 1.40

Cdn $

90.51

88.83

+ 1.68

US $ Index

80.24

80.25

- .01

Crude Oil

99.51

99.09

+ .42

Gold

1290

1330

- 40

US 10 Year Notes

122-30

123-14

- 16

TSX Stocks

14435

14327

+ 108

 

Spring planted crops were higher, but finished the reference period well off their highs, while wheat prices gave back some of their recent gains. Markets reacted to weather forecasts and the USDA stocks and acreage report issued March 31. Volatility is increasing in grain prices.

USDA surprised the corn market with bullish 2014 acreage and March stocks estimates. Acres at 91.7 would be 3.7 mln less than last year, and was 1.2 mln less than traders thought. The corn supply half way through the marketing year was put at 7.006 bln bu., compared to 5.4 bln a year ago. Traders expected 7.11 bln, so over 100 mln bu less than expected, implying strong usage.

The reduced corn acres will go to soybeans, with USDA expecting 81.5 mln, up 5 mln from 2103. Traders guessed it closely at 81.4 mln. Stocks were pegged at 992 mln bu at Mar 1; a year ago it was 998, so very similar. Wheat acres were a minor 200,000 less than thought, while stocks were 21 mln bu more than expected.

Within 24 hours of the report’s release, corn futures rallied over $.30, putting old crop corn at $5.00 for the first time in a long time. New crop wasn’t far behind. Meanwhile, old crop soybean  futures rallied to nearly $15.00, their best level since last July. New crop beans traded over $13.00, a profitable level if yields are decent.

Wheat rallied a remarkable $1.70 in less than 2 months, but has given back over one third of those gains in the past 2 weeks.  Some rain is forecast for the dry wheat areas in the Southern Plains, and speculators, who were behind the huge price run up, sold contracts again. Wild times in the wheat market!

Weather is staying cold in the main US grain growing regions. A hint of warmer weather late next week prompted today’s (Apr 2) selloff. The long term seasonals often top in April for corn. When the market perceives farmers will plant, and every time it rains on the new seeds, prices normally move lower. With carry outs expected to rise again with the 2014 crops, perhaps the current weather premium will fade from markets.

The bottom line for producers is that prices are profitable at current levels, as prices have moved up more than most analysts (myself included) thought they would do. Grabbing some of these prices would seem to make sense from a risk management point of view, especially for any old crop supplies anyone is sitting on.

Livestock prices retreated after their breath taking advances, which proves again; what goes up must come down. Prices should be able to maintain lofty levels for a while yet, however, as it takes time to replenish herds. It is difficult to get a real handle on how serious the PED situation is.

Crude and gold were mixed, as were stocks and bonds. Generally there is still strong demand for assets of all classes (stocks, bonds, commodities) as interest rates are being kept artificially low to keep world economies growing.

Always keep in mind my disclaimer, listening to me can be hazardous to your wealth!!! 

- Frank Backx, HDC Forest Location Manager