Commodities Report

April 16, 2014

 

Close April 16

Apr 2

2 week change

May Corn

4.98

4.96

+ .02

Dec Corn

4.99

4.97

+ .02

May Soybeans

15.19

14.62

+ .57

Nov Soybeans

12.38

11.98

+ .40

July Wheat

6.95

6.75

+ .20

June Hogs

124.50

124.80

- .30

June Cattle

135.65

136.95

- 1.30

Cdn $

90.65

90.51

+ .14

US $ Index

79.83

80.24

- .41

Crude Oil

103.62

99.51

+ 4.11

Gold

1302

1290

+ 12

US 10 Year Notes

124-12

122-30

+ 1-14

TSX Stocks

14416

14435

- 19

 

Markets were mostly firmer over the past two weeks, adding further to their 2014 gains. New crop wheat and soybeans are up $1.00 and Dec corn is up $.50 so far this year. Weather was supportive to the higher values, especially for wheat, and USDA surprised the corn market again with a more bullish demand outlook.

Portions of the Southern Plains wheat areas have been too dry, and then a frost hit on April 14 and 15. Some of the wheat was in the jointing stage, so vulnerable to the cold temperatures. The cold was widespread throughout the Midwest, limiting any significant corn planting.

The inevitable spring warm up will finally start if the 2 week forecasts are accurate. Rainfall amounts were reduced in most growing areas also, so planting should commence in the southern Midwest. This pressured corn a bit lately, but acres are still expected to be less than last year.  

Current new crop board prices at HDC are 13.05 for soybeans and 4.70 for corn. This puts the soy: corn ratio at 2.78 to 1, which favors soybean production. With fertilizer prices, especially nitrogen, rising, there may be even more of a switch to soybeans in Ontario and the US. This makes the recent strong soybean price even more of a puzzle.

In my opinion, grain markets are maintaining some weather premium at current values. It appears weather is more extreme and turbulent all around the world, so perhaps premiums will be maintained until there is certainty of large yields late this summer. Because of demand, the US cannot afford to have subpar crops this growing season.

USDA released their monthly demand supply estimates. Figures were closely aligned with traders’ thoughts for soybeans and wheat, but the corn carry out (CO) turned out to be less than expected. This was entirely due to USDA raising the US export forecast by 125 mln bu. While the CO was lowered to 1.331 bln bu, it is still well above the 821 mln at the end of the 2012/13 crop.

Funds keep adding to their long positions as trends in all grains are up. This attracts even more speculative and investment money. Fund ownership is not at record levels, but the current relatively high level of ownership is now more of a negative than a positive for price.

Because grain markets are stronger, input prices are also increasing. It seems fertilizer prices in particular follow the lead of grain markets. However, part of the latest price rise can be attributed to a messed up logistics, due to the cold weather and shortage of rail freight. Nitrogen prices have shown the largest increase, maybe tied to the higher natural gas prices. However, it appears crop prices are having a larger and larger effect on input prices.

Outside markets were also mostly firmer led by crude oil, which is near a 7 month high. Metals were also marginally better. The US dollar index lost some ground and is getting closer to critical chart support at .79. Breaking that could cause a larger sell-off, and be positive for commodities in general. That scenario, should it unfold, would likely be bullish to the Canadian dollar. 

- Frank Backx, HDC Forest Location Manager