Commodities Report

June 24, 2014

 

Close June 24, 2014

June 11

2 week change

July Corn

4.43

4.41

+ .02

Dec Corn

4.41

4.42

- .01

July Soybeans

14.15

14.45

- .30

November Soybeans

12.25

12.22

+ .03

July Wheat

5.71

5.89

- .18

Oct Hogs

110.85

110.05

+ .80

Oct Cattle

150.20

145.50

+ 4.70

Canadian $

92.95

92.01

+ .94

US $ Index

80.44

80.79

- .35

Crude Oil

106.11

104.39

+ 1.72

Gold

1321

1261

+ 60

US 10 Year notes

124-20

124-05

+ 15

TSX Stocks

15072

14861

+ 211


Corn finally exhibited some stability after the large spring drop. Markets have to stop going down before they can start to go up. US weather overall has been good for crop development, although parts of Iowa and Minnesota are a bit too wet. Forecasts are mostly favorable for the next two weeks.

As of Sunday, June 22, 74 percent of US corn and 72 percent of US soybeans were in good or excellent condition. . While that was 2 and 1 percent less than last week, it was still the best ratings since 1999 and 1986 respectively, perhaps justifying USDA’s current yield estimates of 165.3 and 45.2 bu/acre.

USDA is still the definitive source of fundamental information on grain markets. However, their track record over the past few years hasn’t been that great. Last July, they stated the US would export 1.25 bln bu of corn and the carryout (CO) would be 1.959 bln bu for the 2013 crop. In their June 11 report, they pegged exports at 1.9 bln and the CO at 1.146 bln. for that same crop year.

Thus, last July, they understated exports by 52 percent and overestimated the CO by 71 percent. I suppose this proves again that nothing cures low prices like low prices. The interesting thing, too,  is that this is on the demand supply of the ledger, which tends to be more stable and predictable than the supply side, which is influenced by weather.

USDA’s next big report is June 30, when they report on quarterly grain stocks at June 1 and acres planted this past spring. There have been huge divergences versus traders’ expectations in many of the stocks reports lately, so this report will likely be a market mover.

Large speculators have been liquidating soybean futures at a rapid rate (see chart below). Last week they sold over 39,000 contracts, the fourth largest weekly total ever. Despite that, futures held much better than expected. That means there was buying from other sources. It could well be commercial buying to cover higher than expected export sales.

Technically, new crop corn and wheat sit very near to contract lows. Closing into new lows is likely to trigger further fund and speculative selling. Long term support may not be uncovered until $4.00 for corn and $5.50 for wheat, should that happen. Soybeans could show the most price weakness, as that crop has held up the best, despite expanding acres.

Outside markets were again stronger. The Commodity Research Bureau (CRB) index is an index of 27 commodities with a relatively large grain component in it. So far, it is up 12 percent this year, despite the grain weakness.  Energies, metals and meats are the main contributors to the gains. The stronger commodity board is the main reason the Canadian dollar sits near its best level of 2014. 

- Frank Backx, HDC Forest Location Manager