Commodities Report

August 25, 2014

 

Close Aug 25

Aug 12

2 week change

Sept Corn

3.60

3.59

+ .01

Dec Corn

3.68

3.69

- .01

Sept Soybeans

11.23

11.01

+ .22

Nov Soybeans

10.29

10.60

- .31

Sept Wheat

5.43

5.38

+ .05

Hogs

93.40

97.20

- 3.80

Cattle

148.10

147.70

+ .40

Cdn $

91.02

91.44

- .42

US $ Index

82.52

81.53

+ .99

Crude Oil

93.35

97.35

- 2.00

Gold

1277

1309

- 32

US 10 Year Notes

125-28

125-28

0

TSX Stocks

15613

15258

+ 455

Markets were mixed over the past 2 weeks. Soybeans were the weakest on near ideal growing conditions through August. Wheat was the strongest on poor quality wheat in Europe. In fact, France, who is the largest producer in the EU, is actually importing wheat to satisfy their millers.

Wheat has not made a new low in Chicago since July 29, while corn’s contract low was made on Aug 12, the day of the USDA crop report. It is interesting that the all-time high for corn was made on Aug 12, 2 years ago, in the midst of the US drought that year. Meanwhile, soybeans are making new lows almost daily.

The Pro Farmer crop tour put the corn yield at 169.3 bu per acre. 1.9 more than USDA said on Aug 12. They put the soybean yield at 45.35 bu/ac, very close to USDA’s 45.4 bu. Carryouts will rise sharply if these yields are attained.

The shortage in the soybean crop last year is still reflected in the soybean meal market. Prices for a trailer load are now over $700.00 per metric tonne. Prices will likely remain very strong until the second half of October, or until the soybean pipeline gets replenished.

Old crop corn basis has also firmed significantly, with bids at $1.00 over Dec futures for Sept. shipment. Basis has made up for about half of the Chicago drop that occurred since the May high. New crop corn basis has also appreciated $.20 in the last 2 weeks on a lack of farmer selling.

Many other unrelated commodities are also under pressure due to a very strong US dollar. Crude oil has now fallen 13 percent in the past 2 months. The main reason for the US dollar’s rise is that the Federal Reserve is hinting of an interest rate rise, perhaps in the near future.

The Canadian dollar is staying under pressure, as Canada’s interest rates are unlikely to rise, as there is too much slack in the Canadian economy, especially in the labor market. This is the one silver lining in terms of Ontario grain prices.

The biggest bull market is still in equities, as investors and traders keep buying stocks. Toronto and New York sit at all-time highs. Many companies are sitting on record amounts of cash, rather than spending it on new plants, equipment or labor.  

- Frank Backx, HDC Forest Location Manager