Commodities Report

September 16, 2014

 

Close Sept 16

Aug 25

3 week change

Dec Corn

3.44

3.68

- .24

Nov Soybeans

9.82

10.29

- .47

Dec Wheat

4.97

5.55

- .58

Oct Hogs

106.95

93.40

+ 13.55

Oct Cattle

156.30

148.10

+ 8.20

Cdn $

90.85

91.02

- .17

US $ Index

84.04

82.52

+ 1.52

Crude Oil

95.05

93.35

+ 1.70

Gold

1237

1277

- 40

US 10 Year Notes

124-10

125-28

- 1-18

TSX Stocks

15546

15613

- 67

Grains fell further over the past 3 weeks. USDA pegged yields slightly higher than traders expected. Corn was put at a record 171.7 bu/ac, compared to 167.4 predicted in August. Soybeans will also set a new record at 46.6 bu/ac, versus 45.4 estimated last month.

Demand for corn and soybeans was also raised marginally, but carryouts (CO) will rise to 2 bln bu,for corn  up from 1.81 bln guessed last month. The soybean CO will soar to 475 mln bu, compared to 430 stated last month and 130 mln for the crop year just ended.

The US wheat CO was raised to 698 mln bu from 663 estimated in August and 590 mln last year. This represents one third of this years total usage, so there is no shortage of wheat in the US, or the world for that matter, where ending stocks are predicted to hit 196 mln mt. Much of it will be feed wheat, however, due to poor quality in many producing countries.

Some think these corn and soybean yield estimates will be the highest of the year, due to disease and insect pressure because of all the rain. Ontario yields are definitely hurt in the areas that received the most rain, but overall local crops should still end up with above average yields.

As of Sept 14, the US corn crop was 27 percent mature, normally 39 percent is ready by now, while 4 percent is harvested, compared to 9 percent normal for that date. 24 percent of US soybeans are dropping leaves, 8 percent less than the average.

The drops in Chicago prices this summer were precipitous, with corn and wheat losing 35 percent of their value, while soybeans fell 23 percent. There wasn’t a weather rally all summer, as weather was benign, albeit a bit on the cool side, in many producing areas, including Ontario.

The one exception to the drop in grain markets is soybean meal. Due to record exports, and the small soybean crop last year, soymeal is very tight, with trailer load prices now in excess of $750 per metric tonne. There is little relief in sight until the second half of October, at the earliest.

Ontario basis levels were generally a bit firmer, aided by a slightly weaker Canadian dollar. Old crop corn basis was especially strong as Ontario is now at import replacement cost. It will likely be at least another 5 weeks before we see any new crop corn in Ontario, with the bulk of it likely to be harvested in November.

The weakness in commodities and most currencies is because the US dollar is showing strong gains. The US is cutting back on quantitative easing and hinting interest rates will begin to rise sooner rather than later. Most of this is tied to an improving economy south of the border, with labor and housing markets showing the greatest gains.

Livestock markets had a nice rebound after the rather large correction in price that persisted over the past 3 months after the historic rise early in the year. Lots of volatility in this sector! With cheaper grain prices, profitability for meat producers looks assured for at least the balance of the year.  

- Frank Backx, HDC Forest Location Manager