Commodities Report

October 14, 2014

 

Close Oct 14

Sept 30

2 week Change

Dec Corn

3.57

3.21

+ .36

Nov Soybeans

9.65

9.13

+ .52

Dec Wheat

5.09

4.78

+ .31

Oct Hogs

109.55

108.00

+1.55

Oct Cattle

164.10

160.40

+ 3.70

Cdn $

88.33

89.08

- .75

US $ Index

85.86

86.12

- .26

Crude Oil

81.80

91.16

- 9.36

Gold

1234

1211

+ 23

US 10 Year Notes

127-15

124-20

+ 2-27

TSX Stocks

14030

14961

-931

Markets closed higher compared to two weeks ago, despite record yields and crops predicted by USDA. There was no particular news item that ignited the move up, but the very large short positions in soybeans and wheat by the large speculators definitely gave the rally more legs.

Since the start of the month, corn is up 39 cents, soybeans have rallied 66 cents and wheat has gained 40 cents. It is not unusual for markets to bottom early on in the harvest season when crops are big. A lack of farmer selling was likely a contributing factor to the price rise.

USDA raised their corn yield estimate to a new record  174.2 bu/ac, up 2.5 bu from the Sept estimate. The carryout (CO) will rise to 2.08 bln bu versus 2 bln predicted last month and 1.18 bln last year. The soybean yield was also upped to a new all time high of 47.1 bu. In Sept, USDA said it would be 46.6. The CO was lowered to 450 mln bu, down 25 mln from last month, but still nearly five times the record low of 92 mln bu CO last year.

The US harvest is behind normal, but not alarmingly so, with 25 percent of the corn off and 30 percent of the soybeans now under cover. Some frost in the Northern Plains likely did some damage, and will affect test weight in the areas where the crop wasn’t ready. Yield reports are still in the high range in most areas.

Other than dry beans, there is very little crop off in Ontario, due to near record rains through Sept and early Oct. Many of the soybeans are now finally ready to harvest. The corn is likely at least 3 weeks behind normal because of the cooler than normal weather all summer. Some local corn will likely also have test weight issues, as temperatures got low enough in some areas to end the growing season.

While very early, South America weather hasn’t been ideal either, as they plant their main crop. It has been too dry in the interior areas. Brazil soils are course and do not have the moisture holding capacities of our clay soils. Temperatures often get very hot also, so no rain for 2-3 weeks can be very detrimental to their crops. Weather there will be watched closely by traders.

The US dollar remains near 4 year highs, which is keeping our dollar under pressure. Crude oil traded under 82 per barrel for the first time since June 2012. The drop in this key commodity was over 10 percent in the past 2 weeks alone. This makes the grain rally even more impressive, as often commodities follow each other because of the influence of the exchange traded funds (ETF’s).

Stock markets had their largest correction in 3 years, with the TSX down 6 percent since my last report.  The deflationary implications of the crude oil and stock market drops allowed long term interest rates to move to their lowest yields since June 2013. Just when everyone was talking about rates rising! This proves that the world macroeconomic situation is still precarious.  

- Frank Backx, HDC Grain Marketer