Commodities Report

October 28, 2014

 

Close Oct 28

Oct 14

2 week change

Dec Corn

3.65

3.57

+ .08

Nov Soybeans

10.08

9.65

+ .43

Dec Wheat

5.32

5.09

+ .23

Dec Hogs

90.05

94.95

- 4.90

Dec Cattle

167.75

163.95

+ 3.80

Cdn $

89.24

88.33

+ .91

US $ Index

85.33

85.86

- .53

Crude Oil

81.03

81.80

- .77

Gold

1229

1234

-5

US 10 Year Notes

127-00

127-15

-15

TSX Stocks

14581

14030

+551

 

Grains added to the rally that started Oct 1, despite better harvest progress in the US. The demand side remains solid, with corn and soybean exports well ahead of the pace needed to meet USDA projections. The best cure for low prices still remains low prices and $3.20 on corn and $9.05 on soybeans seems to have done that job.

Remarkably, in the past 2 weeks, the US has physically exported 155 mln bu soybeans, with China by far the largest destination.  On Oct 3, Stats Canada estimated the Ontario soybean crop at 131.2 mln bu., on record acres and a new record yield. Despite the huge crop here, the US exported more than the entire expected 2014 Ont. crop in the last 2 weeks alone!

USDA’s corn export forecast of 1.75 mln bu, for the 2014 crop is down from the 1.925 mln bu exported last year. However, so far for this marketing year, they are almost equal to last year, and the pace is increasing, so upward revisions in this number are likely. It is a combination of the cheaper corn price and widening wheat corn spread that is responsible for the strong exports.

Since Oct 1, soybeans have gained $1.30 while corn is up $.54, which represent percentage gains of 14.4 and 17 percent respectively. These are huge advancements, especially considering the record US crops expected. However, they pale compared to the surge in soymeal futures from $295 per short ton on Oct 1 to as high as 399.80 today for a 35.5 percent gain. Someone must be caught short.

Funds have continued to cover their large short positions in soybeans and wheat, contributing to the rally. More buying could come from this source, as they remain unusually short for this time of year. Commercials, aka grain companies, are also buying crop futures, giving credence to the export situation mentioned earlier.

Brazil’s planting conditions have improved, with rain in many of the dry areas, but this isn’t dousing the bullish flames either. Dima Rousseff was elected to another term as President there. Their currency, the real, has lost over 1/3 of its value since she took power 4 years ago. This helps their soybean farmers and exporters but the economy there isn’t doing very well with her leftist policies.

Ontario’s harvest is amongst the slowest ever. It seems we can’t get 3 dry days in a row. A lot of soybeans are still in fields, and winter wheat acres could be the lowest in a long time. There is very little corn off, as most of it is still over 30 percent moisture. We need a nice November to finish  the harvest and fieldwork.

Outside markets showed little net movement, with crude oil languishing in the low 80’s. Stock markets rebounded after their recent sharp, quick selloff. Most economies keep sending mixed signals, and overall are not running on all cylinders. Lower energy prices, should they persist, will help consumer sentiment. Deflation remains more of a threat than inflation.

 

- Frank Backx, HDC Grain Marketer