Commodities Report

November 25, 2014

 

Close Nov 25

Nov 11

2 week change

Dec Corn

3.75

3.74

+1

Jan Soybeans

10.51

10.64

- 13

Dec Wheat

5.52

5.24

+28

Dec Hogs

91.10

89.90

+ 1.20

Dec Cattle

170.20

167.25

+ 2.95

Cdn $

88.90

88.26

+ .64

US $ Index

87.89

87.49

+ .40

Crude Oil

74.10

77.50

- 3.40

Gold

1197

1165

+32

US 10 Year Notes

127-01

126-06

+27

TSX Stocks

15041

14764

+277

S & P 500

2069

2037

+32


Grain prices were mixed over the past 2 weeks, as prices seem to be range-bound by the Oct 1 lows and the Nov highs. Despite the record crops predicted, markets refuse to break down as the last of the US harvest gets combined.  94 percent of their corn is under cover and 97 percent of the soybeans were cut as of Nov 23.

The surprising resiliency of the markets is due to slow farmer selling and stronger than expected demand. Exports, in particular, are booming, with actual shipments of corn and soybeans ahead of last year’s pace by 15 and 21 percent respectively. The US’s ability to ship large quantities in a short timeframe puts South America to shame. Buyers, such as China, appreciate that.

Soybeans are grown over a very wide area in South America, from tropical to temperate climates from north to south, and a huge distance from east to west. Some areas that were too dry are now too wet, but planting progress has picked up. However, it is still behind normal, especially in Argentina. It is too early for weather there to be a major price factor.

Ontario has struggled to get its crops out of the fields, with a wide array of adverse weather events thwarting harvest. A lot of corn is still out, and the calendar keeps marching on. Conditions often turn harsher this time of year, but hopefully Mother Nature gives farmers a break. There is no doubt they deserve it after the way the 2014 crop year has gone.

Since the markets appear to be at a bit of an equilibrium and in a trading range, a technical look at the markets may be appropriate. Corn dropped significantly, starting in May. As there were basically no weather scares all summer, prices eased until the first of October. The $.70 rally since caught many by surprise. We expect prices to remain within the Oct low and Nov high for at least the balance of 2014,

Soybeans didn’t start their summer drop until the June 30 USDA acreage report, but bottomed the same time as corn. A $1.70 rally ensued, and prices have now turned choppy and relatively volatile. We expect prices to remain in the $1.70 range for the short run at least.

Surprisingly, prices are staying nearer the upper end of the 8 week trading ranges. Should the markets close over the Nov highs, further price gains become more likely as speculators would become buyers, as longer term moving averages turn up. A weather scare in South America is most likely to cause this scenario.

In other markets, cattle and stock markets made new all-time highs, while crude oil continues to languish at over 4 year lows. The Canadian dollar actually gained a bit, on higher than expected inflation numbers. Grain basis values improved, however, as they usually do seasonally after harvest. The slow harvest pace and reports of poor quality corn also contribute to the basis gains. 

- Frank Backx, HDC Grain Marketer