Commodities Report

December 23, 2014

 

Close Drc 23

Dec 9

2 week change

Mar Corn

4.14

3.95

+ .19

Jan Soybeans

10.37

10.48

- .11

March Wheat

6.37

5.86

+ .51

Apr Hogs

83.50

86.15

- 2.65

Apr Cattle

159.75

162.80

- 3.05

Cdn $

85.90

87.40

- 1.50

US $ Index

90.10

88.58

+ 1.52

Crude Oil

56.80

63.22

- 6.42

Gold

1176

1233

- 57

US 10 Year Notes

126-03

126-17

- 14

TSX Stocks

14584

14156

+ 428

S & P 500

2080

2054

+ 26

Wheat enjoyed the largest price gain over the past 2 weeks on reduced exports from Russia. They have put export duties on wheat in an attempt to build domestic reserves. They have totally banned exports to the US and any country that has put sanctions on Russia since their incursion into the Ukraine.

Putin will do everything in his power to make sure there is enough bread and food on store shelves there through this winter. Their economy is being devastated by the nearly 50 % drop in crude prices since June. An internal revolution is the last thing Russia needs right now, and history shows that happens much more frequently if the masses are hungry.

Corn did better than soybeans, especially after Informa, the private analytical firm, stated soybean acres in the US this spring will be higher than corn acres for the first time since 1983. South American farmers have also made a huge switch from corn because of its much higher production costs, compared to soybeans.

For the first time, the US has physically exported over a billion bu soybeans before the end of the calendar year, and 24.5 percent more than at this point last year. In their Dec 10 report, USDA said they expect yearly exports to be up only 10.7 percent. Either exports must slow, or upward revisions in exports will have to be made.

Crude oil fell further into the abyss, losing another 10 percent in the past 2 weeks alone. On June 9, crude hit 107.68, and the recent low trade on Dec 15 was 53.60, for a drop of just over  50 %. The transfer of wealth from energy producing countries to energy consuming countries is massive. Crude is probably the most important commodity market traded. Governments will be more concerned about battling deflation than inflation in 2015.

The crude drop should add at least 1 percent to world growth in 2015. The effect for consumers  is like a tax cut bigger than any government can offer, as discretionary income rises. This should help sustain the huge rises in most world equity markets well into 2015. The S&P made a new all-time high today, as the US economy grew at its best rate in 11 years.

In Ontario, the federal excise tax on gasoline at the pumps is $.10/litre, while the provincial tax is $.147. Then the 13 %  HST is added to those taxes, (tax on tax), so the total tax per litre is 27.9 cents. With gas prices now around $.90., taxes represent 31 percent of the total gas price. Obviously the government take is a much higher percent now that prices have dropped. The huge price spread with Michigan is increasing.

I wish my readers a healthy, safe and prosperous 2015. 

- Frank Backx, HDC Grain Marketer