Commodities Report

February 17, 2015

 

Close Feb 17

Feb 3

2 week change

March Corn

3.90

3.86

+ .04

March Soybeans

10.08

9.87

+ .21

March Wheat

5.35

5.14

+ .21

April Hogs

64.10

66.45

- 2.35

April Cattle

150.90

150.65

+ .25

Cdn $

80.74

80.52

+ .22

US $ Index

94.00

93.59

+ .41

Crude Oil

53.59

53.05

+ .54

Gold

1207

1264

-57

US 10 Year Notes

127-10

130-05

+ 2-27

TSX Stocks

15318

15098

+ 220

S & P 500

2096

2039

+ 57

 

Crop prices closed higher compared to 2 weeks ago, led by wheat. It wasn’t that wheat fundamentals improved the most; it was more that wheat dropped the most since topping out at 6.77 on Dec. 18. The correction low was 4.92 on Feb 2. That means it dropped $1.85 in a bit over 6 weeks. Corn “only” corrected $.51 and soybeans $1.07 from the surprise rally that started Oct.1.

A good sign for the grains is that the market caught hold well above those Oct 1 lows, and now appear to be heading back up. Seasonally, corn and soybeans rally into spring, as uncertainty is at the maximum then with regards to acres and yields. Once spring planting starts, prices often ease, especially if spring comes early.

That doesn’t appear to be the case in the Midwest or Ontario, however.  Record lows are being established, with no end in sight until at least March. Things can change quickly with weather, but longer range forecasts say the cold could last into mid-March. Perhaps the weather market is starting earlier than normal, but the fight for acres shouldn’t be as intense as past years, with the huge carry out increases achieved in 2014.

When markets are quiet, and there isn’t a lot of news, technical s often take over. The funds then have a larger than normal influence. Funds have been sellers the past 6 weeks, contributing to the slide. In the case of soybeans, the large spec funds are nearing their largest short position since 2006, and history says they rarely stay short soybeans for long.

The hog market continues its sharp descent, falling from .94 last Dec to 66.45 now. Hogs are suddenly trading at their worst level since 2009. Lack of exports to Russia is one factor. Meanwhile cattle are holding their strong uptrend, and remain nearly double what they were in Dec 2009. It is unusual for there to be such a divergence in red meat prices.

Outside markets were mostly deflationary also. Metals, including gold were lower, while energy futures were mixed. Funds have generally been sellers of commodities, with some of those dollars still moving into the bullish stock markets, which added about 2 percent over the past 2 weeks.

The US dollar index was up marginally, while the Cdn $ also rose slightly. Ten year interest rates were notably higher, (and bond prices weaker) despite the commodity deflation. The financial markets remain jittery, as the await developments in the Ukraine, the Middle East and Greece, where further instability can happen quickly.

 

- Frank Backx, HDC Grain Marketer