Commodities Report

March 3, 2015

 

Close March 3

Feb 17

2 week change

May Corn

3.91

3.98

- .07

May Soybeans

10.12

10.12

0

May Wheat

5.06

5.32

- .26

April Hogs

65.55

64.10

+ 1.45

April cattle

150.80

150.90

- .10

Cdn $

80.11

80.74

- .63

US $ Index

95.35

94.00

+ 1.35

Crude Oil

50.50

53.59

- 3.09

Gold

1203

1207

-4

US 10 Year Notesx

127-18

127-10

+8

TSX Stocks

15146

15318

-172

S&P 500

2104

2096

+8

No markets showed much net change over the past 2 weeks. Perhaps they will rise from their winter hibernation as spring finally comes closer. Let’s hope so anyway.  This winter has gone on quite long enough.

Trends in grain markets remain decidedly sideways. The lows hit the first of October should be the first line of defence, and I fully expect they won’t be breached. The critical levels then are $9.00 on nearby soybeans and 3.20 on nearby corn. Should the spring become backward, prices would need to close over 10.40 and 4.40 respectively before trends turned up and funds got excited.

A key factor supporting futures prices is the fact input prices remain very high. This is true for the US, but even more so in Ontario, due to the Canadian dollar affect. Not that Chicago cares what farmers’ cost of production is, but marginal land in the US is already expected to be idled with the lower grain prices.

In fact, USDA expects 3.3 less total acres in corn and soybeans than last year. Admittedly, that will be on the marginal land, so overall yield potential should actually increase somewhat. The fight for acres shouldn’t be too intense this year, unless planting gets delayed well into May. The US acreage report is due on March 31.

New crop forward contract prices, fob farm, are $4.60 for corn and $11.60 for soybeans. While that’s still a long way below the recent highs, it could still be a good place to do an incremental sale, in my opinion. With decent yields, a slight profit could be locked in. Good risk management could be more about preventing losses than trying to hit the home run for the 2015 crop.

Soybeans did rally recently when Brazil truckers blocked roads to protest higher fuel taxes. The government responded with force and large fines, and promised to discuss the issue. Logistics seem to be a larger factor in grain markets and inputs, as just in time inventory is now entrenched in agriculture.

The Canadian dollar and crude continue to track each other, and are consolidating. A rally to the upside cannot be ruled out short term, but trends will likely remain lower. The increased US production from the shale drilling is still being pumped, and it is light crude, which refiners prefer. Russia, Canada, OPEC etc. will keep fighting with each other for the dwindling export market.

The US dollar’s relentless climb continues. Investors the world over are buying US stocks and bonds, and safety may be one of the key reasons. US 10 year bond yields aren’t much over two percent, but remain hugely popular. Interest rates remain near zero, and central banks the world over are reluctant to raise them for fear that might derail the still fragile economic recovery. 

- Frank Backx, HDC Grain Marketer