Commodities Report

March 10, 2015

 

Close March 10

Mar 3, 2015

1 week change

May Corn

3.88

3.91

- .03

May Soybeans

9.84

10.12

- .28

May Wheat

4.94

5.06

- .12

April Hogs

65.20

65.55

- .35

April cattle

154.10

150.80

+ 3.30

Cdn $

78.97

80.11

- .14

US $ Index

98.45

95.35

+ 3.10

Crude Oil

49.33

50.50

- 1.17

Gold

1163

1203

- 40

US 10 Year Notes

126-28

127-18

-22

TSX Stocks

14698

15146

-448

S & P 500

2057

2104

-47

 

Grains eased over the past week, but remain well within their recent sideways trends. Wheat is at the greatest risk of a break-out to the downside. Prices are apt to stay range-bound for the balance of March.

USDA updated their demand/supply estimates on March 10, and as expected, changes were minor. The soybean and wheat carryouts were basically left unchanged, while corn was dropped by 50 mln bu. Feed usage and exports were raised 50 mln each, while ethanol was dropped 50 mln. South American production was left unchanged from the Feb estimates.

The bigger report will be on March 31 when prospective plantings are released. Most think soybean acres will rise at the expense of corn. I suspect both may be lower, but corn is likely to show a much larger drop due to the high input prices, especially fertilizer.

From 2005, (before the bull market in grains began), to 2014, US corn acres increased 8 mln ac, while soybeans added 12 mln. The 20 mln growth in acres was primarily in the western corn belt and northern plains, led by the Dakotas, where 7 mln acres were added to these two crops.

The main contributor was the Conservation Reserve Program, which accounts for about half of the 20 mln ac. expansion.  Wheat acres declined 3.7 mln over the reference period in the Northern Plains, while cotton, peanut and rice acres declined 3.7 mln in the South, as farmers responded to the high corn and soybean prices from 2007 to 2013.

With the lower commodity prices now, the big question is how much of this marginal land will again be left idle or returned to pasture.  In those fringe areas, basis also tends to be weaker, and yields are much lower so it could be more than most people currently think. More will be known on March 31.

Brazil logistics continue to astound. The truck strike is partially responsible, but there are 82 boats waiting to load. Wouldn’t want that demurrage bill! Argentina farmers are still trying to hold on to last year’s soybeans, but some will likely move with harvest approaching, bills to pay and perhaps quality issues.

The US dollar index surged to a new 12 year high, as the heavily weighted Euro sank to an 11 year low. US economic numbers continue their slow improvement with unemployment back to 5.5 %, but a record number of people are not working or collecting benefits. Their trade deficit is improving, as they use more of their own oil.

The Canadian dollar is likely to stay under pressure until at least after the election. A surprisingly strong growth figure for Canada in the 4th quarter only gave temporary relief to our beleaguered currency. It is possible that our $ stays supressed, even if crude rallies. It is the easiest way for Canada to gain a competitive advantage for our export economy.  

- Frank Backx, HDC Grain Marketer