Commodities Report

June 9, 2015

 

Close June 9

May 26

2 week change

Dec Corn

3.83

3.73

+ .10

Nov Soybeans

9.24

9.04

+ .20

July Wheat

5.33

4.93

+ .40

June Hogs

80.05

83.35

- 3.30

June Cattle

155.30

151.75

+ 3.55

Cdn $

80.93

80.45

+ .48

US $ Index

95.12

97.25

- 2.13

Crude Oil

60.02

58.00

+ 2.02

Gold

1177

1187

- 10

US 10 Yr Notes

125-03

127-29

- 2-26

TSX Stocks

14826

14991

- 165

 

Grain prices gained over the past 2 weeks. The axiom amongst traders is that rain makes grain, but farmers and agronomists know that excess rains, especially early in the growing season, can be detrimental to final yields. The NOAA (US government weather agency) announced that May was the wettest month on record in the US, despite the lingering drought in California.

As of Sunday June 7, 21 percent of US soybeans were still unplanted. The soils are saturated in many areas, with the regions in and around Missouri faring the worst. Some acres may not get planted as 1 to 3 inch rains are forecast for them again this coming weekend.

1993 was when the Mississippi overflowed its banks by a near record amount during May and June. The market rallied from $2.35 to 2.65, only to lose most of those gains during the summer. Then the crop reports, starting in Sept. showed a much smaller crop, and prices rallied to 3.10 by the end of the year.  This proves that excess moisture can also do damage, but usually it is not as widespread as a drought, so markets do view it differently.

The Commitment of Traders report still shows speculators short a lot of contracts. Perhaps the soggy soils will be the trigger that will start the inevitable short covering. They base their decisions on moving averages etc., and the rally over the past two weeks is turning some of the shorter term averages up. Once the 50 and 100 day moving averages get breeched, the process usually accelerates.

Rainfall in Ontario has been highly variable, but overall has been in excess to achieve top end yields. Many areas have had over 5 inches in the past two weeks, and plants are too small to accommodate that much moisture. Hopefully the rain stops for a week or two so the new seedlings can recover. It is still early in the growing season, but the advantages gained by the early planting are slipping away.

Action in outside markets can also be viewed as mildly constructive to the grain price outlook. US 10 year notes “spiked” to 2.4 percent, as prices dropped 3 points in the past two weeks alone. If investors dump bonds, some of those dollars could go to commodities. Crude oil is back to $60.00, well above its March low near 42. The US dollar index declined again.

The US economy continues to show steady improvement. Stocks, however, may already have much of this priced in. Greece is still a downer for European markets. Any increase in short term interest rates is most likely to start in the US., but there is much debate about the timing of that event, which would be the first increase in eight years.  

- Frank Backx, HDC Grain Marketer