Commodities Report

July 7, 2015

 

Close July 7

June 23

2 week change

Dec Corn

4.33

3.81

+ .52

Nov Soybeans

9.86

9.60

+ .26

Sept Wheat

5.85

5.22

+ .63

Live Hogs

65.05

63.25

+ 1.80

Live Cattle

152.90

153.90

- 1.00

Cdn $

78.40

80.92

- 2.52

US $ Index

96.90

95.47

+ 1.43

Crude Oil

52.46

61.14

- 8.68

Gold

1155

1177

- 22

US 10 Year Notes

127-09

125-24

+ 1-17

TSX Stocks

14558

14904

-346


Grain prices surged in reaction to the USDA report on stocks and acres, released on June 30, with nearby corn actually closing up its 30 cent limit. Weather was also a factor, as more heavy rains hit already drenched areas, primarily in the eastern grain belt. Speculators were huge buyers.

Total corn stocks in the US at June 30 (3/4 of the way through the marketing year) were 4.447 bln bu, 110 mln bu.,or 2.4 percent,  less than traders expected. Soybean stocks were put at 625 mln bu., 54 mln. or nearly 8 percent less than expected. The final carryout for wheat was put at 753 mln bu., 42 mln more than traders thought.

USDA says 88.9 mln acres were planted to corn, 300,000 less than the March report. Soybean acres were put at 85.1 mln., 500,000 more than estimated in March. Both numbers were on the low side of  expectations. USDA said they would revisit acres in Missouri, Kansas and Arkansas before the August 12 crop report, as many acres are unplanted in those states, especially Missouri.

Most of the eastern Midwest had their wettest June ever. This also extended into Essex County, and many other parts of Ontario. The earliest planted corn is faring well with all the rain; the biggest problems are with the later planted crops. Corn on corn is hurting, and no till beans are developing more slowly than those on worked land. Good drainage obviously is making the biggest difference this year.

From June 23 to June 30, specs bought a massive 147,000 corn contracts, while in wheat they covered 57,000 contracts to be short only 22,000 now. In soybeans, they purchased 114,000 contracts in the past 2 weeks, to be long 70,000 now. Single day record volume traded at the CBOT on June 30. Speculative buying could slow now, but charts look more constructive.

As of July 5, US corn was rated 69 percent good and excellent, up 1 from the previous week, but below the 75 last year at this time. Soybeans were unchanged at 63 percent g/e, well down from the 72 last year. Traders had expected the report to show a 1-2 percent deterioration, so prices reacted downward.

Often Chicago markets change direction right around the July 4 holiday. Since markets were strong heading into that date, prices quickly gave back some of the recent gains. Obviously weather will be the main driving force for price, but forecasts for the balance of July currently show no extremes for temperature or rainfall. Hot and dry are not what crops want with their shallow root systems.

Crude oil fell 14 percent over the past two weeks, on a counter-seasonal rise in inventories. This makes the grain rally even more impressive. The US dollar index rose due to all the Greece news . Bonds rallied again on a flight to safety and the deflationary implications of the crude oil drop.

Our dollar was weak on the fourth consecutive monthly contraction in economic activity. No interest rate increase is likely in 2015 for Canada.  Basis levels on grain benefited from the weak loonie. Old and new crop soybean basis gained $.45 and .40 in the last 2 weeks. Corn gained .05 in old and .20 in new. Soft red wheat gained .25, while soft white added .50. Basis is as volatile as Chicago.   

 

- Frank Backx, HDC Grain Marketer