Commodities Report

August 4, 2015

 

Close Aug. 4

July 21

2 week change

Dec Corn

3.79

4.18

- .39

Nov Soybeans

9.43

10.05

- .62

Sept Wheat

4.94

5.25

- .31

Oct Hogs

67.15

62.15

+ 5.00

Oct Cattle

148.10

147.40

+ .70

Cdn $

75.76

77.18

- 1.42

US $ Index

97.74

97.34

+ .40

Crude Oil

45.75

50.87

- 5.12

Gold

1087

1098

-11

US 10 Year Notes

127-26

126-06

+ 1-20

TSX Stocks

14481

14370

+ 111

 

Grains gave back more of the gains achieved in response to the excess rain in the eastern grain belt. Conditions improved there, and weather in the other areas in the Midwest continued to be near ideal. Most expect at least trend line yields, and numbers very close to USDA’s estimate in July. Official surveyed estimates come out on August 12, including an acres update.

US corn and soybeans rated good or excellent has stabilized at 70 and 63 percent, below last year’s 73 and 71 percent, respectively, when record yields were achieved. Crop development is very near normal. August weather can still have a big impact on final yields, especially for soybeans.

Ontario crops are as variable as the amount of rainfall that has fallen in the different areas. Most crops recovered from the extreme wetness, and were getting dry. A soaking rain on Sun., Aug 2 was near perfect and will add bushels to yields. A cooler two week forecast should also be beneficial.

So while most of the Chicago drop can be attributed to the improving crop, there was absolutely no help once again from the outside markets. Crude oil, base and precious metals sugar and cotton are all trading at or near their lowest levels since 2009. The CRB index of 27 commodities is actually trading at its worst level since 2003.

The effect on currencies of commodity based, export economies is also dramatic. The Australian and New Zealand dollars are at their lowest levels since the 2008/09 economic downturn. The Russian ruble, Norway’s krone and Canadian dollar haven’t been this low since 2003. All of this means the US dollar is in favor, as fear and desire for safety are key factors driving markets.

Part of this is driven by Greece’s $300 billion debt problem. Their stock market reopened last Monday after a 5 week shutdown, and immediately lost 20 percent of its value.  It is somewhat scary that Ontario’s debt is rapidly approaching $300 bln. also. Ontario’s population is 13.7 million, while 11 million live in Greece. Admittedly, however, on a GDP basis, Greece is still much worse off.

Also worrying investors is China. Volatility in markets there is extreme. Their yuan is fixed by their government to the US dollar, so is also high priced vis-a -vis most other currencies. Inflation is a problem in many sectors, including housing. The ripple effect of any bad news out of China could be extreme, as they have become a huge global trader.

US new crop export sales of soybeans are 52 percent below last year at this time. Their largest customer, China, has only bought 92 million bu, so far, compared to 314 mln last year at this time. That is only 30 percent of a year ago. Is it because of China’s economic uncertainty, the fact their hog numbers are going down, or perhaps they are sourcing more from South America? Any of these scenarios would mean less demand for US soybeans.  

 

- Frank Backx, HDC Grain Marketer