Commodities Report

September 1, 2015

 

Close Sept 1, 2015

Aug  18

2 week change

Dec Corn

3.69

3.77

- .08

Nov Soybeans

8.75

9.04

- .29

Dec Wheat

4.86

4.99

- .13

Oct Hogs

68.30

66.25

+ 2.05

Oct Cattle

142.85

147.25

- 4.40

Cdn $

75.86

76.57

- .69

US $ Index

95.31

97.04

- 1.73

Crude Oil

46.65

42.95

+ 3.70

Gold

1140

1117

+23

US 10 Year Notes

127-17

127-20

-3

TSX Stocks

13513

14195

- 682

 

Downtrends continued in grains and many other markets over the past two weeks. China’s economy was the biggest news, and since they are such a large exporter of finished goods and importer of raw materials, the effects rippled through world economies and markets.

Specific grain news was scarce, as the weather market for North American crops winds down. The eastern grain belt is a bit on the dry side, as are parts of Ontario, which will have some effect on final yields. However, the western belt (Iowa, Neb., Minn  etc ) will likely make up for any shortfall, as weather has stayed ideal there all year.

Crude oil was firmer over the past two weeks, but the ride getting there was wild. It hit a low of 37.75 on Aug. 24, and then spiked to a high of 49.33 by Aug 31. That makes the one week gain over 30 percent. Rumors were that OPEC would hold an emergency meeting regarding production, which caused panic short covering by the speculators who were short.

Surprisingly, the Canadian dollar mostly ignored the crude oil surge, as it rose only about one cent in the same time frame. This means our dollar is intrinsically and fundamentally weak. Economic numbers continue to disappoint, with consecutive quarters having negative growth. Meanwhile, the US economy grew by 3.7 percent over the same time frame.

The talk of an interest rate hike in the US in Sept. is moving to the back burner because of the weak US stock markets, which are following the Chinese Shanghai Index to lower ground. World markets are more interconnected than ever, which isn’t necessarily a good thing, considering the recent direction and volatility.

El Nino (the warming of Pacific waters to the west of South America) is expected to be the strongest in 20 years. The largest affects tend to be in the winter, with Western Canada and the US north being warmer than normal, while the US south is wetter than normal. It also often leads to excess rains in South American grain regions. So many other factors affect weather that many believe the El Nino consequences are exaggerated.

South America will begin planting in about two weeks, and traders will turn their attention to watching the weather there. They are overdue for a setback in production, as they have had record crops 6 out of the past 7 years. Meanwhile, USDA expects the US will have their second highest yields ever for corn and soybeans when harvest begins.

Which makes me dispute, at least in the short run, what all the climate alarmists are proclaiming. There is no sector of the economy more dependent on weather and the environment than agriculture. None is even close. Yet the world turns out record crops almost yearly. This is a good thing, as populations grow and demand for better and healthier foods increase. No doubt, farmers collectively are also responsible with their stewardship and concern for the environment. 

- Frank Backx, HDC Grain Marketer