Commodities Report

September 15, 2015

 

Close Sept 15, 2015

Sept  1

2 week change

Dec Corn

3.90

3.69

+ .21

Nov Soybeans

8.95

8.75

+ .20

Dec Wheat

4.95

4.86

+ .09

Oct Hogs

66.95

68.30

- 1.35

Oct Cattle

141.25

142.85

- 1.60

Cdn $

75.41

75.86

- .45

US $ Index

95.60

95.31

+ .29

Crude Oil

44.60

46.65

- 2.05

Gold

1107

1140

- 33

US 10 Year Notes

127-18

127-17

+ 1

TSX Stocks

13419

13513

- 94

 

Grains were firmer, led by the corn market. Some of the gains were directly attributable to the USDA report, released on Friday, Sept. 11. Once corn prices broke above the 100 day moving average, speculative buying picked up. $4.00 is still key resistance on the Dec corn chart.

USDA lowered the corn yield to 167.5 bu/ac., compared to 168.8 estimated in August. This was in line with pre-report estimates. The new crop carryout (CO) was estimated at 1.592 bln bu, down 121 mln from August, and less than last year’s 1.732 bln bu.

The US soybean yield was raised by .2 bu/ac. to 47.1.  Traders had expected a reduction. The market sold off sharply on the news, but recovered by the close on the strength in corn. The CO was lowered to 450 mln bu, compared to 470 mln estimated last month and 210 for the 2014/15 crop, so ending stocks will still more than double.

The US soybean crop is now rated only 61 percent good or excellent, the lowest ratings of the year.  This is down 2 percent in the past week and compares with last year’s 72 percent. Yet USDA says they will have the second highest yield ever. Something doesn’t quite add up with these two pieces of information.

The US wheat CO was raised to a burdensome 875 mln bu., up 25 mln from last month. Exports were dropped 25 mln, accounting for the increase in the CO. The US keeps getting shut out of the tenders by the large importers. At least part of this the fact the US has a lot of poor grade wheat, due to the excess moisture that hit wheat regions just as the wheat was ready for harvest.

It is common for grain prices to bottom at harvest in big crop years. A close over $4.00 in Dec corn and 9.00 in Nov soybeans would go a long way towards that being the case this year also. The weather focus will shift to South America now, and El Nino affects tend to be more dramatic for those regions.

Brazil farmers have just started to plant soybeans. Most analysts expect record acres yet again. The extra acres will come from corn, due to its higher input and transportation costs. The overall economy in Brazil is hurting bad, with no growth, high inflation and exploding government deficits. International credit rating agencies have relegated their debt to junk status.

This has resulted in a further sharp depreciation of their currency, the real. In 2011, it took 1.56 reals to buy 1 US dollar. Today it takes 3.87. The currency has lost over 30 percent of its value since April alone, so the downtrend is accelerating. This gives them a very high basis on crops, but also causes their input prices to rise dramatically. The shift to soybeans from corn acres could well be larger than current thoughts.

Most markets besides grains eased marginally over the past two weeks, as the US dollar was slightly in favor. China economic news is still very much in focus, as the government there tries to control the recent volatility in many of their markets. Any large move in world markets will likely get their cue from events in China.

One nice trending market has been the Canadian dollar, which has had a lower weekly close in 11 of the past 12 weeks. The loss has been exactly 10 percent in the past 4 months. Even news the Federal Government had a surprising minor budget surplus in the past fiscal year did nothing to help. With the election campaign ongoing, there is little chance for a Cdn $ rally, at least in the short run. 

 

- Frank Backx, HDC Grain Marketer