Commodities Report

April 11, 2016

 

Close April 12

March 29

2 week change

May Corn

3.63

3.73

- .10

May Soybeans

9.36

9.16

+ .20

May Wheat

4.53

4.76

- .23

June Hogs

79.25

83.00

- 3.75

June Cattle

122.75

125.45

- 2.70

Cdn $

78.36

76.44

+ 1.92

US$ Index

93.99

95.21

- 1.22

Crude Oil

42.18

38.28

+ 3.90

Gold

1260

1239

+21

US 10 Year Notes

130-18

130-00

+ 18

TSX Stocks

13614

13414

+ 200

There was a huge divergence in grain prices, led by soybeans strength, Corn and wheat lost ground over the past 2 weeks. The primary reason was the USDA acreage estimates issued March 31.

US corn acreage was put at 93.6 million, compared to 88 million last year. Traders had expected an increase to only 90 mln. Soybean acres were put at 82.2 mln, down slightly from the 82.65 in 2015, and expectations of 83.07. All wheat acres were put at 49.6 mln versus 54.4 the previous year.

The biggest shift is to more corn acres and less wheat in the Northern Plains. Western Canadian farmers are also expected to grow much less wheat than in previous years. Wheat is definitely the least  profitable crop at current prices. The lower acres will eventually, however, help wheat prices.

Corn acres in the deep south (US’s first harvested corn) will likely end up less than expected, as it remains too wet to plant there. Most traders expect that the 93.6 mln corn acres won’t be achieved. Spring weather will determine the final corn/soybean mix, but some shift to soybeans is likely.

USDA issued grain stocks and new demand supply estimates in the past 2 weeks. There were no surprises in either report. Supplies of all 3 main grains remain burdensome, both in the US and on the world level. The world has never had crops like the past 2 years. However, demand is so strong that a US drought would still cause a huge run up in price.

The political and economic situation in Brazil is dire. The President may be impeached, and inflation is accelerating. The Zika virus is another issue that seems to be getting more serious. Their second corn crop, planted after soybeans, is suffering from drought with little relief in sight. Meanwhile, their currency has rallied to its best level since August, which doesn’t help an export economy.

China announced they want their farmers to grow more soybeans and less corn. They would like to see a 60 percent increase by 2020. Their soybean imports have grown dramatically, to 85 mln mt  this year, compared to only 28 mln 10 years ago. Meanwhile, they supposedly have a huge stockpile of corn, which they have subsidized the production of.

Most currencies are strong, as the US dollar index continues to be under pressure. The Canadian dollar was no exception, rallying another 2 cents in the past 2 weeks to a new 9 month high. Crude oil contributed, adding another 10 percent in the same time frame.

Commodities collectively are responding to the weaker US dollar, but basis is weaker again on crops and livestock because of our dollar’s strength. Cash and forward contract prices remain flat, as one offsets the other.

Now it’s all up to Mother Nature, and she will give North American growing areas a nice reprieve after a few weeks of cold, wet conditions. Corn planting will begin in the lower Midwest this week. Farmers have proven they can plant a lot of crop in a short period of time anymore.  

 

- Frank Backx, HDC Grain Marketer