Commodities Report

May 2, 2016

 

May 3, 2016

April 26

1 week change

July Corn

3.80

3.87

- .07

July Soybeans

10.30

10.27

+ .03

July Wheat

4.71

4.88

+ .17

June Hogs

84.95

78.00

+ 6.45

June Cattle

116.10

126.95

- 10.85

Cdn $

78.66

79.28

- .62

US $ Index

92.85

94.55

- 1.70

Crude Oil

43.55

44.00

- .45

Gold

1287

1243

+ 44

US 10 Year Notes

130-09

129-14

+ 27

TSX Stocks

13684

13820

- 136

I plan to do this report on a weekly basis now that the North American weather market has started and volatility has returned to the grain markets. 

Soybeans traded at a 10 month high before profit-taking set in today.  Soys rallied nearly $2.00 in 2 months. Corn and especially wheat prices are seriously lagging the soybean performance. The relative changes could result in increased soybean acres this spring.

Argentina soybean crop loss estimates are increasing. There are also serious production problems with palm oil production, which will increase the demand for soybean oil. India is importing more of many food commodities due to adverse weather there. Vegetable oils are near the top of their shopping list.

USDA reported that 45 percent of US corn was planted as of May 1. Normal is 30 percent for that date. Eight percent of soybeans are in the ground, vs. six normally. 61 percent of US wheat is rated in the good and excellent categories; last year it was only 43.

Speculative funds continued to buy crop futures, as more and longer term moving averages turned higher, especially in soybeans. They are now long 149,000 soybean contracts, their largest long position in 2 years. They also own 75,000 corn contracts, the most since last November. They remain short 66,000 wheat contracts. Less buying is likely from this source in the near future, especially in soybeans.

However, the investment community seems to have more of an appetite for commodities again, which also explains the recent strength in metals, energies and other some of the soft commodities. Exchange traded funds, aka ETF’s, are a big part of this. These are similar to stock mutual funds, except they are invested in an array of commodities instead of stocks.

The reason is simple. Interest rates remain near record lows, and people are looking for better returns. The US stock market is near all-time highs, increasing the risk there. Commodities are relatively cheap as an asset class, so some money is beginning to flow to that sector.

The stronger commodity prices has also supporting our dollar, which breached the psychological $.80 barrier briefly last week. The fact the US dollar index is at its lowest point since January, 2015, is also allowing our dollar to climb to higher levels. The result was that basis was under pressure yet again in the past week.  

On Jan. 19, Hensall Co-op’s new crop soybean elevator basis hit $3.20 over Nov futures. Today it is 1.80 over. Corn basis went from $1.05 over Dec to .52 now, while soft red wheat dropped from $.95 over July to .25 now. The most consistent new marketing phenomenon is how Chicago and basis trend in opposite directions for Ontario producers.  

 

- Frank Backx, HDC Grain Marketer