Commodities Report

May 9, 2016

 

Close Tues May 10

May 3

1 week change

Dec Corn

3.88

3.87

+ .01

Nov Soybeans

10.68

10.10

+ .58

July Wheat

4.61

4.71

- .10

June Hogs

80.55

84.95

- 4.40

June Cattle

123.15

116.10

+ 7.05

Cdn $

77.39

78.65

- 1.26

US $ Index

94.25

92.85

+ 1.40

Crude Oil

44.45

43.55

+ .90

Gold

1267

1287

- 20

US 10 Year Notes

130-27

130-09

+ 18

TSX Stocks

13772

13684

+ 88

Volatility continued in Chicago. The range in soybeans was 30 cents for all of January, as well as for February. For the first week of May, the average daily volume was 30 cents. Chicago is a casino for speculators. The average daily volume in ag commodities is setting new records, and is up 52 percent from last year.

Then on May 10, USDA issued new demand/supply estimates, including the first carry out (CO) estimates for the 2016/17 crops. The 15/16 corn CO was lowered to 1.8 bln bu from 1.86 guessed last month. Traders had expected a huge increase. The new crop CO was put at 2.15 bln, 100 mln less than traders thought.

The 15/16 soybean CO was lowered from 445 mln bu to 400 mln. The biggest surprise was for the 16/17 CO, which was lowered to 305 mln bu, so a sizable drop from the current crop year. USDA is anticipating very strong demand to get the number there, because they used a trendline yield of 46.7 bu/ac.

The market reaction was huge and instant, with soybean prices rising over $.50 immediately after the report.  Corn and wheat continue to lag the soybean strength. The Hensall Co-op new crop board prices show a soybean:corn ratio of 2.90. This strongly favors more soybean acres and less corn.

As of May 3, specs were long 157,000 soybean contracts, their largest ownership since April, 2014. Their largest long position was 250,000 contracts during the bull market in 2012. Funds are still short 107,000 wheat contracts. This goes a long way towards explaining the relative performance of the two crops.

The US wheat crop is rated 62 percent good or excellent; last year it was only 44 percent, so US wheat is in good shape, as is Ontario’s. Then it was revealed the UK is shipping a 61,000 cargo of feed wheat to the US east coast. It’s little wonder wheat prices can’t get any traction.

As of Sun. May 8, 64 percent of US corn was planted. Last year it was 69 percent, and normal for that date is 50. Soys are 23 percent planted, above the average of 16 percent for May 8. The western grainbelt is well ahead of normal, while the eastern belt is behind.

Most of Ontario is also lagging. It’s not there was a lot of rain; it’s just that very little drying happened with the cool temperatures, and predominantly north winds. A few days of warmer temperatures will be followed by another cool trend, but Ontario farmers should be able to make some progress this week.

Livestock prices, like grains, are marching to the beat of their own drummer. Hogs have been strong lately, while cattle were weak. This was reversed this past week in a big way. Volatility is increasing in this commodity sector also.    

 

- Frank Backx, HDC Grain Marketer