Commodities Report

June 7, 2016

 

Close June 7

May 31

2 week change

Dec Corn

4.33

4.09

+ .24

Nov Soybeans

11.17

10.56

+ .61

July Wheat

5.09

4.65

+ .44

June Hogs

86.30

80.45

+ 5.85

June Cattle

121.15

121.10

+ .05

Cdn $

78.30

76.25

+ 2.05

US $ Index

93.83

95.78

- 1.95

Crude Oil

50.28

49.20

+ 1.08

Gold

1246

1217

+ 29

US 10 Year Notes

131-01

129-23

+ 1-08

TSX Stocks

14354

14099

+ 255

 

Defying gravity, and some say logic, grain prices accelerated their uptrend in the past week. Soybeans are now at a 22 month high, corn is making new 11 month highs and wheat is at its best level in 7 months. 

This is tough to explain. US weather so far hasn’t been that terrible overall. Planting stayed ahead of average all spring. There are a few too wet areas, and some dry areas, but crop ratings are still decent. USDA says 75 percent of the corn is good or excellent; it was 74 a year ago.   72 percent of the soybeans are in the top 2 categories,  last year at this time was 69.  

Even the lowly wheat market participated in the rally. Since the low on June 1, wheat futures shot up 52 cents. Speculators remain short wheat, so further price gains become more likely. The wheat crop in France suffered from near record rains, hurting yield and quality. India may import 2 mln mt. , their largest purchases in 10 years. 

Grains are not the only commodities in bull mode. Crude oil is back over $50.00, after bottoming at 26.05 in February. Metals are doing better, as are sugar, cocoa, and lumber futures. Most commodity indexes are up 20 percent from their lows, but are still 50 percent below their 2014 highs.

A lot of investor money is going to commodities, as they are still relatively cheap. Even corn and soybeans at their new current  “high levels” of 4.33 and 11.17 are still well below their record highs hit just 4 years ago of 8.44 and 17.95. Meanwhile US stock markets are near record highs, and interest rates remain near zero. 

The Canadian dollar rose 2 cents on the stronger crude and a poor labor report from the US. It now appears less likely the Federal Reserve will raise rates this month. This weakened the US $ Index by over 2 percent in the past week. The Canadian economy was struggling even before the Fort McMurray  situation which will be a further hindrance to growth. 

Ontario basis levels retreated marginally considering the dollar’s rise. Forward contract prices delivered Hensall elevators hit $5.05 for corn and 13.58 for soybeans this week. These should be profitable, even with average yields. Farmer selling and contracting has been more active, especially in soybeans. 

Ontario crop conditions are highly variable. Eastern Ontario is too dry, but most other areas are in decent shape as we head into summer. Wheat yields could beat Ontario’s record set in 2006 of 82.3 bu/ac. by 10 bushels if we get no adverse weather over the next month. That would be a big help to get wheat towards profitability. 

- Frank Backx, HDC Grain Marketer