Commodities Report

June 14, 2016

 

Close June 14

June 7

1 week change

Dec Corn

4.46

4.33

+ .13

Nov Soybeans

11.49

11.17

+ .32

July Wheat

4.85

5.09

- .24

June Hogs

73.90

71.95

+ 1.95

June Cattle

115.10

115.50

. .40

Cdn $

77.75

78.30

- .55

US $ Index

94.89

93.83

+ 1.06

Crude Oil

48.26

50.28

- 2.02

Gold

1289

1246

+ 43

US 10 Year Notes

131-27

131-01

+ 26

TSX Stocks

13882

14354

- 472

 

It was yet another week with the same story. Prices keep climbing on weather concerns, which is fueling more speculative and investor buying. Crop losses in South America are forcing buyers to source more of their necessary requirements from the US.

This was reflected in the USDA demand/supply report issued June 10. Carry outs (CO) were lowered for both old and new crop corn and soybeans, almost entirely due to more exports. Old corn exports were raised 100 mln bu, while new was raised 50 mln. This puts the new CO at 2.008 bln bu., compared to 2.153 bln predicted last month. This would still be more than the 1.708 CO for the 2015 crop.

Soybean exports were raised 20 mln bu on old and 15 mln on new, putting the new crop CO at 260 mln, versus 305 mln estimated last month. Last year’s CO was lowered to 370 mln bu. That means that if the US yield is 3 bu less than the trendline yield of 46.7 bu/ac., the US CO would be near zero. It’s no wonder the market is nervous and strong.

The wheat numbers weren’t bullish, which explains the price performance. The 16/17 CO was raised to 1.05 bln bu (1.029 predicted last month), and compared to .980 bln for last year’s crop. The increased US supply due to strong yields was mostly offset by increased usage. US and world CO’s are huge.

In world numbers, USDA lowered Brazil’s corn crop by 3.5 mln mt, and their soybean crop by 2 mln mt. They surprisingly left Argentina’s soybeans at 56.5 mln mt., most traders were looking for a decrease there too. However, world CO’s were also lowered.

Speculators are now long 220,000 corn and 211,000 soybean contracts, which is near a record on the soys. They have been huge contributors to the crop price advances. They have a lot of company on the long side. Specs are still short 83,000 wheat, but did buy 35,000 in the past week, helping that price.

The US corn crop is rated 75 percent good or excellent,  75 last week and  73 a year ago. Soybeans in the best 2 categories were put at 74 percent, compared to 72 last week and 67 a year ago. Obviously the crop is doing okay so far, but it is a futures market we are dealing with, which looks at least 1 to 2 weeks out.

Weather is variable throughout North America. Some intense heat will build in Texas and move into the Southern Plains. The overall pattern shows above normal heat with below normal precipitation. And this is only June!  In most years, the weather market gets rolling in July and August. Volatility will be extreme.

Ontario isn’t off to its best start. Some areas are too dry. Other areas, where heavy rainfall fell immediately after planting, are having emergence issues, especially in soybeans. This latter scenario is making for tough decisions for those affected. 

 

- Frank Backx, HDC Grain Marketer