Commodities Report

June 21, 2016

 

Close June 21

June 14

1 week change

Dec Corn

4.09

4.46

- .37

Nov Soybeans

11.11

11.49

- .38

July Wheat

4.59

4.85

- .26

Oct Hogs

74.40

71.95

+ 2.45

Oct Cattle

111.75

114.85

- 3.10

Cdn $

78.20

77.75

+ .45

US $ Index

93.98

94.89

- .91

Crude Oil

49.40

48.49

+ .91

Gold

1272

1289

- 17

US 10 Year Notes

131-08

131-27

- 19

TSX Stocks

14039

13882

+ 157

 

Grain markets are now in corrective mode, after huge gains this spring. Soybeans exploded by $3.17/bu since March 1, while corn rallied $.85 since April 1. Meanwhile the lowly wheat market is trading about where it was in March and April.

The driver for the big gains in the spring planted crops was the extreme heat in the Southern Plains and western Midwest. Many new temperature records were set. While it is still hot in those areas, rainfall has become more plentiful.

In the past 2 days, corn has retreated $.40, while soybeans have given back $.75 since June 13. Speculators have bought over a billion bushels of each commodity since the up move started, and it appears some are now cashing in some of their chips. Wheat has declined $.62 since June 8.

USDA’s weekly crop ratings show corn is still 75 percent good or excellent. A year ago it was 71. Soybeans are rated 71 percent good/exc, compared to only 65 percent last year. Remember that in 2015, the US had a record soybean yield, and the second highest corn yield ever.

These ratings were better than expected. However there is a long way to go, and most years the weather market doesn’t even start until July. There will be major volatility over the next three months.

South American farmers are reacting to different circumstances. In Brazil, soybean prices are at record highs, and most expect increased acres there when they plant this fall. Their weak currency is a big contributor and soybeans are cheaper to grow than corn.

Argentina farmers are expected to substantially increase their corn and wheat acres at the expense of soybeans. There is still a heavy tax on soybeans that go export, while the tax has been removed from the other two main crops.

Over one third of the world’s population live in China and India. China’s demand for commodities, including foodstuffs, is well documented. Now some think India could replace China as the fastest growing importer. This could be a longer term bullish factor for many commodities, including grains.

The big news politically is whether Britain will leave the European Union (EU), dubbed Brexit. The vote is on July 23. Voting to leave would have negative repercussions for many financial markets. Polls show the no vote to leave is winning. Hopefully that is the case, or it could open up the door for other countries to also leave the EU.

Financial markets were unusually quiet. World stock markets did firm, while the US dollar index lost about 1 percent, anticipating the no vote in Britain. The Canadian dollar remains range-bound between $.76 and $.80. Ontario basis levels were stagnant. 

- Frank Backx, HDC Grain Marketer