Commodities Report

August 16, 2016

 

Close Aug 16

Aug 2

2 week change

Dec Corn

3.37

3.34

+ .03

Nov Soybeans

10.07

9.53

+ .54

Sept Wheat

4.16

4.01

+ .15

Oct Hogs

60.15

60.70

- .55

Oct Cattle

113.25

114.45

- 1.20

Cdn $

77.85

76.36

+ 1.49

US $ Index

94.78

95.05

- .27

Crude Oil

46.65

39.34

+ 7.31

Gold

1350

1364

- 14

US 10 Year Notes

132-01

132-19

- 18

TSX Stocks

14722

14441

+ 281

Grain prices were mostly higher compared to two weeks ago. This occurred despite huge yield estimates released by USDA on Aug 12.

The initial response was negative, but prices recovered by the end of the day, and have strengthened more in the days after the report. Usually when a market refuses to drop on negative news, the path of least resistance becomes upward.

The corn yield was put at a record 175.1 bu/ac, easily eclipsing the 171 yield in the 2014/15. That put production at 15.153 bln bu,  628 mln more than estimated last month. However, exports were raised 125 mln and feed use by 175 mln., resulting in a projected carry out (CO) of 2.41 bln., compared to 1.706 for last year’s crop.

The soybean yield was pegged at a record 48.9 bu/ac. Last year was the previous record at 48 bu. Usage was only raised 46 mln bu, so the CO rose to 330 mln bu, versus 290 predicted last month and 255 mln last year.

Soybeans were the strongest as export sales for the 2016/17 crop are booming. US sales are up 22 percent from a year ago at this time. China has purchased 7.3 million mt so far this year from all sources; a year ago it was only 4.2 mmt.

The US wheat yield was also raised, to 52.6 bu/ac.,  eclipsing the old record set in 2013 by nearly 12 percent. The CO is predicted to be 1.1 bln bu, also a new record, which is 50 percent of this year’s projected usage. This helps to explain why wheat prices are languishing near 10 year lows.

Large speculators are now short 119,000 corn and 132,000 wheat contracts. This should be price supportive, as eventually they will buy those contracts back. They remain stubbornly long 105,000 soybean contracts, which can be viewed as slightly negative to price.

Ontario crops should so some improvement, as most areas received a shot of moisture recently. The last 6 weeks have had high temperatures and humidity, which could take the top end off of yields. Harvest could be a week earlier than normal.

The Canadian dollar rallied to its best level since June 22 on the coattails of the crude oil market, which surged 21 percent in the past 2 weeks. There are rumours OPEC and some other exporters will hold a meeting and curtail production. As usual Ontario’s grain (and livestock) basis levels eased as our dollar rose.   

 

 

 

- Frank Backx, HDC Grain Marketer