Commodities Report

September 12, 2016

 

Close Sept 12

Aug 30

2 week change

Dec Corn

3.40

3.16

+ .24

Nov Soybeans

9.64

9.51

+ .13

Dec Wheat

4.09

3.92

+ .17

Oct Hogs

59.65

61.40

- 1.75

Oct Cattle

105.80

107.65

- 1.85

Cdn $

76.74

76.44

+ .30

US $ Index

95.06

96.12

- 1.06

Crude Oil

46.24

46.36

- .14

Gold

1329

1313

+ 16

US 10 Year Notes

130-18

131-28

- 1-10

TSX Stocks

14598

14686

- 88

Despite another negative USDA report on Sept 12, and more speculative selling, crop futures actually gained marginally in the past two weeks. Eventually all the negative news gets built into prices, and it appears as if we might be getting very close to that point.

USDA lowered the corn yield to 174.4 bu/ac, compared to 175.1 estimated in August and 173.4 expected by the trade. This would still be a record.  The carryout (CO) was lowered to 2.384 bln bu., versus 2.409 guessed last month and 1.716 for the 2015/16 CO.  Demand factors were basically left unchanged.

The soybean yield was raised to a new record 50.6 bu/ac, up sharply from the 48.9 in August. The CO was only raised 35 mln bu, however, as USDA lowered the final 15/16 CO by a large 60 mln bu. to 195 mln. It is interesting that in May, only 4 months ago, USDA had that CO at 400 mln bu..  USDA consistently understates soybean demand and CO’s.

USDA left the wheat fundamentals unchanged, with the final CO at 1.1 bln bu., compared to .981 bln for the previous crop year. Unfortunately that is 47.5 percent of this year’s projected usage, the highest in decades. The world numbers are also this negative fundamentally.

Large speculators keep selling futures. They are now short 197,000 corn and 148,000 wheat contracts. They still remain long 59,000 soybean contracts, but they were long over 200,000 in June before the market topped out. Overall, this should be considered price supportive.

Livestock prices remain under pressure. Cheaper feed usually translates into cheaper meat prices, with a lag. Live cattle prices traded at a record 1.70/lb  in late 2014; now they are down to the 1.05 area. Hog prices have also been weak on increasing production, but demand also remains firm.

The financial markets had more volatile trade. There is increasing thoughts that the US Federal Reserve may in fact raise interest rates in their September meeting. Despite that, the US dollar index fell one percent in the past two weeks. The US election is suddenly only six weeks away and there will likely be market ramifications, regardless of who wins.

Ontario harvest was expected to be earlier than normal with all the heat, but that doesn’t seem to be the case now. Yields are expected to be highly variable, even in a small area. Farmer selling has slowed to a dribble with the low flat prices. Anything forward contracted sure looks good now. 

- Frank Backx, HDC Grain Marketer