Commodities Report

August 30, 2016

 

Close Aug 30

Aug 23

1 week change

Dec Corn

3.16

3.37

- .21

Nov Soybeans

9.51

10.07

- .56

Dec Wheat

3.92

4.28

- .36

Oct Hogs

61.40

60.80

+ .60

Oct Cattle

107.65

109.80

- 2.15

Cdn $

76.44

77.45

- 1.01

US $ Index

96.12

94.52

+ 1.60

Crude Oil

46.36

48.14

- 1.78

Gold

1313

1340

- 27

US 10 Year Notes

131-28

132-09

- 13

TSX Stocks

14686

14782

- 96

 

Prices fell hard again in the past week on near perfect August weather to finish off the crops. USDA confirmed how good the crops are in their recent crop ratings report. Corn is 75 percent good or excellent versus 68 last year. 73 percent of the soybeans are in the two top categories, compared to only 63 percent last year.

These ratings confirm the record yields predicted in the August 12 crop report. However, the Pro Farmer  crop tour put the corn yield at “only” 170.2 bu/ac., which would still be a record, but well below the 175.1 bu USDA estimate on Aug 12. Pro Farmer thinks the soybean yield will be slightly higher than what USDA said.

The slide from the highs has been dramatic. In August, corn , soybeans and wheat fell $.31, .52 and .45 respectively.   That was after the $.28, 1.50 and .38 drops in July. That goes up must come down, but his drop easily exceeded what most market watchers thought was possible. Corn is at a 7 year low, while wheat is languishing at 10 year lows.

The correlation with speculator (aka managed money) was strong. In the past 10 weeks, they sold a massive 420,000 corn contracts, or 2.1 bln bu.. That is 23 percent greater than the carry out for the current crop year, and very close to the 2.175 bln bu USDA expects the US will export for the entire 2016/17 crop year.

There are more and more reports that Ontario corn yields will be lower than how the corn looks like from the road. There is a lot of tip back, and cobs seem smaller than in the past few years. This is likely due to the extreme heat we experienced through July and August. It is obviously worse in areas that lacked moisture.

Most other markets are also under pressure, including livestock, energy futures and metals. Deflation is still very prominent in commodity markets, as investors in this asset class have been pulling money out because of poor returns. The stronger US dollar index is also a factor.

Currencies have also been weak. Our dollar fell another cent, which helped Ontario grain basis by 5 to 10 cents. Farmer selling is apt to remain slow, because flat prices have retreated so much. Ontario  wheat prices are the same as the new crop corn contract, and 20 cents less than old crop corn, an unusual situation. 

- Frank Backx, HDC Grain Marketer