Commodities Report

October 11, 2016

 

 

Close Oct 11

Sept 27

2 week change

Dec Corn

3.46

3.32

+ .14

Nov Soybeans

9.54

9.52

+ .02

Dec Wheat

4.07

4.04

+ .03

Dec Hogs

42.85

46.75

- 3.90

Dec Cattle

99.00

103.15

- 4.15

Cdn $

75.52

75.64

- .12

US $ Index

97.69

95.45

+ 2.24

Crude Oil

50.66

44.56

+ 6.10

Gold

1257

1327

- 70

Us 10 Year Notes

129-30

131-15

- 1-17

TSX Stocks

14537

14577

- 40

Grains were marginally firmer over the past two weeks, in low volume, low range trade. Close to half the corn and soybeans are now under cover. As mentioned before, prices often bottom this time of year, especially in big crop years.

USDA will update yields, acres, production and carry outs on Oct. 12 (too late to include in this report). The expectation is for a bushel or two less corn and a bushel or two more soybeans per acre. Demand numbers are likely to be adjusted upwards also.

Export sales for the new crop are very strong. Corn sales are up 70 percent from the previous five year average for this date. Soybean sales, which make new records yearly, are up 18 percent from last year’s very strong pace. Even wheat sales are up 26 percent compared to where they were last year.

In the case of corn and soybeans, the strong sales are directly attributable to less competition, especially from South America. Both Brazil and Argentina had crop problems in 2016. The world needs more production from them this year or prices will again move higher. They are just starting to plant now.

Another potentially bullish factor for grain prices is that speculative funds are short a lot of grain contracts, betting that prices will drop further. In the case of wheat, they are short a record 165,000 contracts. Eventually, they will get bought back. A close over $4.10 on Dec wheat could be the trigger to get that process started.

Soybean harvest in Ontario is in full swing. Yields are surprising to the upside in most areas. Ontario had record wheat yields in 2016, and it appears soybeans will as well. Ontario’s record soybean yield was set in 2012 at 46.5 bu/ac.  It is unlikely that Ontario will set a new record in corn yields.

The old market saying, “the trend is your friend” sure doesn’t apply to hog and cattle farmers right now. The dramatic drop continued the past two weeks. This could well be the climax blow-off to the downside. This latest drop proves again that nothing is so cheap that it can’t get cheaper.

The Canadian dollar was only steady, despite a 13 percent move up in crude oil. The US dollar was again firm, which depressed most currencies. Ontario crop farmers would like nothing better than firming Chicago prices and a weaker Canadian dollar. Most times our dollar tempers Chicago moves in both directions, through its effect on local basis values.

There is much talk that China will move their currency, the yuan, to a floating exchange rate. As they are now the second largest economy in the world, it makes sense, especially since they built their economy on trade. However, it is unlikely they would let it rise too much, as that would hurt their competitiveness. It is currently pegged near a six year low.  

 

 

- Frank Backx, HDC Grain Marketer