Commodities Report

March 14, 2017

 

 

Close March 14

Feb 28

2 week change

Dec Corn

3.84

3.94

- .10

Nov Soybeans

9.95

10.18

- .23

July Wheat

4.46

4.59

- .13

June Hogs

79.20

77.65

1.55

June Cattle

106.90

107.55

- .65

Cdn $

74.15

75.23

- 1.08

US $ Index

101.38

100.95

+ .43

Crude Oil

47.68

53.95

- 6.27

Gold

1203

1252

- 49

US 10 Year Notes

122-30

125-05

- 2-07

TSX Stocks

15407

15441

- 34

 

Grain prices dropped over the past 2 weeks, with losses accelerating after the USDA report issued March 9. Funds were heavy sellers also, and there was no help from the outside markets.

The US corn carry out (CO) was left unchanged at 2.32 bln bu., as feed use was dropped 50 mln bu., but ethanol was raised a similar amount. World stocks were raised by 3.1 mln mt, however, as Brazil’s crop was raised 5 mln mt, while Argentina was increased 1 mln mt.

The soybean CO was lifted 15 mln bu to 435 mln, as exports were dropped 25 mln, but crush was raised 10 mln. World stocks increased 2.4 mln mt, as Brazil’s crop was raised 4 mln mt and Argentina was up 1 mln mt. These would both be new records, if achieved.

The wheat CO was lowered a minor 10 mln bu, to 1.129 bln bu., which still puts stocks to usage at 49.7 percent. The world CO was raised 1.3 mlm mt, however, on higher Australian and Argentina supplies. There is no shortage of wheat in the US or the world.

Another negative for demand is the cases of avian flu in Tennessee and Wisconsin. This disease can spread rapidly if not contained, and already some Asian countries are restricting or banning imports of US poultry.

Most think the US will have an early spring. The Midwest  (and Ontario) enjoyed a very mild winter, and soil conditions will be conducive to an early start, as snow cover was generally on the light side. The focus of traders will soon shift to the Northern Hemisphere, and especially the US Midwest.

Other markets were also very weak, led by crude oil, which lost over $6.00 per barrel over the past two weeks. Inventories are building, as the US has increased the number of rigs fracking out of the shale. Precious and base metals were also very weak.

The weaker commodity board also allowed our dollar to ease further. There is support at .7350, but if that doesn’t hold, further weakness is likely. The weaker dollar has helped wheat and the soybean basis to get stronger.

Many felt inflation would rise under Trump policies, but that sure hasn’t been the case lately. Perhaps it’s the realization that the new President may have difficulty enacting all of his proposed policies in regards to trade, infrastructure spending and tax cuts.

There is a high probability the US will raise interest rates this week. In theory, this should rally the US dollar further, especially considering few, if any, countries will follow suit. A strong dollar is also usually a depressant to commodities. Perhaps this also partially explains the recent commodity weakness. 

 

 

- Frank Backx, HDC Grain Marketer