Commodities Report

April 11, 2017

 

Close April 11

March 28

2 week change

Dec Corn

3.90

3.82

+ .08

Nov Soybeans

9.49

9.72

- .23

July Wheat

4.48

4.38

+ .10

June Hogs

73.95

72.45

+ 1.50

June Cattle

113.75

111.60

+ 2.15

Cdn $

75.11

74.83

+ .28

US $ Index

101.13

99.96

+ 1.17

Crude Oil

53.25

48.44

+ 4.81

Gold

1275

1248

+ 27

US 10 year Notes

125-13

124-09

+ 1-04

TSX Stocks

15710

15592

+ 118

Soybeans continued their recent slide over the past two weeks. They are now down 90 cents per bushel since March 1. Corn and wheat, however, managed minor gains. As weather is more of a factor on those crops early in the spring.

USDA released their monthly US demand supply report for their major crops on April 11, and included world numbers. No major changes were expected, but the report was considered a bit bearish, and prices initially reacted accordingly. However, prices recovered by the close, which is encouraging.

The corn carryout (CO) was left unchanged, at 2.32 bln bu., as ethanol was raised 50 mln bu., but feed use was dropped the same amount. The previous year’s CO was 1.737 bln bu., so ot is up by about one third

The soybean CO was raised a minor 10 mln bu., to 445 mln., as the residual component of demand was adjusted. The 2015/16 CO was only 197 mln bu., so the CO will more than double. This would be the highest CO in 10 years.

The all wheat CO was raised 30 mln bu., to 1.159 bln. It was 976 mln the previous year. This would be the largest CO in the modern era, so there is no shortage of wheat in North America. The low returns, however,  give no incentive for farmers to plant much. US acres will be the lowest since 1906.

South American crops keep getting bigger. USDA saw fit to raise Argentina’s corn and soybean crops by 1 mln and .5 mln mt respectively. Brazil’s corn was increased another 2 mln mt, while their soybean crop grew by 3 mln mt. This will mean more competition in export markets and larger world CO’s than expected.

The focus of the grain trade and speculators is quickly shifting to North America weather patterns. It will remain on the wetter side for the next two weeks, with mostly above normal temperatures. Early planting in the US could result in less of a switch to soybean acres from corn than the market currently thinks.

Speculative funds have been heavy sellers. They are now short 150,000 corn contracts, not that far from their record short of 229,000 contracts. They are even soybeans now, after being long 170,000 contracts in early March. They have sold 105,000 wheat contracts in the last 6 weeks to be near their record short of 151,000 contracts. This should be supportive to all three crops in the short run.

Crude oil had the largest gain, rising 10 percent in the past 2 weeks alone. Gold also gained. Investors seem to have more of an appetite to own commodities. This trend would increase if stock markets retreat from their current lofty levels.

The world has become a bit scarier due to Trump’s unpredictability. Now more “black swans” are appearing, with the situations in Syria and North Korea. These areas of concern could involve China and/or Russia also. Volatility in many markets is likely to increase. 

 

 

- Frank Backx, HDC Grain Marketer