Commodities Report

April 25, 2017

 

Close April 25

April 11

2 week change

Dec Corn

3.89

3.90

- .01

Nov Soybeans

9.61

9.49

+ .12

July Wheat

4.27

4.48

- .21

June Hogs

71.85

73.95

- 2.10

June Cattle

115.95

113.75

+ 2.20

Cdn $

73.66

75.11

- 1.45

US $ Index

99.98

101.13

- 1.15

Crude Oil

49.40

53.25

- 3.85

Gold

1265

1275

- 10

US 10 Year Notes

125-13

125-13

0

TSX Stocks

15755

15710

+ 45


Crop prices were mixed over the past 2 weeks, with only soybeans higher. Probably the main reason for its strength was the fact prices in Chicago dropped 90 cents from March 1 through April 11, as estimates of the South American crop kept getting bigger, adding to the already burdensome world supplies.

USDA predicts world soybean production will hit 346 mln mt in 2017, eclipsing the previous record of 319.6 mln mt set 2 years ago by over 8 percent. The world ending stocks are forecast to rise to a new record of 87.4 mln mt, which is 10.3 mln mt greater than last year’s record. There is no shortage of soybeans in the world, even though China’s purchases keep setting yearly records.

Brazil could face some storage issues when they start to harvest their double crop corn in a month or two. They don’t have the infrastructure to put away that much crop, especially if both the soybean and corn crops hit the records currently expected by the trade. Much will need to be stored on the ground.

The carry outs (CO) on wheat and corn are also growing, as producers around the world keep achieving strong yields. In fact the US wheat CO will be the highest in 30 years. Prices are in the tank, so US acres will be the lowest since the early 1900’s. Low prices encourage demand, and discourage production.

Speculators, realizing how good farmers collectively have been at growing crops, have become aggressive sellers. They are short 172,000 corn contracts now. The only time they were shorter was March last year, and problems with the Brazil crop caused short covering and a 90 cent rally by June.

The large specs are also now short 46,000 soybean contracts, adding 19,000 contracts in the latest week. They were long 175,000 contracts in February. That’s a lot of selling! Funds have been short wheat for years, and they are very close to being record short again.

Spring planting will slow in the US if the next 2 week forecast is even close to accurate, as heavy rains are predicted in the main growing areas. If the wet weather persists through May, it could be the trigger for funds to exit some of their large short positions. This is the best hope for the spring rally which happens about 7 years out of 10.

Stats Canada released acreage estimates that have everyone scratching their heads. Wheat acres are expected to be steady, but canola acres are forecast to rise 10 percent. Corn acres are expected to increase 12.8 percent, while soybeans will rise 27 percent, mainly in Western Canada. If you add up all the main crops, Canada will plant 2 mln acres more than last year!

The best news story for Ontario farmers over the past 2 weeks was the declining Canadian dollar. It fell on the tough trade talk from Trump on dairy and especially the up to 24 percent countervailing duty on softwood lumber. Basis on crops and livestock firmed, offsetting some of the weakness in Chicago.

When an elephant takes on a mouse, the mouse usually loses.

US stock markets were firm after the early French election result. The TSX index in Toronto is lagging, as resource prices remain under pressure. Deflation still remains more of a concern for central bankers and governments around the world than inflation, preventing interest rates from rising. US rates might not rise as much either as previously thought. 

 

 

 

- Frank Backx, HDC Grain Marketer