Commodities Report

May 9, 2017

 

 

Close Tues May 9

April 25

2 week change

Dec Corn

3.85

3.89

- .04

Nov Soybeans

9.65

9.61

+ .04

July Wheat

4.30

4.27

+ .03

June Cattle

77.40

71.85

+ 5.55

June Hogs

125.00

115.95

+ 9.05

Cdn $

72.88

73.66

- .78

US $ Index

99.98

99.98

0

Crude Oil

46.02

49.40

- 3.38

Gold

1222

1265

- 43

US 10 Year Notes

124-30

125-13

- 15

TSX Stocks

15556

15755

- 199


Volatility increased over the past 2 weeks, as the 2017 North American weather market has begun. Heavy rains hit many key areas of the Midwest, including Illinois, Missouri and Indiana (and Ontario).   Despite that, 47 percent of US corn and 14 percent of the soybeans were planted by May 7, only 5 and 3 percent below average for that date.

Wheat also had a large jump on Monday May 1 after western Kansas got hit with a snowstorm and freezing temperatures. Crop losses are expected to be minor, and there’s no shortage of wheat in the US or the world, so prices gave back all of those gains in the past week.

There are no shortages in any of the 3 main crops in the US, as carry outs have risen drastically in the past couple years. While not keeping up to the supply increases, the demand story isn’t too shabby either.  China’s April soybean imports from the US were up 13 percent from a year ago. Jan, Feb and March imports also set new records, and were collectively up 18 percent from last year.

Meanwhile cumulative corn exports out of the US in this marketing year are up 54 percent from a year ago to the second highest ever.  Corn for ethanol has been at a record most of the year. Even wheat, where the US is a smaller and smaller player, has seen exports rise 32 percent compared to 2016.

On May 10, USDA released their monthly demand/supply report. There was some expectation that exports would be raised, and carry outs lowered, due to the fast pace so far.  The May report gives traders the first estimate of carry outs (CO)  etc for the new crop year (2017/18)

USDA’s initial May estimate of the new crop soybean CO  has been overstated  in 18 of the past 21 years by an average of 141 mln bu. That’s not very accurate, but at least USDA is consistent.  It is amazing that the estimates are almost always wrong in the direction that keeps prices lower.

The old crop corn CO was guessed at 2.3 bln bu, near expectations, while the 2017/18 was 2.27 bln, a minor 57 mln bu less than thought. The biggest surprise was the world new crop CO was 191 mln mt, almost 20 mln mt less than the average guess. This caused a 4 cent rise in futures. They used a 170.7 bu trend line yield.

The old soybean CO was as expected at 435 mln bu, and should rise to 480 mln for the 2017/18 crop. This is still a big number but is 83 mln less than traders thought. Maybe they’re factoring in for their bad track record over the past 21 years? They used a 48 bu yield to get the numbers.

Old crop wheat ending stocks were as expected at 1.16 bln bu., but new crop will drop to 914 mln., so at least finally the trend is towards lower stocks. This is mainly due to reduced production due to low acres.

Traders quickly went back to looking at the weather maps, which are turning wetter as of this writing. Despite very comfortable supplies, any serious adverse weather can still have a profound effect on price as we go through the summer.  

 

- Frank Backx, HDC Grain Marketer