Commodities Report

June 6, 2017

 

 

Close June 6

May 23

2 week change

Dec Corn

3.96

3.89

+ .07

Nov Soybeans

9.32

9.50

- .18

July Wheat

4.35

4.30

+ .05

Oct. Hogs

67.85

68.00

- .15

Oct. Cattle

119.05

118.05

+ 1.00

Cdn $

74.36

74.07

+ .29

US $ Index

97.27

97.27

0

Crude Oil

48.17

51.50

- 3.33

Gold

1296

1254

+ 42

US 10 Year Notes

126-27

125-30

+ 29

TSX Stocks

15477

15488

- 11

Soybeans were weak again over the past 2 weeks, while corn and wheat traded higher. Estimates of Brazil’s soy crop keep growing, and US acres will be a new record, especially with all the wet weather in the eastern Midwest. The US may see soybean acres higher than corn for the first time in history.

As of June 4, USDA said 68 percent of US corn was in the good and excellent categories. That was up 3 percent from the initial assessment last week. Last year at this time it was 75 percent. There is not a real strong correlation between the early condition reports and final yield.

Weather forecasts show no extremes over the next two weeks. The National Weather Service (NWS) expects most of the main US growing areas (and Ontario) will have above average temperatures and above normal precipitation, which is usually an ideal scenario for big crops.

It is interesting that markets showed some of their best gains in a while today (June 6), despite the improved corn crop and the accommodating weather forecasts. It appears to me that negative news just can’t drive grain markets any lower. That means any surprise is more apt to cause a rally.

Funds are heavily short all the grains, in near record numbers. They are short over 1 billion bu. corn. The only time they were shorter was March, 2016, when a 3 month, $.90 rally started. In soybeans, they are short 99,000 contracts. This is their largest short position since 2013. The always long index funds are at their lowest levels of ownership since 2009 in corn and 2013 for soybeans.

Most of the speculative and investor trading is motivated by moving averages etc. They are trend followers. Should there be a spark, a sizable rally could ensue, as they don’t want to be caught on the wrong side of the market. Funds can have a huge impact on grain prices in the short run.

Minneapolis wheat futures are used to price spring wheat, which is mainly grown in the Canadian Prairies and in the northern US. Prices traded to a nearly 2 year high today, as conditions have turned very dry there. Spring wheat is higher in protein, and the hard red wheat in Kansas is lacking in protein, which also adds more value to the spring wheat. This development is also helping corn and soybean prices, and reminds traders that eventually markets always bottom.

There were limited moves in outside markets. Overall market volatility is at its lowest level in years, despite increased uncertainty in the news. North Korea, the Middle East, terrorist attacks, and Trump’s unpredictability are causes for concern, but markets don’t seem to care too much.

 

Maybe right now it’s the proverbial calm before the impending storm in the grain and outside markets!  

 

- Frank Backx, HDC Grain Marketer