Commodities Report

July 18, 2017

 

 

Close July 18

July 11

1 week change

Dec Corn

3.91

4.14

- .23

Nov Soybeans

10.02

10.43

- .41

Sept Wheat

5.04

5.53

- .49

Oct Hogs

67.90

69.20

- 1.30

Oct Cattle

116.90

114.85

+ 2.05

Cdn $

79.26

77.48

+ 1.78

US $ Index

95.63

95.71

- .08

Crude Oil

46.59

45.05

+ 1.54

Gold

1243

1215

+ 28

US 10 Year Notes

126-03

125-05

+ 30

TSX Stocks

15139

15112

+ 27

To say volatility has increased lately is an understatement. For the 5 months from Jan 1 to May 31, Dec corn was confined to a 26 cent range. Since June 1, the market had a 23 cent rally, followed by a 35 cent drop, then a 43 cent rally before the 35 cent drop last week. Markets are showing some strength again as I write this.

This doesn’t make marketing any easier or less stressful, but at least it does give opportunities for better pricing than when the markets are stagnant. It’s sure more exciting this way!

The yoyo markets are caused by the wildly fluctuating weather forecasts. Every time even a hint of rain is added, prices quickly retreat. The latest 6 to 10 and 8 to 14 day forecasts turned hotter and drier again, and prices responded accordingly.

The net effect of all the weather to now is reflected in the crop ratings. They have been on a slow steady decline since planting. The latest report showed corn, soybean and spring wheat ratings all down 1 percent from the previous week.

Corn is 64 percent good or excellent (g/e). Last year it was 76 percent. Soybeans are at 61 percent g/e versus 71 a year ago, while spring wheat is only 34 percent g/e, less than half of last year’s 69 percent. The Dakotas are still in a drought, and it seems to be spreading, especially into Iowa and the western belt.

The bottom line is this weather market isn’t anywhere near over. The trends in the crop ratings and the current forecasts should be price supportive. Markets dropped last week when USDA kept corn and soybean yields at trend line. The surveyed estimate in Aug. 10 should correct that.

Not as bullish going forward is the record number of grain contracts the large speculative funds have bought recently. Two weeks ago they bought 672 mln bu. of grain, and the latest weekly report showed they purchased another 1.18 bln bu. This was mainly short covering, but considering the volume, one would have thought markets would have done better.

The Canadian dollar showed large gains again in the past week and is up nearly 7 cents since early May. This rally has dropped soybean basis by $.80, wheat by $.40 and corn by $.22. Our interest rates went up the expected 25 basis points, but Poloz hinted there may be more increases coming. Meanwhile, the US Fed is telling markets that rates may not rise much more there due to low inflation.

This helps to explain why the US dollar has dropped to its lowest level since Sept 2016, before Trump won the election. I’m sure Trump realizes that a lower currency would be one of the easiest ways to “make America great again”, and that might be a part of the story also.

A cheaper US dollar usually buoys any commodity that is priced in US dollars around the world. This includes crude oil, gold and grains, as it makes it cheaper for foreigners to buy those goods with their rising currencies. Gold and crude did show minor gains, and despite this week’s setback in crop prices, the grain charts look much more constructive now. 

- Frank Backx, HDC Grain Marketer