Commodities Report

August 8, 2017

 

Close August 8

August 1

1 week change

Dec Corn

3.84

3.77

+ .07

Nov Soybeans

9.73

9.72

+ .01

Sept Wheat

4.57

4.61

- .04

Oct Hogs

67.75

64.40

+ 3.35

Oct Cattle

110.60

112.70

- 2.10

Cdn $

79.05

79.90

- .85

US $ Index

93.60

93.03

+ .57

Crude Oil

49.07

49.17

- .10

Gold

1258

1273

- 15

US 10 Year Notes

126-06

125-27

+ 11

TSX Stocks

15256

15206

+ 50

Grains were mixed over the past week, after giving back most of the early July gains. Many areas received much needed rain, and temperatures were on the cool side. However, much of Illinois and Iowa missed the precipitation, offsetting the better crops elsewhere.

As of Sunday Aug 6, 60 percent of US corn was good or excellent (g/e).  This was down 1 from the previous week, but down sharply from last year’s 74 percent. Soybeans gained 1 percent in the g/e categories to 60 percent. A year ago it was 72 percent. Remember that the US had record yields last year.

USDA will update yields, production and ending stocks on August 10. As this is the first surveyed yield estimate, traders will be nervous with the diverse conditions across the main growing areas. It is certain yields will be below trend line for the first time in the past four years. The only question is by how much.

Ontario crop yields will also have a wide range. In the Forest area, wheat yields ranged from 60-120 bu/acre. Corn and soybean yields will also vary widely, but recent weather in SW Ont. is likely adding bushels. Unfortunately that may not the case in E Ont., where it’s been too wet all growing season.

Livestock prices have been mixed lately, with US hog prices firming, but cattle falling to their worst levels since April. The nearly 8 cent gain in the Canadian dollar since May obviously hurt Ontario livestock producers.

Our dollar rally peaked at 80.60 in late July, before profit taking set in. It has come back to reality over the past two weeks, losing 1.6 cents. This should firm basis from current levels in both livestock and grains

Last week I mentioned deflationary pressures could mitigate any further interest rate increases, in the short run, which would be good for borrowers. However, deflation hurts more people than inflation does, because it destroys wealth, as prices of goods and assets drop. Most people feel poorer under deflation.

Inflation has the opposite effect, unless it gets out of hand, and that isn’t about to happen anytime soon. Farmers, for sure, felt the positive effects of inflation over the past 10 years. Crop prices were stronger, and assets like land increased in value. This increased producers’ net worth dramatically.

The increased wealth also enabled agribusiness to make more money, as input prices also increased sharply. So the last decade was some of the best of times in agriculture.

Current prices aren’t so profitable, but it’s good to know that with the strong demand for food, we are just one drought away from strong prices again. It’s perhaps getting late for that to happen in the US, but South America will begin planting again in a month or two. 

- Frank Backx, HDC Grain Marketer