Commodities Report

August 15, 2017

 

 

Close Aug 15

August 8

1 week change

Dec Corn

3.68

3.84

- .16

Nov Soybeans

9.24

9.73

- .49

Sept Wheat

4.29

4.57

- .28

Oct Hogs

70.55

67.75

+ 2.80

Oct Cattle

109.05

110.60

- 1.55

Cdn $

78.38

79.05

- .67

US $ Index

93.85

93.60

+ .25

Crude Oil

47.54

49.07

- 1.53

Gold

1275

1258

+ 17

US 10 Year Notes

126-06

126-06

0

TSX Stocks

15107

15256

- 149

Grain prices were weaker again due mainly to USDA’s very bearish production report issued August 10. It was a shocker to everyone in the grain trade, as USDA pegged both corn and soybean yields at levels significantly higher than even the largest estimate of individual analysts and grain companies.

The corn yield was put at 169.5 bu/ac., the third highest in history. Last year was the new record at 174.6. US corn rated good or excellent a year ago was 74 percent, while this year it is only 62 percent. One would have expected that variance to cause a larger drop in yield than 5.1 bu./ ac.

The soybean yield was put at 49.4 bu/ac., a new record for the Aug. report and second only to last year’s final record of 52.1 bu. Traders had expected only 47.5. As of Aug. 13, only 59 percent of US soybeans are good/exc., while a year ago, 72 percent were in the top two categories.

It was interesting that USDA actually lowered the 2016/17 soybean carry out to 370 mln bu. due to the strong exports all year, from the 410 predicted last month.  Last Dec., they said that figure would be 480 mln., so they missed the target by 110 mln bu again.

However, they are getting better at forecasting fundamentals. Their average overestimation of soybean ending stocks has been 140 mln bu per year, as they have been wrong in the same direction in 16 out of the past 20 years. So at least one could conclude that the final carry out won’t be anywhere close to what USDA just told us.

However, a well-respected commodity broker pointed out to me years ago that the path to the poor house is paved with people who don’t believe USDA. They are still the source of information that the markets respond the most, by far. Last Thursday was just another example.

There is no doubt that the weather improved in August across most of North America. Many key areas that were dry got some rain. This should help the soybean yield more than corn, as 97 percent of UIS corn has pollinated as of Aug. 13.

Despite Trump’s controversial tweets and unusual management style, the stock markets sure love him. Since the low immediately after his election on Nov. 8, the NASDAQ stock index is up over 30 percent. What makes that even more amazing is that the index had already quadrupled from the recession low hit in Nov., 2008 prior to his election.

Most farmers’ biggest asset is farmland, and it too has done well in the past decade. However, according to Farm Credit, Ontario land values are “only” 2.45 times more than the value at the depths of the 2008/09 recession. So compared to stocks, it doesn’t look like it has inflated that much. 

 

With current ag prices, it is unlikely land prices will gain in the short run. However, it doesn’t look like they are dropping either. The demand for land still seems solid, despite the poorer returns. 

- Frank Backx, HDC Grain Marketer