Commodities Report

August 29, 2017

 

 

Close Aug 29

August 22

1 week change

Dec Corn

3.49

3.60

- .11

Nov Soybeans

9.37

9.38

- .01

Dec Wheat

4.03

4.03

0

Oct Hogs

60.25

63.75

- 3.50

Oct Cattle

106.25

107.70

- 1.45

Cdn $

79.84

79.65

+.19

US $ Index

92.12

93.50

- 1.38

Crude Oil

46.32

47.83

- 1.51

Gold

1316

1287

+ 29

US 10 Year Notes

127-07

126-19

+ 20

TSX Stocks

15049

14992

+ 57

Corn drifted lower again, while beans and wheat were little changed in quiet, low volume trade. Volatility has disappeared as prices attempt to carve out a bottom, with prices at or below the cost of production for many growers.

Chicago prices are cheap, there is no doubt. Long term lows were likely printed a year ago, when soybeans bottomed at $9.00 in nearest month futures, so we’re still 34 cents above that low water mark. Wheat also likely made a long term low a year ago at $3.60, and nearby September futures are over $4.00 now.

Corn also bottomed last August at $3.01, holding above the psychological $3.00 mark. September futures are 3.34 now, so still well above that low. I suppose one could argue that there is still downside risk since markets traded that much lower then. Corn rallied $.45 during harvest last year.

However, for Ontario farmers, prices aren’t reflecting all that. The Canadian dollar was under $.78 late  last August.  Hensall’s new crop board prices were $.90 over for corn and $2.55 over for soybeans, compared to .65 and $1.70 now. Local soybean prices are much lower now than a year ago.

The Pro Farmer crop tour estimated the US corn yield at 167.1 bu/ac., and soybeans at 48.5. These are both less than the trend line yields USDA used in their August 10 report, but were not small enough to cause a stir in the markets.

The Midwest had one of its coolest Augusts in many years. The crop is marginally behind normal in maturation, as it is in Ontario. The biggest risk to the crop and price would be a frost in the next six weeks. With climate seemingly more extreme than ever, one cannot rule anything out.

The devastating flooding on the Gulf of Mexico was negative to grain prices. Traders worried it could hurt the infrastructure necessary to export crops. New Orleans is the main exit port, and while it will receive copious amounts of rain also, the disruption hopefully won’t last too long.

A big mover in the past week was the US dollar index. It traded at its worst level since January, 2015. It seems Trump et al are quite OK with a weaker US dollar, as it will stimulate trade, and help a bit to get some inflation going.

 It is also likely the main reason the Canadian dollar gained in the past week. It sure wasn’t because of crude oil, which fell over 3%. One would have thought grains might have caught some tailwind from the US dollar’s slide. Gold did show a solid gain, however, maybe on North Korea considerations. 

- Frank Backx, HDC Grain Marketer