Commodities Report

September 19, 2017

 

Close Sept 19

Sept 5

2 week change

Dec Corn

3.48

3.58

- .10

Nov Soybeans

9.66

9.69

- .03

Dec Wheat

4.43

4.43

0

Oct Hogs

60.15

63.75

- 3.60

Oct Cattle

108.88

104.45

+ 3.55

Cdn $

81.53

80.78

+ .75

US Dollar Index

91.84

92.40

- .56

Crude Oil

49.90

48.65

+ 1.25

Gold

1307

1340

- 33

US 10 Year Notes

126-00

127-19

- 1-19

TSX Stocks

15293

15084

+ 209

The biggest news over the past 2 weeks was the USDA report issued on Sept. 12. Once again, USDA saw higher yields than what most people thought. The corn yield was put at 169.9 bu/ac., second only to last year’s record of 174.6 bu. Traders expected only 168.2 bu/ac. The 2017/18 carry out was raised to 2.235 bln bu.

The soybean yield was raised to 49.9 bu/ac, the third highest ever. The average guess of the analysts who study crops and markets was 48.8. However USDA saw fit to lower last year’s carry out by 25 mln bu., and 2017/18 exports by 25 mln bu., to leave the US carry out at 475 mln bu., the highest in 11 years.

 The deviation from what was expected was relatively large, so corn prices dropped 12 cents and soybeans fell 29 cents immediately after the report. However, the knee-jerk reaction was short-lived, and prices recouped those losses shortly thereafter, except in corn.

When a very bearish report can’t send prices any lower, it usually means the path of least resistance reverts to the upside. Seasonally, prices often rise through the harvest season, especially in big crop years. However, with the fundamentals as they are, it seems highly unlikely that prices will explode to the upside either.

Attention will now shift to South American weather. Their planting window is very wide, so it will be a while before a full blown weather market there has the potential to cause a rally. Their currency, the real,  is near a 2 ½ year high, so crop prices aren’t very profitable there either. Farmer selling is slow.

Stats Canada released their latest crop estimates, and raised yields sharply from their August estimates. Ont. corn was pegged at 169.5 bu/ac, vs. 161.6 guessed last month and 158.5 last year. Soybeans were raised to 49.3 bu, compared to 44.6 predicted last month and 45.9 a year ago. Crops did enjoy the August weather.

Livestock markets were mixed, with cattle higher and hogs lower. This reverses recent trends that saw hogs outperform cattle. The stronger Canadian dollar has obviously had a negative effect on Ontario livestock producers since our dollar’s 9 cent rise since May.

Trumps tough talk sure isn’t hurting US stock markets, as most indices hit new record highs again. The Toronto TSX index has lagged many other world stock markets because of our abundance of resource stocks. However, it is showing some life as commodities overall do a little better.

Bond prices are easing in the US and Canada, which implies higher longer term interest rates. Inflation in both countries is getting closer to the 2 percent targets. However, most don’t expect an interest rate in the US until December, at the earliest. The Bank of Canada sure is more hawkish than the US Fed. 

- Frank Backx, HDC Grain Marketer