Commodities Report

November 7, 2017

 

Close Nov 7

Oct 31

1 week change

Dec Corn

3.48

3.46

+ .02

Jan Soybeans

9.96

9.85

+ .11

Dec Wheat

4.27

4.19

+ .08

Dec Hogs

63.95

68.00

- 4.04

Dec Cattle

124.65

125.65

- 1.00

Cdn $

78.23

77.58

+ .65

US $ Index

94.94

94.53

+ .41

Crude Oil

57.20

54.38

+ 2.82

Gold

1276

1271

+ 5

US 10 Year Notes

125-13

124-30

+ 15

TSX Stocks

16118

16026

+ 92

Once again, changes in crop prices were minor over the past week. There is little news and large supplies and carry outs are being met by record demand, creating a bit of a stalemate. It’s unlikely, but maybe USDA can get us out of this log jam on Thursday Nov. 9 when they update the fundamentals.

A slight increase in the corn yield and decrease in the soybean yield is expected. However, South American weather will be what moves markets over the next few months. As is usual over their large growing area, there are some areas of concern, but overall planting is going OK. About half of Brazil’s soybeans are planted.

 Corn harvest progress is slow in the US and Ontario. As of Nov 5, 70 percent of US corn was in the bin. Normally it’s 83 percent now. 90 percent of US soybeans are harvested, near the normal  91 percent. Ontario corn harvest is slow due to wet soils, but the weather forecasts look drier.

In outside markets, the biggest mover was crude oil. It trades at its best level since July 2015, and is up 16 percent in the last 30 days. Some blame rising tensions in the Middle East, especially Saudi Arabia, while others cite increasing demand. This should support ethanol and corn prices.

What should also support the corn price is that large speculators are short 203,000 corn contracts, which is over 1 billion bushels. Their record short was 229,000 contracts in March 2016. Corn then rallied 89 cents/bu. in the next 10 weeks, as they covered those short positions.

The US dollar index is trading near a 4 month high. This usually creates headwinds for most world currencies and commodities, but tailwinds for US stocks, which keep setting record highs. Trump was elected a year ago, and the US S&P index is up 27 percent since his election. What makes it more impressive is that the index was already at record highs when he got in.

What is also interesting is that the two main commodity indices, the Goldman Sachs Commodity Index and Commodity Research Bureau Index are at two year highs, despite the stronger US dollar index. Crude oil is the largest contributor, as it is heavily weighted in both indices. The stronger commodity price action may attract more investment dollars and could be helpful to grain prices also.

Repeating what I’ve been saying in past articles, the fundamentals in grains are anything but positive, but the price action belies that. Outside factors like strong crude, and the large speculative short position could cause an upside breakout in price from the recent sideways trends, especially in corn. 

- Frank Backx, HDC Grain Marketer