Commodities Report

December 5, 2017


Close Dec 5, 2017

Nov 28

1 week change

March Corn



+ .04

Jan Soybeans



+ .16

March Wheat



+ .04

Feb Hogs



- .95

Feb Cattle



- 5.40  

Cdn $



+ .66

US $ Index



+ .28

Crude Oil



- .41




- 27

US 10 year Notes



- 24

TSX Stocks



- 96

Grains were a bit firmer over the past week, in continued low volume, low range trade. Prices often rally after harvest in large crop years. This has been slower this year, especially in corn and wheat, where US and world supplies are burdensome. Surprisingly, soybeans are the most resilient.

The soybean to corn ratio for new crop in Chicago is 2.64 to 1. For Ontario producers, when basis is added, it is 2.70 to 1. This should result in another increase in soybean acres, at the expense of corn. However, if there is a yield kick, it seems more likely to come from corn. This past year was proof again.

Most think US 2018 corn and soybean acres will both be around 90 million acres, which is close to this past year’s. US’s recent record corn acres were in 2012, when US farmers planted 97.3 mln. Until last year, US record soybean acres were 83.4 mln. So it looks like the huge switch last year to soybeans will be sustained this year.

South American planting is proceeding, with no unusual delays. The talk about La Nina is likely supporting soybeans. The cooling of Pacific waters off South America is often associated with a dry summer for South Brazil and Argentina. The forecast there is for another 10 days of dryness.

The Canadian dollar has been more volatile lately. It had been weaker until last Friday’s employment report, which showed very strong labor market growth. Our trade deficit also shrank last month, so our economy seems to be improving.

This can be mostly attributed to what is happening in the US, by far our largest trading partner. Trump’s tax reforms have a good chance of passing, which has supported their equity markets in a big way. Their S&P 500 stock index is up nearly 18 percent since the start of 2017, and has more than tripled since the 2009 recession low.

Much of the money created to divert a total meltdown in 2009 has found its way into stock markets. The financial crisis then also resulted in the lowest interest rates in a generation, so everyone looked for better returns elsewhere.  Interest rates remain depressed, as inflation remains under pressure.

Much of that has to do with technology, which makes everything run more efficiently. Agriculture is but one example. Better seeds, equipment and agronomic practices have resulted in bigger and bigger yields, which were needed to feed a growing population.

However, the increased production worldwide has prices at or below the cost of production for many growers now. Agricultures amazing ability to produce is one of the main contributors to the slow inflation in most developed countries today. 

- Frank Backx, Hensall Co-op Grain Marketer