April 14, 2015
Close April 14
2 week change
US $ Index
US 10 Yr Notes
S & P 500
The technical picture in grains continued to deteriorate over the past two weeks. Soybeans and wheat are inching closer to the critical lows hit on Oct 1 last year, while corn is still well above its 2014 harvest lows.
As mentioned previously, longer term seasonals show prices often ease through the spring. Uncertainty is greatest before seeds get planted. Once planting begins in earnest, and rains fall on the newly planted seeds, prices usually soften. That appears to be the case again this year.
Planting is slow, however, with only 2 percent of the corn in by April 12. The eastern US is expected to stay on the wet side, but conditions in the western and northern belts are expected to remain dry, so seeding should progress rapidly in those areas.
US winter wheat is 42 percent good or excellent, which is actually better than the 34 percent last year at this time. However, conditions should improve now with the recent rains and forecast for more to come. This hurt wheat prices significantly so far this week.
On Apr 9, USDA updated their demand/supply estimates. The corn carry out (CO) was raised to 1.827 bln bu from 1.777 predicted in March. The increase was expected, as USDA raised corn stocks in their March 31 report. Soybean and wheat CO’s were as expected.
The CO’s in corn and soybeans are up substantially from a year ago, which takes some pressure off this year’s yields. Even with about 2 mln less acres planted to the main crops, weather could be less of a factor, unless dryness gets serious during the growing season.
The Canadian dollar traded higher, as it continues to follow the crude oil market, which is up 11.3% in the past 2 weeks. Both markets are still in longer term down trends , but short term trends have turned more sideways. A close over 80.80 in the CD could cause some minor short covering and result in further gains.
The US dollar index and their stock markets continue to trade at lofty levels. Other stock markets around the world are playing some catch up to the US stock performance. Deflation is still prevalent in many sectors, but a hint of inflation could be just around the corner. The crude oil market will be a key indicator.
In the meantime, governments around the world remain reluctant to raise interest rates. The fear is that this could squash the still fragile recovery that is taking place. Rates are likely to rise in the US before they go up in Europe, Canada or most of Asia, but a rate rise in the US has also been put on hold for now. ♦
- Frank Backx, HDC Grain Marketer