Commodities Report

July 19, 2016



Close July 19

July 5

2 week change

Dec Corn



- .45

Nov Soybeans



- .92

Sept Wheat



- .16

Oct Hogs



- 7.60

Oct Cattle



- 3.70

Cdn $



+ .27

US $ Index



+ .79

Crude Oil



- 2.17




+ 15

US 10 Year Notes



- 1-00

TSX Stocks



+ 701


Corn and soybean prices fell further over the past 2 weeks. Timely rains and above normal temperatures created greenhouse conditions in large areas of the Midwest, including the important I states (Iowa, Illinois and Indiana). Speculators were heavy sellers, contributing to the downside.

US corn is still rated 76 percent good and excellent. A year ago, it was only 69, when the US had their second best yield ever. Soybeans are 71 percent good or excellent; a year ago it was only 62, and the US had a record yield of 48 bu/ac. The weather has also put the crops well ahead of normal in development.

There is a heat wave coming this week, but it is expected to be short-lived. Preliminary forecasts for August show a cooler pattern with normal rainfall. If accurate, traders’ expectations for yield will surely increase.

USDA’s monthly demand/supply report wasn’t a help either. The 2016/17 corn carry out (CO)was put at 2.08 bln bu., up 380 mln from last year, or 22 percent. The 16/17 soybean CO  is 290 mln bu., down from last year’s 350 mln, but 30 mln bu more than estimated last month.

The US wheat CO was raised 55 mln bu., due to higher production. Yield was pegged at 53.9 bu/ac., which is up 11.4 bu from last year’s 42.5 bu. It also shattered the previous best yield ever by an amazing 15 percent.

Ontario wheat yields locally are also bin busters. Many producers who have never hit 100 bu/ac are hitting over 120 bu/ac this year   Ontario, too, is likely to have a record yield this year. The supply side is burdensome everywhere, which explains where the market is. The largest part of the bearishness is likely already in the price, however.

Speculative funds dumped 93,000 corn contracts in the latest reporting week. They are now long only 14,000 contracts, compared to 240,000 a month ago. They remain long 145,000 soybean contracts, so haven’t liquidated much there. They sold another 10,000 wheat to be short a near record 134,000. This could support wheat prices.

Deflationary trends are more evident in other commodity markets also. Livestock prices have been weak, led by cattle, which are trading at 5 year lows. Crude oil has lost $7 per barrel since its high on June 9. Interest rates continue to hover near zero. The TSX stock index gained 5 percent in 2 weeks.

The US dollar index firmed due to Brexit. The Euro dropped, but the British Pound dropped more. The Canadian dollar held in well considering the commodity weakness. Ontario old crop basis firmed, while new crop held steady. Surprisingly, wheat basis firmed $.25 in the past 2 weeks.  

- Frank Backx, HDC Grain Marketer