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Commodities Report

December 18, 2017

 

Close Dec 19

Dec 12

1 week change

March Corn

3.48

3.48

0

Jan Soybeans

9.56

9.76

- .20

March Wheat

4.20

4.11

+ .09

Feb Hogs

66.90

66.55

+ .35

Feb Cattle

120.45

119.15

+ 1.30

Cdn $

77.78

77.68

+ .10

US $ Index

93.45

94.14

- .69

Crude Oil

57.54

56.87

+ .67

Gold

1264

1243

+ 21

US 10 Year Notes

123-21

124-05

- 16

TSX Stocks

16177

16123

+ 54

Once again, not a market was stirring, as it’s the Christmas holiday season. Prices are mostly staying under pressure due to the large North American yields this past year. It’s too early to get overly concerned about South American weather at this point of their growing season.

Lately, soybeans have been weaker than corn and wheat. This isn’t that surprising, as soybeans pencil out better for most farmers than the other two crops, so soybean acres will increase more.  One farmer told me, “I’m likely to lose less growing soybeans, so I’m going to switch some acres.”

US ethanol grind has been very strong, which obviously helps corn demand. However, ethanol prices have crashed, and are at their worst level since 2005. Exports are the swing fundamental for ethanol futures, as the amount included in gasoline blends is mandated by the Renewable Fuel Standard (RFS)

It is becoming more difficult to write a weekly grain commentary when there is so little going on. Since September, corn has had a 28 cent range, while the range in soybeans and wheat has been about 70 cents. Prices are near the lows of that 3 ½ month range in all 3 crops.

I have learned that if you make enough predictions some will be wrong and some will be right. At the beginning of 2017, I felt commodities would do better, especially when comparing them to stocks. I thought investor money would leave stocks and some would find its way into commodities.

Corn is down about a nickel since the start of the year, soybeans are down about a quarter, while wheat is up about 15 cents. Meanwhile The US S&P Index is up 25 percent, while their Nasdaq index is up over 30 percent in 2017. These are the largest yearly gains in decades.

The Toronto TSX stock index is up less than 5 percent so far in 2017. That is because of the dominance of resource stocks (metal and energy companies) in the TSX. The US administration is cutting taxes, which stock markets like, while Canadians are paying more in taxes, despite the promises of our leaders.

One example is in energy costs. Ontario consumers pay 27.9 cents per litre in taxes at the fuel pump. Currently Sarnia’s gas price is $1.06 per litre. Across the bridge in Port Huron Michigan, prices are $2.20 per US gallon, which works out to about 75 cents per litre in Canadian dollars, or a 40 percent difference..

Unfortunately, this price spread will only widen. Ontario’s current carbon tax adds 4.3 cents per litre of gas. By 2022, as the cost of carbon rises to $50.00 per tonne from the current $10.00, the carbon tax will rise to 11.6 cents per litre. The US, under Trump, will not likely impose a carbon tax.

What’s interesting is that the lower peninsula of Michigan, which includes Port Huron and Detroit, gets their petroleum supplies almost entirely from Canada. 

- Frank Backx, Hensall Co-op Grain Marketer

 

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