Commodities Report

January 16, 2018

 

Close Jan 16

Dec 31, 2017

2 week change

March Corn

3.48

3.51

- .03

March Soybeans

9.67

9.62

+ .05

March Wheat

4.17

4.27

- .10

Feb Hogs

73.95

71.80

+ 2.15

Feb Cattle

117.45

121.55

- 4.10

Cdn $

80.66

79.90

+ .76

US $ Index

90.44

92.29

- 1.85

Crude Oil

63.86

60.42

+ 3.44

Gold

1339

1309

+ 30

US 10 Year Notes

122-30

124-02

- 1-04

TSX Stocks

16315

16209

+ 106

Grains remain in a stalemate, awaiting South American weather developments. Most of Argentina has been drier than normal so far in their growing season, although some rain is in the forecast. Their weather forecasts will become more critical in a couple of weeks. 

 USDA released their crop report on Friday January 12. This included the final production estimates for the 2017 US growing season, as well as Dec 1 stocks on US grains and US winter wheat acres.

The corn yield was raised 1.2 bu/acre, to a new record high of 176.6 bu. The carry out was raised 40 mln bu to 2.477 bln., the highest in 30 years. Some expected a drop in the export forecast, but it was left unchanged.

The soybean yield was lowered by .4 bu/acre to 49.1. However, exports were lowered by 65 mln bu., resulting in a 25 mln bu increase in the carry out to 470 mln bu. This would be the largest carry out since 2006, if USDA is right.

US wheat acres were left unchanged at 46 mln., down another 4 mln from this past year, and the lowest in 100 years. The projected carry out was raised 29 mln bu to 989 mln. This is still below last year’s figure of 1.18 bln, however.

There is no doubt Brazil will drop corn production in a big way. Their first season corn acres are likely down double digit percent. Now many experts also expect a huge drop in their safrinha, or double crop corn also, as prices are far below the cost of production, especially in the important interior areas.

Currency obviously plays a huge part in what South American farmers get for their grain. Since 2008, the Brazilian Real has lost over half its value versus the US dollar. The Argentina peso traded at $.33 to 1 US dollar 10 years ago; today it is just over $.05. This makes them more competitive in world markets.

Over those 10 years,  our dollar was often over par with the US dollar, trading as high as $1.10, just before the economic meltdown in 2008. Today it sits at just over $.80, so we are down only 20 percent in the past 10 years.

Unfortunately our dollar has gained 3 cents since its low on Dec 19. A strong jobs market is the main reason. This makes it more likely the Bank of Canada will increase short term interest rates when they meet again later this month.

However, if the US also increases interest rates, which is expected, it should be more of a wash for our currency. It is the relative rates between our countries that have the largest influence. Our dollar hit $.829 last September.  Hopefully that will be strong resistance for all of 2018.

Before the latest 3 cent rise, Hensall’s board basis on soybeans was $2.05 over Jan. Today we are at $1.65 over March. Taking into account that March was a dime higher than Jan futures, Ontario farmers suffered a net 30 cent drop in basis since Dec. 19. 

- Frank Backx, Hensall Co-op Grain Marketer