Commodities Report
March 13, 2018

 

Close March 13

Feb 27

2 week change

May Corn

3.92

3.79

+ .13

May Soybeans

10.49

10.50

- .01

May Wheat

4.87

4.77

+ .10

June Hogs

77.50

82.05

- 4.55

June Cattle

113.15

116.35

- 3.20

Cdn $

77.42

78.49

- 1.07

US $ Index

89.67

90.31

- .64

Crude Oil

60.65

63.05

- 2.40

Gold

1327

1320

+ 7

US 10 Year Notes

120-10

120-11

- 1

TSX Stocks

15669

15698

- 29

Since the last good rains on January 20, Argentina has been the driest it’s been since 1980, and by a large margin. They have likely lost 10 to 15 mln mt of soybean production and 5 to 10 mln mt of corn as a result. This will put a nice dent into world stockpiles, but still won’t make the world carry out (CO) precariously tight.

What it does, however, is make US acres and yields that much more important this spring and summer. USDA will update acres on March 29, and they are surveying farmers now. Most expect another increase in soybean acres due to the price relationships with other grains and because of their lower cost of production.

USDA released their latest monthly US and world demand/supply estimates on March 8. They lowered Argentina’s soybean crop from 54 ml m tot 47 mln and their corn was dropped 3 mln mt to 36 mln. Brazil’s soybeans were upped 1 mln mt to 113, while their corn was dropped a minor 500,000 mt.

The biggest surprise in the US data was the 225 mln bu increase in US corn demand. Exports were raised 175 mln and ethanol by 50 mln.  This all went to the bottom line as the COwas reduced from 2.352 bln bu to 2.127 bln.

USDA lowered soybean exports by 35 mln bu., but they did raise crush 10 mln. The 25 mln bu change in demand resulted in a 555 mln bu CO, very close to the record hit in 2006. The world CO was reduced to 94.40 mln mt from the 98.14 mln predicted in Feb., due to Argentina. That is still a big number.

If we assume that Argentina lost another 5 mln mt of soybeans since the USDA report,  the world CO would be just under 90 mln mt. While that is down from last year’s 96.5 mln., the record before that was 80 mln in 2014. So while the losses in Argentina are quite severe, this must be kept in perspective.

The US wheat CO was raised 25 mln bu to 1.034 bln. The world CO was also raised to 268.80 mt, from 266.10 predicted in Feb., and up sharply from 252.72 last year. There is no shortage of wheat in the US or the world.

The Canadian dollar looks weak technically and fundamentally. The US economy is very buoyant, and there is talk there could be 4 interest rate increases there this year. It is unlikely Canada will keep pace. The different directions the 2 governments are going also means we will need a cheaper dollar to compete.

The trade issue also doesn’t bode well for Canada, IMO.  The US economy is over10 times the size of Canada’s in terms of GDP. It’s the proverbial elephant and mouse theory. Trump’s unpredictability and unreasonableness at times adds to the Canadian dollar risk.  

- Frank Backx, Hensall Co-op Grain Marketer