Commodities Report
March 20, 2018

 

Close March 20

March 13

1 week change

Dec Corn

3.97

4.10

- .13

Nov Soybeans

10.25

10.44

- .19

July Wheat

4.69

5.05

- .36

June Hogs

76.75

77.50

- .75

June Cattle

109.00

113.15

- 4.15

Cdn $

76.62

77.42

- .80

US $ Index

90.32

89.67

+ .65

Crude Oil

63.46

60.65

+ 2.81

Gold

1312

1327

- 15

US 10 Year Notes

120-04

120-10

- 6

TSX Stocks

15613

15669

- 56

The weekly change chart is now using new crop Chicago values. Prices will likely now be moved more by North American fundamentals. The Argentina drought is likely priced in. However, the Brazilian safrinha or double crop corn is in its early stages of growth, so could still be a market factor.

On March 29, USDA will release their prospective plantings repot. Most think there will be a shift of 1 to 2 million acres from corn to soybeans.  The quarterly stocks report that day will also show US grain supplies at March 1, which is halfway through the marketing year.

Perhaps prices did get a bit ahead of themselves with the recent rally. Corn gained $.41 and soybeans added $1.25 from their lows in January. Wheat rallied $1.20 from its low in December. Basis was also firm, as the Canadian dollar has been under pressure.

The market giveth and the market taketh away. It just seems to me that prices struggle to make gains, but drop like a stone when they head down. Monday, March 19 was a perfect example, as new crop corn soybeans and wheat dropped 6, 18 and 17 cents respectively.

Wheat has suddenly dropped 64 cents from its recent high on March 2. The Chicago soft wheat rally was a bit of a surprise and a gift, as it is the hard red that was hurting, and end users can’t substitute one class of wheat for the other.  

Between the market bottom on Jan 17 and the March high large speculative funds bought 1 million contracts of CBOT futures and options. That’s 5 bln bu.! They are now long 267,000 corn and 147,000 soybean contracts. Less buying is likely from this source now.

Trump continues to talk tough on trade. There are rumours he will impose tens of billions of dollars of tariffs on goods coming in from China. There is a worry that China will retaliate, and a larger trade war will ensue.

The effect on agricultural markets should be minor, however. China is still largely a state controlled economy. The last thing they will allow to happen is not enough food on store shelves. That could be a recipe for revolution.  So China will likely talk tough, but they need all the soybeans and other food products they import.

The US trade deficit with China last year was $375 billion, which makes two thirds of their total trade deficit. While trade wars are not good for world growth, perhaps Trump isn’t all wrong in going after China in this matter, and it will help him “make America great again”.

The new Federal Reserve chairman is expected to raise US interest rates 25 basis points tomorrow. It is the first of several rate increases expected this year, as the US economy continues to do well. The labor market is very strong, but retail sales are slowing down. 

- Frank Backx, Hensall Co-op Grain Marketer