Commodities Report
March 27, 2018

 

 

Close March 27

March 20

1 week change

Dec Corn

3.97

3.97

0

Nov  Soybeans

10.21

10.25

- .04

July Wheat

4.67

4.69

- .02

June Hogs

74.05

76.75

- 2.70

June Cattle

105.25

109.00

- 3.75

Cdn $

77.78

76.62

+ 1.16

US $ Index

89.34

90.32

- .98

Crude Oil

65.26

63.46

+ 1.80

Gold

1344

1312

+ 32

US 10 Year Notes

120-25

120-04

+ 21

TSX Stocks

15328

15613

- 285

As expected, grain markets basically ignored the tough trade talk. China will not put a tariff on something they absolutely need and which they depend on from outside sources. It would only raise the price of those goods in their country, which obviously wouldn’t be in their best interest.

One agricultural product China may put a tariff on is pork. Currently, hog profitability in China is poor, as prices are in the tank. So they don’t need more pork from the US or anywhere else right now. A tariff on hogs won’t change the fundamentals in the short run, but it did accelerate the downtrend in Chicago hog prices.

It appears Trump’s tariff threats are bringing China to the table. That may have been his plan all along. Hopefully they can resolve their differences through negotiation, rather than confrontation. Trade does create wealth and efficiencies in the world economy, so hopefully cooler heads prevail.

South America is still in the news, as traders try to guess how much crop Argentina actually lost. Most Argentina soybean estimates are around 40 mln mt. Initial estimates were in the mid 50’s range. This is still affecting soybean meal the most, but that also supports soybeans.

Currencies in South America are weak. The Brazilian real is down about 6 percent so far in 2018, while the Argentine peso is down 11 percent. This gives them an advantage in exporting. The Canadian dollar is down 2.7 percent since the start of the year.

Our dollar rallied right after the US raised their interest rates, and when Trump announced the possible trade tariffs with China. Increasing trade tensions with China may be bullish our dollar, as perhaps the US will not want to alienate everyone in this critical segment of the economy?

Crude oil and gold have been stronger, as inflation expectations are increasing. This usually means interest rates will increase also. Even though rates have already risen a bit, they are still very near the lowest in a generation. With the whole world operating on debt, a substantial rate increase could have serious implications.

This Thursday is USDA’s acres and stocks report. With the markets closed Friday for the Easter holiday, volatility could increase next week. With volatility comes opportunity to hopefully grab some better prices.  A 1 to 2 million acres shift is expected, with soybeans increasing and corn declining. 

- Frank Backx, Hensall Co-op Grain Marketer