Commodities Report
April 2, 2018

 

Close April 2

March 27

1 week change

Dec Corn

4.12

3.97

+ .15

Nov Soybeans

10.42

10.21

+ .21

July Wheat

4.74

4.67

+ .07

June Hogs

71.65

74.05

- 2.40

June Cattle

99.65

105.25

- 5.60

Cdn $

78.13

77.78

+ .35

US $ Index

90.21

89.34

+ .87

Crude Oil

63.42

65.26

- 1.84

Gold

1336

1344

- 8

US 10 Year Notes

120-28

120-25

+ 3

TSX Stocks

15133

15328

- 195

Corn and soybean prices firmed sharply immediately after USDA’s stocks and acres report released on March 29. The stocks in all positions as of March 1 (halfway through the marketing year) was very bearish, but the acres report was friendly to price.

US corn stocks were put at a RECORD 8.89 billion bu. on March 1, compared to 8.62 bln last year at this time. Traders expected only 8.70 bln., so a significant 190 mln more than expected. Soybean supplies were also a new RECORD at 2.11 bln. versus 1.74 bln a year earlier. Expectations were for 2.03, so 77 mln bu. more than thought.

When I saw these numbers, I expected to see a drop in price. Instead, prices rose sharply. In fact Dec corn and Nov soybeans wiped out all the losses that these markets encountered in March. New crop soybeans traded at new contract highs.

One of the reasons was likely the acreage numbers that USDA also released that day. Total planted acres, combining all the major crops, were put at 318 million, down 1.16 mln from last year. That would be the lowest US acres since 2011.

There were some significant switches, however, that the trade didn’t expect. Corn acres at 88 mln were less than analysts’ average of 89.4 and well below last year’s 90.2. This would be the lowest since 2009.

Soybean acres were put at 89 mln., well below the 91.1 expected, and the 90.1 last year. Most thought there would be more soybean acres, as farmers switched from corn, due to their lower input costs, and relatively better price.

USDA says US farmers will plant 1.6 mln more acres to spring wheat than expected. Minnesota and North Dakota alone are expected to cut corn acres by 820,000, all going to spring wheat. The basis on corn and soybeans is extremely low in the Northern Plains, so wheat pencils in quite competitively.

US winter wheat is only rated 32 percent good and excellent. This is the lowest rating for this time of year in 20 years. A year ago, 51 percent was in the best 2 categories. It remains dry in the Southern Plains, but that is mainly hard wheat, used for bread.

US weather forecasts may also have aided the recent rally. Wet and cold for most crop areas is likely for at least the next 2 weeks.   It is still very early, but with the reduced acres that USDA is forecasting, and the much smaller Argentine crops, the margin for error on US yield is getting smaller.

The Canadian dollar trades at a 5 week high. Rumors are that Trump may be more accepting of a NAFTA deal. China is retaliating against Trump’s initial tariff proposals by implementing tariffs on many US products entering their country.

Stock markets are on quite the wild roller-coaster ride. Much of it seems related to Trump’s rhetoric.  Volatility will be the norm, as traders and investors dislike uncertainty. Lower stock markets could be a benefit to commodity prices in general. 

- Frank Backx, Hensall Co-op Grain Marketer