Commodities Report
May 8, 2018

 

 

Close May 8

May 1

1 week change

Dec Corn

4.20

4.20

0

Nov Soybeans

10.25

10.51

- .26

July Wheat

5.15

5.29

- .14

June Hogs

76.30

77.90

- 1.60

June Cattle

106.30

105.85

+ .45

Cdn $

77.21

77.90

- .69

US $ Index

93.01

92.43

+ .58

Crude Oil

69.15

67.45

+ 1.70

Gold

1315

1307

+8

US 10 Year Notes

119-16

119-13

+ 3

TSX Stocks

15805

15610

+ 195

Grains were mostly lower over the past week. Volatility is increasing, which is normal for this time of year, as the uncertainty of the US growing season is directly ahead of us. The largest daily drop recently occurred last Monday after the commitments of traders report was released.

Large speculators, who go long or short with the sole purpose of trying to make a profit, were reported even longer than most thought. No doubt they were the main contributors to the markets recent strength, because the current fundamentals aren’t that bullish.

In soybeans, they are long 177,000 contracts. In the past 5 years, whenever they got to 200,000 long, liquidation ensued, and prices fell. In corn, they are long 186,000. This isn’t as extreme a long position compared to soybeans, but still their longest position in over 2 years.

Seasonally, prices often drop when the planters begin to roll. Farmers are able to plant a large percentage of each crop in a small window with all the big equipment out there. So far, planting is going well.

As of May 6, US farmers planted 39 percent of their intended corn acres; average for that date is 44 percent. 15 percent of the soybeans were already in the ground, slightly above the average of 13. Spring wheat at 30 percent planted lags the average by 21 percent.

Corn is holding better than soybeans and wheat lately because Brazil’s double crop corn is hurting due to dryness, as their normal rainy season is now over. USDA also expects the lowest US corn acres in 7 years at 88 mln, so yield becomes more important.

As is often the case, when grain futures fall, the basis goes up some. The same factors that affect grains can affect the Canadian dollar also. These include the US dollar index, interest rates and general commodity inflation.

Crude oil traded over $70.00 lately for the first time since 2014. The price at the pumps seems to be going up even faster, especially in Canada. Sarnia prices are in the $1.30 litre range, while prices across the bridge in Michigan are in the $.97 range in Canadian dollars.

That’s a 34 percent difference and is due to taxes. Unfortunately, the spread will only get worse, as the carbon tax will go up yearly for the next 4 years. This makes us less competitive versus our largest trading partner. It also takes away from producers’ bottom lines, as energy is a key component in the cost of farming. 

- Frank Backx, Hensall Co-op Grain Marketer