Commodities Report
June 26, 2018

 

 

 

Close June 26

June 19

1 week change

Dec Corn

3.73

3.76

- .03

Nov Soybeans

8.88

9.11

- .23

July Wheat

4.70

4.78

- .08

Oct Hogs

60.95

63.20

- 2.25

Oct Cattle

105.90

108.50

- 2.60

Cdn $

75.25

75.46

- .21

US $ Index

94.72

95.02

- .30

Crude Oil

70.16

64.85

+ 5.31

Gold

1260

1279

- 19

US 10 Year Notes

120-00

119-29

- 03

TSX Stocks

16328

16347

- 19

Prices declines are at least slowing after one of the largest June drops in history. I don’t know whether it was the weather that trumped Trump or that Trump trumped the weather that caused such a fall.  The combination nonetheless caused funds to sell grain contracts.

Most of the Midwest experienced above average rainfall so far this spring, with above average temperatures. These greenhouse conditions have US corn at 77 percent good or excellent vs 67 a year ago. Soybeans are at 73 percent in the top 2 categories, the highest ever, compared to 66 last year.

Trump isn’t backing down on his rhetoric about imposing tariffs with nearly all their major trading partners. It is unlikely he will impose all those he is threatening to enforce, but he does mean business about getting their huge trade deficit reduced.

The President knows he wields the big stick, as the US is still the largest consumption market in the world. Anyone that doesn’t take his overtures seriously will likely suffer dire consequences. At this point, they are more threats than real, but that can quickly change with this guy.

China has the most to lose, longer term, as they have the largest trade surplus with the US by far. However, SO FAR, all the talk has contributed to soybeans dropping $1.70 per bushel since late May. There is a fire sale on soybeans right now and it’s at the expense of soybean growers and to the benefit of the buyers like China.

I’ve stated previously that China won’t reduce by much their soybean purchases from the US, even with a tariff. They depend on the US for 6 months of the year. Brazil isn’t a totally reliable supplier, even after their harvest. There are currently 60 boats waiting to load 6.8 mln mt of soybeans off Brazil’s coast, due to logistical issues.

 In the past 4 weeks, large speculators have sold 181,000 corn contracts or over 900 million bushels. However, they are still long 35,000 contracts. In soybeans, they are now short 52,000 contracts. At the end of May, they were long over 200,000. That’s 1.26 bln bu that they’ve sold, or over 3 times the US carry out!

Trump’s actions are affecting most markets. Stock markets are under pressure, as economic uncertainty increases. Chinese equities are 20 percent below where they were in January, as many of their companies are so reliant on exports. Markets are global, and the fallout is spreading.

Donald and Justin don’t seem to be very good friends lately.  In Trump’s latest speech, he tied the dairy tariffs directly to a potential duty on Canadian made cars entering the US. Negotiating with an eccentric bully who holds much of the power, won’t be easy for Trudeau.

As usual, all opinions expressed are my own, and not necessarily those of Hensall Co-op.

 

- Frank Backx, Hensall Co-op Grain Marketer