Commodities Report
July 17, 2018

 


 

 

Close July 17

July 10

1 week change

Dec Corn

3.60

3.61

- .01

Nov Soybeans

8.55

8.72

- .17

Sept Wheat

4.98

4.92

+ .06

Oct Hogs

52.20

53.80

- 1.60

Oct Cattle

108.50

107.85

+ .65

Cdn $

75.82

76.31

- .49

US $ Index

94.97

94.15

+ .82

Crude Oil

68.26

74.14

- 5.88

Gold

1228

1256

-28

US 10 Year Notes

120-05

120-02

+3

TSX Stocks

16528

16547

- 19

Price weakness continued over the past week, as weather remained non-threatening for most of the US Midwest. Temperatures are expected to moderate, and most areas should catch some rain.

US corn ratings fell 3 percent and soybeans 2 percent out of good and excellent in the latest report. 63 percent of US corn is tasseling; normal is 37. 65 percent of US soybeans are flowering, well ahead of the normal 45 percent.

Much of the corn that has tasseled did so under very hot conditions. This can affect pollination, even with good moisture levels. Perhaps this will prevent record corn yields, which many agronomists are now predicting.

The rapid crop development is verified by the NDVI or normalized difference vegetation index. This uses satellite imagery to try to predict yield. The current rating is near the best ever for the US Midwest. As usual, Aug. and Sept. weather will determine final yield.

The 25 percent tariff on Chinese purchases of US soybeans kicked in on July 6. China will buy what they can from other sources, but they will still need to import a large quantity of US soybeans to meet their needs.

On July 12, USDA released their monthly demand supply report. It was very interesting. Soybeans were by far the most bearish, while the corn and wheat numbers turned out to be a bit friendly for price.

USDA, as usual, did not adjust yields, as August is the first month they walk the fields. Soybean exports were lowered a whopping 250 mln bu from the June report, mainly due to Trump’s trade actions. To put that into perspective, Ontario grew 380 mln bu last year.

That will drop US exports to 2.04 bln bu., which isn’t very far below the 2.085 bln bu that will be exported for the old crop year. So while China will buy less, other countries are expected to increase their US purchases.

The expected carry out (CO) for 2018 soybeans was raised 195 mln bu from their June estimate to a new record high of 580 mln bu. Keep in mind USDA is notorious for overestimating soybean CO’s in their early estimates.

The 2018/19 corn CO was guessed at 1.552 bln bu., compared to 2.207 for the previous crop, so 23 percent less. This was much lower than expected. The main reason was a sizable jump in projected exports for old and new crop. There is nothing wrong with corn demand.

The US wheat CO is expected to fall to 985 mln bu., compared to 1.10 bln for the previous crop. That’s still a big number. World production was reduced by 8.4 mln mt from June’s estimate. This is 21.6 mln mt less than last year. Russian and EU crops were reduced the most.

World corn stocks are projected to fall nearly 40 mln mt. from last year, or over 20 percent. That will put the stocks to usage ratio at its lowest level in 25 years. USDA says world wheat stocks will also fall 12.6 mln mt. Crop conditions aren’t perfect everywhere.

Speculators increased their bearish bets in grains by the most ever in a 6 week period. This is unusual for this time of year, as we are in the middle of the growing season. The weather to date and forecasts gave them the confidence to push the short side.

Outside markets were mostly lower. Crude oil fell nearly 8 percent over the week. Gold is trading at its worst level in a year. Livestock markets have been weak, as they are also caught up in the trade disputes initiated by Trump.

- Frank Backx, Hensall Co-op Grain Marketer