Commodities Report
July 24, 2018

 

 

Close July 24

July 17

1 week change

Dec Corn

3.66

3.60

+ .06

Nov Soybeans

8.73

8.55

+ .18

Sept Wheat

5.10

4.98

+ .12

Oct Hogs

52.40

52.20

+ .20

Oct Cattle

110.35

108.50

+ 1.85

Cdn $

76.05

75.82

+ .23

US $ Index

94.62

94.97

- .35

Crude Oil

68.74

68.26

+ .48

Gold

1226

1228

- 2

US 10 Year Notes

119-18

120-05

- 19

TSX Stocks

16424

16528

- 104

 

Prices firmed marginally over the past week, which shouldn’t surprise anyone, considering how far prices fell over the past two months. So far, the price recovery has been minor compared to the decline.

From the end of May to the recent low, Chicago corn lost 79 cents, and then gained back 20 cents at the recent high. Soybeans collapsed $2.34, and only recovered 44 cents. Wheat fell $1.00, and did gain half of that back at its recent high.

US crop ratings actually improved somewhat in the latest Monday report. Traders had expected a decline. Corn pollinating and soybeans flowering are still well ahead of normal for this time of year.

The two largest, highest producing states of Iowa and Illinois have some of their best ratings ever. This should skew the average yield higher. USDA will release their first surveyed yield numbers on August 10. Many think corn and soybean yields will be put at new records.

That obviously isn’t a bullish scenario. The demand side has been hit by Trump’s trade tariffs, so there is the proverbial double whammy. However, at some point all the bad news gets built into the price. A neutral or bullish market response to a bearish report on Aug. 10 could give a clue.

The latest weekly speculative fund position report showed they are still selling. They sold another 61,200 contracts of corn, so in 8 weeks, they dumped 423.700 contracts or 2.12 billion bushels. They are also short 84,000 soybean and 37,400 wheat contracts.

This is likely the most positive aspect of the current setup in the grains. A short covering rally could feed on itself should longer term moving averages start to turn up. It seems short term price direction is dictated more and more by what this group does.

The most likely fundamental  change could come from going on elsewhere. The US crop has lots of potential, but the same cannot be said for Europe, Russia and Australia, where adverse weather is decimating their crops. Paris wheat futures are at a 3 year high.

Trump upped the ante on trade tariffs, saying he may tariff another $500 bln. of Chinese goods. It’s interesting that markets barely reacted. It is very likely his bark will turn out to be much worse than his bite, but he sure has the attention of China, and the world. 

Trump announced they will spend $12.0 bln to help US farmers hurt by the trade war.  He will need their votes again in the Nov. elections to retain his majorities in Congress and the Senate. Unfortunately, these subsidies wouldn’t help Ontario farmers.

But at least most Ontario farmers are already in a much better mood after most were blessed with timely rains over the past week. It wasn’t a drought buster for many, but it was very much needed nearly everywhere. It surely added many millions of dollars to Ontario agriculture.

- Frank Backx, Hensall Co-op Grain Marketer