Commodities Report
August 28, 2018

 

Close Aug 28, 2018

Aug 21

1 week change

Dec Corn

3.56

3.74

- .18

Nov Soybeans

8.33

8.86

- .53

Sept Wheat

4.98

5.27

- .29

Oct Hogs

51.95

56.25

- 4.30

Oct Cattle

108.70

110.10

1 1.40

Cdn $

77.40

76.92

+ .48

US $ Index

94.54

95.10

- .56

Crude Oil

68.50

65.92

+ 2.58

Gold

1206

1196

+ 10

US 10 Year Notes

120-04

120-14

- 10

TSX Stocks

16356

16352

+ 4

Grains were sharply weaker again on thoughts the crops are getting bigger. This was verified by the Pro Farmer crop tour that predicted record corn and soybean yields.

US corn was put at 177.3 bu/ac, slightly less than the 178.4 USDA predicted on Aug. 10, but still above last year’s record of 176.6. The soybean yield was pegged at 53 bu., where USDA predicted 51.6. The previous record was 52 bu. two years ago.

North America’s yields are setting records nearly every year.  Temperatures are also setting new records almost yearly.  The summer of 2018 will likely not be an exception either with all the heat and humidity we’ve experienced the past two months.

There is no sector that is more dependent on the environment and weather than agriculture. One can only conclude that crops react very favorably, in fact thrive, with all the heat, moisture and humidity we’ve been experiencing the past number of years, including the summer of 2018.

While most people can’t handle these conditions as well and many are alarmed at the climate change going on, the plant world seems to be handling it very well indeed. While this is obviously bad for price, it is good for humanity, as we need the record crops to continue to feed the earth’s expanding population. And it’s being none at a relatively low price.

US crop ratings were steady over the past week, and harvest will be 1 to 2 weeks earlier than normal based on crop development. Weather remains non-threatening across North America for the next 2 weeks.  Much of Ontario could see record corn and soybean yields also.

Purdue Univ. says 2018 average US farm income could fall to the levels last realized in the early 2000’s and down 35-40% from the 2011-2014 average when corn was $5.32 per bushel ($3.60 expected in 18/19) and soybeans, $12.50 ($8.90 seen for this year). That’s a significant drop.

Cash prices in North Dakota are $6.77/bu US for soybeans and corn fell under $3.00. The variable cost of production keeps going up, so farmer losses are getting serious there. Our dollar at .785 is helping Ontario prices. But even here, it’s getting pretty lean.

Trump announced the details of the $12 billion farm aid package announced earlier. Soybean farmers will get $1.65/bu., while for corn it is 1 cent/bu., and wheat is 14 cents. This is unlikely to change farmers’ acreage plans for next year. Most expect more corn and less soybean acres next year in the US.

The US and Mexico signed a bilateral trade agreement. Little progress is being reported on reducing the trade frictions with China, and new tariffs are scheduled to come into effect in Sept. Trade negotiations are on again with Canada. Trump appears to remain adamant about the Canadian tariffs on milk.

He has cost crop farmers a lot of money through the trade fight with China. Perhaps he’s trying to show he cares about US farmers, so will not let this issue go. Let’s hope this doesn’t become a stumbling block to a trade deal with Canada. Lumber, autos, steel and aluminum have a much larger economic impact on both countries than dairy.

- Frank Backx, Hensall Co-op Grain Marketer