November 16, 2011
South America's sowing affects soy values
The value of soy is the lowest among corn and wheat as the planting progress in South America is at a record pace, under generally ideal conditions.
Corn and wheat gained over the past two weeks, while soy eased. Corn acres in Brazil will likely increase by 15% over last year due to the relatively stronger corn price
On November 9, the USDA updated the demand/ supply numbers. They lowered the corn yield to 146.7 bushels/acre, compared to the 148.1 estimated last month and 152.8 last year. The carryout was lowered to 843 million bushels, versus 866 million estimated last month.
The soy yield was lowered to 41.3 bushels to the acre, compared to 41.5 that was guessed last month and 43.5 last year.
The carryout was raised to 195 million bushels, versus 160 million last month, due to reduced exports. The wheat carryout was lowered to 828 million bushels from 837 million estimated in October.
Overall the report was fairly neutral. Prices retreated after the report, however, as the European situation turned worse. It appears Italy is the next country of concern, as their 10-year bonds are now yielding over 7%. This means investors are dumping Italian bonds, as fear grows that they too will need a bailout.
Where all this bailout is supposed to come from is unclear. It will likely be just new debt to pay off the old debt. This is how the US bought its way out of their banking crisis in early 2009. Normally, these moves would be inflationary and cause interest rates to firm. The world economy would crumble if interest rates rose even 2% or 3%.
Stock markets had minor gains also. Corporations are showing good profits. Unfortunately they are sitting on them rather than buying new equipment or hiring new workers. It is estimated that American companies are sitting on US$2 trillion, which is up 15% in the past year.
The Canadian dollar eased after the Canadian economy shed more jobs in October than expected. It appears our economy is heading down rather quickly now, as consumers slow their spending. The true cost of living is not being reflected in the official inflation statistics, so individuals have less disposable income to keep shopping.