The Rural Voice, 1985-09, Page 32FARM COMMODITY WATCH
Prices as of the market close,
August 22, 1985
Grain and Livestock Prices
All Lower Over the Month
CORN: Good weather conditions,
poor export interest, and speculation
regarding the proposed 1986 Farm
Bill all served to pressure the market
during August. December corn
futures finished on Thursday, August
22 at 2.25, a decline of 16 1/4 cents
over the course of the month. The
USDA crop production report releas-
ed on August 12 indicated that 1985
production was projected at
8.23 -billion bushels, which would be
a record crop for the United States.
Within a week of the release of the
crop production report, many traders
on the floor were suggesting that pro-
duction could exceed 8.3 -billion
bushels — as excellent weather con-
tinues. Carry-over estimates for the
1985 crop look to be the second
highest in history, smaller only than
the carry-over created in the 1982
crop year (that year December corn
The information contained herein
is believed accurate. However, Bache
Securities Inc. assumes no respon-
sibility for its use. For specific recom-
mendations and suggestions regar-
ding stop orders, please contact your
nearest Bache office.
David Clarke is an Account Ex-
ecutive with the investment firm of
Bache Securities Inc., 376 Richmond
Street, Suite 200, London, Ontario,
N6A 3C7.
30 THE RURAL VOICE
futures traded as low as 2.11).
**HEDGERS** should still consider
buying PUT options to protect
against further downside potential —
yes, there is further downside poten-
tial! December 2.30 PUTS are
reasonably priced and afford the
hedger predetermined risk. Basis
levels may firm if Ontario farmers
decide they will not sell at these levels.
SOYBEANS: Will the loan support
rate of $5.02 hold the sliding price of
beans? Stay tuned and see! November
beans closed at 5.14 1/2, losing 51
3/4 cents from their levels of a month
ago. Only once, in 1962, did beans
trade significantly below their loan -
rate prices. In 1962 they did go below
the loan -rate price, but only for a
period of two days. This year may be
the exception. Corn and wheat are
already trading well below their
respective loan rates of $2.55 and
$3.30. Negative fundamentals in-
clude:
• poor U.S. export demand,
• undertainty regarding the 1986
-1990 Farm Bill,
• increasingly higher estimates for the
1985 bean crop.
Positive fundamentals include:
• cash prices are well below the 5.02
area; therefore we anticipate minimal
farm selling at harvest,
• South America should have virtual-
ly terminated its exports of beans and
product by the latter part of
September,
• early acreage estimates for Brazil
for beans are 9 to 10 per cent below
levels of last year; the government
seems to be emphasizing corn produc-
tion over bean production.
• a weakening U.S. dollar will
enhance soymeal demand,
• U.S. oil stocks will be in relatively
tight supply by October 1. Despite the
fact that there appears to be some
positive fundamentals on hand in the
bean market, the trend remains clear.
LIVE CATTLE: Fat cattle prices
went the way of most agricultural
prices during the month, with cash
markets bearing the brunt of con-
tinued heavy weight shipments and
lack -lustre packing demand.
Rumours of strikes in the packing-
house industry so far have failed to
have anything but short-term impact
on the cash scene. December live cat-
tle futures closed on Thursday,
August 22 at 57.30, a decline of 2.52
cents over the month. The Monthly
Cattle -on -Feed report, due out on
Friday, August 23, is likely to show
the following:
Cattle on Feed down 4.1%
Placements down 9.7%
Marketings up 6.1 070
These figures are only guesstimates —
contact your broker for specifics of
the report. Notice that with the poor
profit margins presently in the beef
industry, placements are expected to
decline significantly, despite the fact
that feeding costs are lower than last
year. This is probably for two
reasons: feeder cattle are relatively
expensive and difficult to find, and
beef prices have declined substantial-
ly from last year's levels.
**HEDGERS** in the beef industry
may consider two strategies: 1. buy
CALL options on live cattle to lock in
purchase costs for replacement cattle
and 2. buy CALL options on March
or May corn futures to lock in spring
feed prices. Both these strategies in-
volve limited risk — an important
feature in a marketing strategy.
LIVE HOGS: Isn't anyone eating hot
dogs anymore? It seems not, as hogs
suffered the same fate as cattle over
the last month. December hogs closed
on Thursday, August 22 at 38.12, a
decline of 6.43 cents over the course
of the month. Based on USDA
statistics, the average feed cost to get
a 40 -Ib. pig to market is the lowest it
has been in the past 7 years. Tradi-
tionally, periods of low cost feed
availability are times when the hog in-
dustry expands. This may or may not
be the case in this instance. Some
other factors that will come into play
in the expansion question will be pro-
fitability and borrowing capacity.
Based on USDA data, the "average"
pork producer will break even this
year, as has been the case for the past
two years, so profitability is ques-