The Rural Voice, 2001-06, Page 54Grain prices remain
in doldrums
By Dave Gordon
Grain prices continue to be in the
doldrums and the supply/demand
report of May 10 certainly worked to
eliminate any bullish thinking. There
weren't any surprises in U.S. carryouts
or stocks but suddenly a large amount
of com and wheat was found in China.
Earlier in the year, an advisory firm
from the U.S. stated their belief that
Chinese corn and wheat stocks had
been severely understated but their
report wasn't taken too seriously. Now
that the USDA has made their
statement about stocks, the market has
taken notice. Corn futures dropped
Grain Markets
under $2/bu for the first time in
months and are now struggling to
recover based on U.S. conditions.
Soybean prices flopped some more
before finding that producers would
not sell at such low prices. Now, old
crop soybean prices are rebounding.
But barring catastrophic weather. I
have trouble seeing prices recover too
much unless wheat prices finally start
going higher.
CORN
The USDA reduced U.S. corn
exports and raised the carryover for
2001 by 47 million bushels. However,
this was no surprise. The surprise
came from the world stocks figure,
which was increased by about 50
million tonnes. Whether this world
number is accurate or not won't be
known for several months. In the
meantime, planting and weather
concerns are moving more to the
forefront. We've already seen
temperatures in the 90s north into the
Dakotas while Minnesota (fourth
largest corn state) is still too wet to get
much corn in the ground. Some
analysts now wonder how many areas
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50 THE RURAL VOICE
won't get planted. Sparks just came
out with a one million acre reduction.
Given that the funds are so short corn
futures, a weather market will send
them scrambling to cover their
position which will push prices up
from today's low levels.
Basis levels in Ontario have started
to fade with new crop coming down by
20 cents to 80 cents over December
futures and old crop down by only five
cents so far. I feel that old crop basis
will soften even more considering the
amount of corn that has been imported
and the apparent Targe stocks still in
Ontario. I think this drop could come
in June and July and we will move
down from import value. When the
Mississippi opens to full barge traffic
I'm sure heavy selling will follow.
Lots of growers in the U.S. have their
corn under loan, which will mature in
August and September thus bringing
even more corn to market.
SOYBEANS
The USDA reduced the soybean
carryover slightly but increased world
stocks by almost a million tonnes.
Now, the focus shifts to acreage and
potential production of the crop being
planted.
Sparks has already come out with
an acreage that is 800,000 higher than
USDA's March figure. In fact, their
soybean acres are well above corn
acres for the first time. However, the
market has rallied in recent days
simply because the U.S. producer is
not selling. Buyers are hard pressed to
get any vessel or train quantity offers
right now and it has caused a little
short covering in the soy complex.
South America is reporting slightly
lower production than the USDA has
reported but more importantly, a foot
and mouth disease outbreak in Brazil
has stopped soy meal exports to some
countries who in turn, are now coming
to the U.S. just adding to tightness in
North America.
In Ontario, basis levels have been
very strong and have gotten even
stronger. Elevators are paying from
$2.30 - $2.45 over July futures for old
crop soys and $1.70 - $1.85 over
November for new crop. Futures
prices have strengthened resulting in
old crop prices getting back to almost
$7/bu. It appears that Ontario growers
have stuck with plans to reduce
soybean acres and the result should be