The Rural Voice, 2000-07, Page 41n
s
Rain good in U.S.
bad in Ontario
By Dave Gordon
Just when it looked like the grain
markets were holding steady and
getting set to go higher, rains hit all
parts of the U.S. grain belt. It's tough
to promote a drought when it's
raining almost daily.
The last of the bulls got flushed
out of the market from June 12
forward. The only exception to this
was the wheat market, which actually
has started to strengthen. I've
maintained for some time that the
wheat market will be the first one to
recover because it led prices down.
Today's low prices coupled with a
disastrous spring in many parts of
Ontario are leading to a great deal of
frustration, especially in eastern
Ontario. It's one thing to hope for the
best after a crop is planted but there
are literally thousands of acres that
are sitting unseeded east of Toronto.
CORN
Corn futures prices plummeted
after a weekend of rains which
occurred on June 10 and 11. Rain
kept falling over the ensuing days,
which along with 80 degree
temperatures created a greenhouse
affect, perfect for corn and soybean
growth.
The updated 30 -day and 90 -day
forecast both showed warmer and
drier than normal conditions and over
Iowa for the months of July. August
and September. However, traders
remain unconvinced that conditions
will get bad enough to warrant higher
prices. They will not change their
position until they actually see hot,
dry conditions develop.
In hindsight, all of us should have
been wiser than we were. With corn
Grain Markets
and soybeans in the ground eery early
and enough rainfall to get the crops
started. we should have realized
earlier that the potential for huge
crops was quite high.
In Ontario, basis levels have held
steady in Canadian funds. which is
actually stronger in U.S. funds.
Ontario producers are reluctant to sell
into this market even though some
need to move old crop corn ahead of
wheat. 1 can't blame producers for
not selling new crop corn when yields
are such an unknown and acres are
unplanted. My guess, right now, is
that the Ontario corn crop will not
reach 200 million bushels compared
to crops of over 230 million bushels
in each of the last two years.
Producers also need to keep in
mind that a late planted crop in
Ontario will likely lead to a late
harvest which in turn gives us an
extra month of old crop usage.
SOYBEANS
Soybean futures prices have also
dropped sharply with November
down about $ 1.00 in the last month.
Soybeans got planted early in the
U.S. and so far have had ideal
weather to germinate and get off to a
good start. As a result. new crop
futures have dropped relative to old
crop futures with processors having
to reach for old crop supplies. Basis
levels for old crop soys in the U.S.
are very strong.
However. the same cannot be said
in Ontario where basis levels for both
old and new crop have fallen because
crushers are fairly well covered for
old crop and new crop acres could be
higher than originally anticipated.
Not only has the basis dropped in
U.S. dollars but, the Canadian dollar
has strengthened as soybean futures
have weakened. The resulting basis in
Canadian funds has fallen
dramatically.
There may still be a problem
moving old crop soybeans when a
producer wants to, although we
should see an extra two weeks added
to the marketing year. However, the
users will need steady shipments until
new crop soys come on the market.
They will not be able to receive a
large quantity over a short period.
FEEDGRAINS
Feedgrain prices are actually
holding fairly steady compared to
corn prices. Wheat prices in both the
U.S. and Canada are steady to higher
because of a reduction in world
production.
Old crop Ontario barley is selling
for about $105/mt with new crop at
$90. Local oats are trading for S85 to
$90 depending on quality.
Right now, wheat quality is on
everyone's mind. We've seen so
much rain and wet conditions that
there is concern about fusarium
levels. How much of the Ontario
wheat crop will have to go into the
feed market because of high fusarium
levels'? We won't know until harvest
begins around July 1.
Who would have thought that
futures prices would fall to these
levels'? I suppose if all of us had
focused on the early planting
followed by sufficient rain, instead of
thinking about drought. we would
have realized that the potential for
huge crops was in the cards. But
markets usually overreact to weather
events and considering the fact that
it's only June and there are three
months until maturity. prices should
rebound and find some balance.
Some producers in Ontario are
being hit with a double whammy.
Prices have sagged while at the same
time the crop in the ground is in poor
condition or. worse, not planted at all.
Others have all of their acres planted
but not to their preferred crops.
When futures prices fall out of bed
like they have recently. it's time to
step back and let some balance return
to the market. In Ontario, the corn
crop especially will be quite small so,
we should have relatively strong
basis in the coming year. Producers
have had an opportunity to forward
contract at some very attractive
prices. For those' who haven't sold
yet, be patient. Sit back and evaluate
your options before making any more
sales.0
Information supplied by Dave
Gordon, LAC, Inc., Hyde Park, 5/9-
473-9333.
JULY 2000 37