The Rural Voice, 2002-02, Page 39So much for an
optimistic start
By Dave Gordon
January 18, 2002
Well, 2002 started off with a little
optimism. The stock market was
stronger; the Canadian dollar
strengthened off the lows of late
December and the USDA surprised
most traders with some relatively
friendly numbers on January 11, 2002.
However, by January 17, the stock
market had stalled out and the
Canadian dollar become the Canadian
peso or the dollarette. Some traders
think our dollar will trade under $.61 in
the near term.
Corn and soybean production was
cut slightly through reduced harvested
acres, as were the projected ending
stocks for both grains. Immediately
upon the release of the USDA report,
grain prices gained some strength based
on the report and soybeans
strengthened even more on news of
some dry weather in parts of south
America. Traders will be keeping a
close eye on the weather in South
America for the rest of our winter,
which equates to July and August in
Brazil and Argentina. The Argentine
financial problems are also causing
farmers to hold grain rather than sell it.
If their currency devalues any further, it
would mean more cash to farmers
selling into the world market.
CORN:
Most analysts figured that the
USDA would increase production in
their report of January 11. However,
harvested acreage was reduced slightly
while domestic demand offset the
reduced exports leaving the projected
carryover lower than in the December
2001 report. There was also a thought
that the USDA might raise Chinese
corn stocks but this was not the case. In
fact, the projected world ending stocks
was also reduced slightly.
Combine these surprises and you
Grain Markets
have the foundation for stronger prices,
which was the case immediately after
the reports were released. Corn traded
$.04 to $.05 higher but stayed range
bound and I still believe that corn
futures will have a difficult time
moving much higher without weather
related problems in South America.
Some analysts are already thinking that
U.S. corn acreage will be higher which
certainly does not bode well for higher
prices even though domestic usage is
growing by leaps and bounds.
In Ontario, basis levels have
softened as most feed and industrials
users' needs are covered for the near
term and the marketplace is very quiet.
There is lots of corn in position to
move right now and this will probably
be the case for the next three or four
months. Imports from the U.S. are not
an immediate issue although Ontario
will need to bring more U.S. corn in
during this crop year. It appears that
corn acreage in Ontario will increase
dramatically and if we see anything
close to normal weather, production
could easily outpace usage. If this
scenario unfolds, Ontario will become
an exporter which means basis level,
still have some downside risk.
SOYBEANS:
The USDA cut harvested acres in
the U.S. by more than one million acres
but increased the yield. Production was
cut by 32 million bushels while usage
was increased by 13 million bushels.
Exports are remaining ahead of
projections and for the short term 11
appears that the U.S. is getting some
business that Argentina normally would
have handled. As this article is being
written, the market seems to be focused
on the weather in South America. Since
late December 2001, future prices have
gained $.35 and if demand continues
strong, there should still be some hope
for higher cash prices in the next couple
of months.
The U.S. loan rate for 2002
soybeans has not been established yet,
but it likely will not be changed too
much from 2001. The result points to
more soybean acres again, but not at
the expense of corn. It has been
estimated that upwards of three million
acres did not get planted last year and
this land will get split between corn and
Decision Making is Tougher Than Ever!
The biggest change in the farming business is the rate of change. Farm
managers are now faced with a multitude of issues which are more complex
than ever. At times, the options and the consequences are overwhelming to
the decision maker.
For 30 years Ward & Uptigrove has been helping farmers
make decisions by providing advice with respect to.
• financial projections for expansions or other projects
• bookkeeping and accounting systems
• income tax planning and annual Income tax filings
• government assistance programs including NISA
• estate and retirement planning
• business succession
• GST issues
Give us a call. We would be pleased to meet you to review your farming
business and the issues you face. If you decide we are the type of people you
need to succeed - great. If you decide not to use our services, at least you
will have received some fresh ideas and a free coffee.
WARD &
UPTIGROVE. LLP
145 MAIN STREET EAST
LISTOWEL, ONTARIO N4W 3H2
PHONE: 519-291-3040
Fax: 519-291-1850
EMAIL: WUCAeWU.ON.CA
PARTNERS:
R.E. UPTIGROVE, CA
C.D. NEWELL, CA
R.H. LOREE, CA
R.K. NEWELL, CA
N.M. MACLENNAN, CA
T.J. SOLTYS, CA
R.K. UPTIGROVE, CA
SENIOR PRINCIPALS:
P.J. HAK, CMA
B.R. BUCHANAN, CGA
PRINCIPALS:
D.C. LEGAULT, CGA
G.T. SLOT. CA
ASSOCIATES:
B.W. CORNELL, CA
R.D. DEYELL, CA
C.L. GIBSON, CGA
A.J. MCKAY, CA
D.T. PATTEN. CGA
FEBRUARY 2002 35