The Rural Voice, 2002-06, Page 55Grain Markets
What a spring this has been!
Dave Gordon
is a
commodities
specialist
with LAC,
Inc., Hyde
Park, 519-
473-9333.
By Dave Gordon
May 17, 2002
What a spring this has been! Cold
and wet weather extends all the way to
Chicago and it has been a real struggle
to get corn planted. On this side of the
border, we actually are fairly lucky
compared to the situation found in
Ohio and Indiana. The southern part of
both states as well as southern Illinois
and northern Missouri have received
nine to 15 inches of rain in the last
month. As of May 12, only 11 per cent
of the corn was planted in Indiana and
17 per cent in Ohio.
Because of these wet conditions and
the cold temperatures in the western
corn belt where the crop is planted,
corn prices finally stopped bleeding
and moved up $.17/bushel. This move
had an interesting make-up as funds
bought back their positions while
heavy producer selling kept a cap on
any further gains.
CORN:
The USDA issued their updated
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supply/demand report on May 11 and
there was virtually no change to the
2002 carryover. However, the 2003
end stocks were lowered by 60 million
bushels using trend line yields. The
USDA did lower feed use but
increased industrial use and exports
and I think the export figure is very
optimistic. The U.S. has not reached 2
billion bushels of corn exports in the
last six years and I see no reason to
export 2.1 billion in 2002-2003.
No matter what the report said,
traders were more focused on weather
and the fact that a lot of rain was in the
forecast. Rain did fall and future prices
continued the upward move. Even if
the U.S. ends up with a good corn crop,
there should be several opportunities
for higher prices this summer. The
USDA used a trend line yield of 138
bu/acre and I am sure there will be
events this summer that will have
traders second-guessing the yield.
In Ontario, planting has progressed
past the 40 per cent completed level.
The far east of Ontario is 80 - 90 per
cent complete while the Toronto area is
less than 20 per cent complete and
very. very wet. It appears the corn
acreage could be switched to soybeans,
but I do not think it will happen until
the end of May. However, yields may
be affected on all planted acres because
of the very slow start and it will take
some exceptional weather over the
summer to get yields back to normal.
Old crop basis is very strong with
most elevators offering $1.15 over July
futures. I expect this basis to remain
firm since we still have five months of
usage left before harvest is expected to
begin.
On the other hand, new crop basis
could strengthen from today's values
of $.80 over December futures quite
quickly if the Ontario trade gets the
idea that the crop is in trouble. Keep in
mind that total usage in Ontario is
about 240 million bushels and with
total production getting cut back each
day that it stays cold and wet, an
undercurrent of strength should be seen
in basis levels.
SOYBEANS:
The U.S. farm bill certainly reduced
the support for soybean growers
although the loan rate at $5/bu is still
quite attractive. The USDA did lower
the 2002 carryover by five million
bushels and their initial look at 2002-
2003 showed an ending stock of 255
million bushels, virtually unchanged
from this year.
Many traders think that soybean
acreage will exceed the March
intention figure used by USDA and if
corn planting is delayed into June, even
more soy acres will get planted. Keep
in mind though that the USDA is using
a yield of 39.7 bu/acre in their
estimate, which would be a record.
therefore higher acres and a slightly
lower yield would probably leave the
carryover unchanged.
In Ontario, old crop basis levels
remain very strong and as I have said
before, will remain strong. New crop
basis is also relatively strong, as we do
notesee any move yet to more soy
acres. If corn planting gets delayed too
long, there could be some last minute
switching to soys but not enough to
affect prices.
OUTLOOK:
This recent rally in future prices has
offered some optimism for producers
and I think the planting problems in the
U.S. may suggest some hope for better
prices this summer. The cold weather
has offset the advantage of early
planting in the western corn belt and
the eastern corn belt is still soggy.
These events should keep traders on
their toes this summer and the funds
will especially be looking at every bit
of news that can affect yields and trade
accordingly. Even if the U.S. crop ends
up on target, I think there will be
opportunities between now and
harvest.
I mentioned earlier that new crop
corn basis could get stronger
depending on how the crop progresses.
If production comes in around 200
million bushels which would be equal
to 2001's production, Ontario would be
short about 40 million bushels and
basis would likely move up by $.l0 to
$.20.
My hope now is that our weather
turns the corner and allows every acre
of corn and soys to be planted in
Ontario. Ontario producers simply
cannot withstand a repeat of 2001
yields.0
JUNE 2002 51