Loading...
The Rural Voice, 2002-09, Page 64Grain Markets USDA report takes traders bg surprise Dare Gordon is a commodities specialist vyith LAC, Inc.. Hyde Park. 519- 473-9333. By Dave Gordon August l5. 2002. The USDA monthly supply/demand reports are usually very mundane and bland as government officials take a very middle-of-the-road approach to estimating and reporting. However. the August 12 report surprised everyone with the severe cuts in corn and soy production and a resulting reduction in the projected carryovers. For the first time since 1996, corn carryover is estimated below one billion bushels for September 2003. As well. the soybean carryover was dropped to 155 million bushels. At the market's open on August 12, soybean futures traded $.45 higher and corn traded $.17 higher - moves not seen for years. The next major activity to watch will be the ProFarmer tour, which starts August 19. Tour participants will travel about 25,000 miles of roads all across the Corn Belt looking at both corn and soybean crops. CORN: Prior to the USDA report, most private analysts pegged the corn crop close to 9 billion bushels and the 1 Car ". rtt Workwear Durable 100% cotton duck - Sizes Small to 5XL Workshop FEATURING MEN'S WORKWEAR 180 Josephine St. Wingham 357-4503 60 THE RURAL VOICE consensus was that the government would not come in below 9.2 billion bushels. Therefore, the whole trade was left in shock when the production number came out at 8.89 billion bushels vs. the 9.792 billion in July and dropped the 2003 carryover to 767 million bushels (the lowest since 1996.) The reaction has been predictable with a gain so far of well over $.20/bu in the futures market. There is reluctance in some circles to believe this report without some confirmation, which will only come in future weeks. However. some well-respected crop scouts have been in the fields and their reports confirm what the USDA has projected. If the production figure is confirmed at harvest, $3.00 futures is a real possibility. but growers who have not sold any new crop production should sell a portion well before that price is reached. In fact, today elevators are paying $3.95 - $4.00 for new crop corn - a far cry from what many of us expected. The corn crop in Ontario is spotty. Most areas north and east of London have the potential of a bumper crop. However, south and west of London and eastern Ontario are suffering to some extent. In Elgin county, silo filling may start before the end of August and the OCPA reduced the projected crop to 213 million bushels - a number well below the Ontario usage of 240 million bushels. Does this mean that prices will stay relatively high for the next year? Not necessarily. As history has shown us, the highest prices may be seen before the end of 2002. SOYBEANS: The USDA pared the 2002 soybean production but also reduced the old crop carryover by 15 million bushels. The projected 2003 carryover was reduced from 230 to 155 million bushels. Many crop scouts maintain that the soybean crop can still be saved with lots of rain in August. A smaller crop and higher prices in the U.S. is a double-edged sword. As prices continue to go up, South America will respond with more and more soy acres. In Ontario, there is a divided opinion about the yield potential of the soybean crop. Where soys are good, they are very good and where the crop is bad. it is very bad. 1 have heard of soys in Elgin County that are three to six inches high while other areas have tall well -podded crops. The best guess right now is a yield of 35 - 37 bushels/acre with about 25 per cent of the crop consisting of food grade soys. This should indicate a continuation of strong basis levels throughout the coming year in the crusher market. As with corn, many analysts are looking for much higher prices but producers should be selling a portion of their production into this market. After all, the bulge in prices may not be long lived. The opportunity we are seeing in the market today needs to be rewarded with some sales. Futures prices rally like this about once every five to eight years and sharp grain producers will forward sell one or two crops when this move happens. 1 think all producers need to take advantage of the prices that are possible in the next six to eight weeks because high prices rarely stay around too long. There is an old saying that a short crop has a long tail and that means that prices peak early and fade away in the following months. 1 have seen this happen several times over the years including 1992-93 when Ontario's crop was virtually wiped out in areas. So I think the possibility of seeing the highest prices by December is very real. This time frame should fit in very well with producers planning for 2003. But it also means that it is a time for action not procrastination. None of us ever know what the high will be in any market or when it will occur, but a seller must take the initiative and get the crop sold when opportunity knocks. Our opportunity will likely be here in 2002.0 Information supplied by Dave Gordon, LAC, Inc., Hyde Park, 519-473.9333.