The Rural Voice, 2003-05, Page 57Grain Markets
USDA acreage forecast takes traders bg surprise
Dave Gordon
is a
commodities
specialist
with LAC,
Inc., Hyde
Park, 519-
473-9333.
By Dave Gordon
Since my last commentary in
March, the USDA issued a quarterly
stocks report, an updated
supply/demand report and, most
importantly, a projected plantings
report for 2003. The vast majority of
analysts figured that corn acres
would be increased by one to two
million acres and soybean acreage
would be down. When the dust
settled, corn acres were left
unchanged from 2002 and soybean
acreage was lowered only slightly.
Although markets didn't react
immediately, there certainly
appeared to be a change in market
psychology, especially in the corn
futures pit.
The quarterly stocks report
showed more soybeans in bins on
March 1 than predicted which was
hard to comprehend given the great
export pace and decent domestic
crush. However, these reports
quickly became old news as the
soybean marked focused once again
on export sales.
Corn:
The USDA really dropped a
bombshell with their acreage survey.
The market was absolutely sure corn
acreage would increase from 2002
and it was just a matter of by how
much. After the planting report
showed acres unchanged, and
quarterly corn stocks were lower
than any pre -report estimate, the
market took on a different tone. Corn
prices gained 14 cents in a matter of
a week and continue to hold most of
the gain. Now, the corn market will
focus on planting progress followed
by summer weather. I would suggest
that new crop corn futures have a fair
bit of weather premium built in as of
today.
Basis levels in the United States
are still very strong and if there is
softness in a market, it is usually
short lived. That basis strength is
certainly evident in Ontario prices.
Basis levels in Ontario have rarely
been as high in U.S. funds and oddly,
even with the Canadian dollar
moving higher, levels in Canadian
funds has remained unchanged. I still
believe that this U.S. strength will
remain until new crop corn hits the
market.
Soybeans:
Equally as shocking as the corn
plantings, was the prospective
soybean plantings report. While most
analysts thought acreage would be
down by 1.5 to 4.0 million acres the
USDA only reduced acres by
600,000. Coupled with the quarterly
stocks that were higher than anybody
estimated, soybean prices took a bit
of a dip shortly after the report. But,
even though stocks were higher than
anticipated, they are well below the
March 2002 figure and traders don't
want to be short soybeans given the
extremely high usage worldwide.
Reports out of Brazil indicate
problems with logistics in moving
soys out of their ports in a timely
manner and this too is playing into
the hands of U.S. exporters. I just
heard a report out of South America
that Asian rust will reduce the crop
size by over two million tonnes.
Could this add more fuel to the fire?
Only time will tell.
In Ontario, basis levels are steady
in U.S. dollars although in Canadian
funds, we've seen a significant drop.
Movement of soys has been fairly
heavy and producers should be aware
that one of the crushers will shut
down for extended maintenance this
summer. Delivery scheduling
actually needs to be done two weeks
ahead right now so some planning is
required to get soys moved.
Grain markets continue to grind
although there has been a slight
change in psychology. The corn
market turned abruptly higher while
the soybean market just couldn't sell
off. In fact in corn, the funds went
from a short to a long position rather
quickly which shows some
uncertainty in the minds of traders. It
could be called fence sitting.
The funds have been long soybean
futures for months now and they
show no sign of giving up, especially
in the old crop months where
contract highs were made this past
week. Even November futures are
close to contract highs. The carryout
for soybeans is getting tighter and
tighter and there is no room for error
in the 2003 crop with either reduced
acres or weather. When planting
weather is ideal, growers tend to
plant a little more corn than planned
and fewer soybeans even when
economics may not favour corn. But,
will higher fertilizer prices affect
traditional thinking?
In Ontario, I still believe that corn
and soybean acres will be down from
last year given the fact that the winter
wheat crop appears to have come
through the winter in good shape.
Lower acres should tend to keep
local basis levels a little higher than
historical values.
Now that planting is underway,
producers should look at selling
some new crop if and when a
profitable price is hit. First though,
let's hope that we have a good spring
weather wise and that the crop gets in
the ground in good shape.0
Information supplied by Dave Gordon,
LAC, Inc., Hyde Park, 519-473-9333.
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MAY 2003 53