The Rural Voice, 2003-07, Page 43Grain Markets
Time to be cautious in hour marketing
Dave Gordon
is a
commodities
specialist
with LAC,
Inc., Hyde
Park, 519-
473-9333.
By Dave Gordon
June 20, 2003
It has been an extremely tough and
challenging spring in Ontario. As of
this writing, there are many acres of
soybeans still to be planted along
with some silage corn. It appears that
corn acreage will come in well below
original estimates, while soybean
acres will be much higher. My guess
on corn acres is less than 1.65 million
acres as compared to 1.92 million in
2002. With the later planting, yields
will be a huge concern as well and I
believe that Ontario will need to
import at least 25 per cent of its
requirements in 2003/2004. Soybean
acreage on the other hand could
approach 1.9 to 2.0 million acres,
which would be comparable to last
year.
CORN
The USDA updated the
supply/demand reports on June 11
with no surprising changes. Exports
were reduced by 25 million bushels
for the current year. However, some
traders are thinking that 2003 corn
acreage in the U.S. needs to be
reduced by as much as 500,000 acres
which translates into roughly 65
million fewer bushels of corn in the
2003/2004 scenario.
The bigger news from the
supply/demand report was the world
ending stocks. It is tough to get a
good read on China, but it appears
that their corn stocks may drop by
about 700 million bushels with a drop
in production of only 130 million
bushels. China has been a big
exporter of corn, which obviously has
cut into the U.S. trade. Weather will
be a big item in both the U.S. and
China. Prices will likely be very
stagnant with good growing
conditions and it will take major
weather concerns to get much kick
out of the futures market.
The rapid ascent of the Canadian
dollar has already affected basis
levels and if the dollar continues to
rise, basis levels will continue to be
under pressure even though we
remain at import values. In Ontario, it
appears that harvest will be late this
year as compared to the last couple of
years. If harvest does not start until
November, we may actually see a
decent market in September and
October for producers who are still
holding corn since the 2002-2003
crop year would be extended to 13
months.
SOYBEANS
The USDA only reduced domestic
crush in their supply/demand report,
which came as a surprise since most
traders thought exports would
increase by a comparable amount.
The futures market did not take
notice as it traded higher for the
following two sessions before
crashing on the third day with good
weather news. The USDA is
predicting that soybean carryover
stocks will increase by 110 million
bushels to 250 million in 2004. But, it
is interesting to note that the USDA
has a poor track record in estimating
carryover so far in advance as trend
lines or theoretical numbers are
plugged into their calculations. There
is still strong growth in the world for
edible oils and to date there is no
indications of a pull back.
The Ontario soybean basis has
stayed constant and strong in U.S.
funds even though producers have
seen the effects of the rising
Canadian dollar reflected in a lower
Canadian funds basis. A true hedger
must hedge both the Canadian dollar
and soybean futures in the event of
major swings in futures prices.
Producers will continue to see a lot of
fluctuation in basis levels throughout
the year since the dollar will likely
continue to be volatile as will
soybean futures, at least until the crop
is made.
Ontario soybean and corn
producers need to be very cautious
with their marketing this year. Most
planting in Ontario was not done
under optimum conditions and both
crops are behind normal, so it will be
a while before anyone will really
know how the crop is developing. On
top of poor planting conditions, a
large number of corn acres did not
get planted and this is already being
reflected in highet new crop basis
levels. There is some talk that
soybean acres could reach 2 million,
but this would would still be slightly
less than in 2002. Besides, with later
planting, what yields are we going to
see? I foresee a market for soybeans
similar to last year. We will stay at or
close to import values until the crop
size is determined. The only
downside right now is the possibility
of an extra half million acres of
soybeans in the U.S. which could
cause weaker future prices if there is
no weather scare.
The corn crop in Ontario presents
many challenges this year. We seem
to have plenty of old crop supplies
around to get the industry through
September but what about October?
Last year, the crop got planted but
much of it was decimated by drought
in southwestern Ontario, but basis
levels did not respond until
Thanksgiving weekend and continued
to stay strong through the winter.
This year, we already have a
premium built into prices and
although we are at import prices, no
new crop corn is being forward
contracted on either side of the
border. Therefore, we have not found
a price at which new crop corn
will actually trade. When that level
is established, producers should sell
an amount that they are comfortable
in trading. In other words, be sure
that you are going to have a crop to
sell.
Many marketing opportunities are
lying ahead that producers should
consider. Caution is the key before
selling.0
Information supplied by Dave Gordon,
LAC, Inc., Hyde Park, 519-473-9333.
JULY 2003 39