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20 THE RURAL VOICE
GRAIN MARKETS
June 21, 1990 —One could almost
provide a tape of my comments that
simply repeats itself. The main topic
of conversation is the volatility in the
markets that we've seen for the past
several weeks. In fact, the corn
market continues to get more volatile,
with one comment being, "if you don't
like the price today, just wait a while."
CORN
Com futures have shown consid-
erable strength even with the ups and
downs in the market. A good exam-
ple of this strength occurred two
weeks ago when July futures dropped
quickly to 2.71 and December corn
fell to 2.61, followed by new highs in
both contracts one week later. The
basis for these fast, hard moves is
nervousness with crop conditions and
the stocks situation.
Last week the USDA released
updated supply/demand figures which
dropped the projected carryover by
50 million bushels. Along with late
planting, this has caused and will
continue to cause uneasiness among
traders.
Many analysts are looking for a
U.S. crop of 7.5 to 7.9 billion bushels.
The top end of this range will depend
on a fairly good growing season and a
planted acreage of about 75 million
acres. However, traders are nervous
because of some long-range weather
forecasts for very hot, dry conditions
from early July through late August,
which could affect pollinating corn
(which could be a large percentage
of the crop).
Locally, basis levels have strength-
ened in the old crop to a range of 55 to
60 cents over July futures at the eleva-
tor level. Farm bids are in a range of
70 to 80 cents over July futures,
depending on the location. Producers
have not sold as much corn so far in
June as we thought they might have.
But commercial elevators have taken
up the slack and offered corn in order
to make space for what looks to be a
record wheat crop.
When wheat harvest begins,
it's hard to say how corn supply and
demand will be affected. Wheat could
easily replace some of the corn needs
through August and September and
be negative on the basis.
On the other side of the coin,
the supply of corn could be tight once
wheat harvest begins, although there
are several industry people who feel
that corn stocks are excellent. Which-
ever scenario is true will have a ma-
jor impact on corn basis. Right now
we're in a standoff between sellers
and buyers, who have divergent views
on the worth of corn for the summer
months. Basis levels could range
from today's levels to much higher
levels, but don't forget about the fu-
tures side of the equation.
Futures prices have made stabs
at the 2.93 area on the July contract
and backed twice. However, with the
volatility in the market and the tight
stocks situation, we should see futures
gain another 20 to 30 cents to the
3.05 to 3.15 range, on the nearby
month, sometime this summer. This
should help new crop futures show
further gains to the 3.00 plus area.
For your information, the cost
of U.S. corn with full countervail duty
delivered into feed mills in Ontario
today would be approximately 1.40
over July futures. So as you can see,
if Ontario's corn supply is light, there
could be strong gains in the basis.
However, if supplies are ample, there
would be very little affect on the basis.
SOYBEANS
The USDA supply/demand report
showed a slight drop in projected
carryout of 10 million bushels to 295
million bushels. This slight drop in
carryover was a non-event as far as
traders were concerned. There is
much more concern with getting the
last 20 per cent of the soybean crop
in the ground and with the fact that it
is getting late.
Statistics generally show a lower
than average yield for late planted
soybeans in the U.S., and this may
just provide some hope of a little
strength in soybean futures.
Basis levels in Ontario have
changed somewhat in the past month
with new crop elevator basis dropping
to the 55 to 60 cent range over No-
vember futures. Old crop basis
1