The Rural Voice, 1990-12, Page 20AUSTREES
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16 THE RURAL VOICE
GRAIN MARKETS
TIMING IS OF UTMOST IMPORTANCE
Harvest has finally got into high
gear now and, with it, a sharp drop in
local corn basis levels. The soybean
basis dropped 2 weeks ago, but is
starting to strengthen again. Along
with a mish-mash of a market, feed
grain prices are relatively strong.
CORN
At the time of the last writing, the
corn harvest had barely started and we
were hard pressed to find any substan-
tial quantities of corn. Now, as of this
writing (November 16), we are hard
pressed to find markets for the crop.
We have experienced a classical case
of a sharp drop in basis levels (from
cz+35 down to cz+20) due to extreme
harvest pressure, which has given
users an excellent opportunity to make
relatively cheap purchases. In fact,
corn values are well below barley
prices.
Com usage has been tempered
somewhat by a larger use of wheat and
we've had to look to "export" market
to absorb a portion of the crop. I
made special note of the word export
because Ontario's only export market
happens to be countries that can't
trade with the U.S. But, as is often the
case, harvesting hasn't coincided with
the arrival of vessels, and as a result,
space at the terminals has been at a
premium. Of course, producers will
continue to harvest as long as the
weather co-operates and will be
finished by the time the later vessels
arrive.
Since last month, moisture levels
have dropped significantly and quality
has improved greatly. And, in many
areas, yield is certainly better than the
past two years with the replanted clay
ground being the exception.
I feel that once the last combine is
put away, basis levels will improve,
perhaps dramatically before leveling
out through the winter months. Keep
in mind that the Ontario crop is
pegged at 95 million bushels which
should be achieved. It would be about
10 million bushels more than last year.
USDA issued the updated produc-
tion reports last week. Once again,
corn production was lowered to less
than 8 billion bushels for 1990. Most
observers thought the September
and October figures were too high and
were looking for a correction. How-
ever, the world corn production
number is still fairly high. This fact,
coupled with large open interest in
December futures and good sized
quantities of corn being shipped to the
delivery points, set the speculators off
in a flap with the result being lower
futures prices than we've seen in two
months. We need to hold around
$2.21/bu on December futures or we'll
be looking at the teens.
I would reiterate my past thoughts
about buying some insurance with call
options or using minimum price
contracts in case you need to sell some
corn for cash flow. The premium
costs are dropping, along with the
futures, and there are some relatively
good values.
SOYBEANS
The soybean harvest is now
virtually complete in Ontario. While
the production estimates vary, basis
levels should improve for producers.
Right now the Ontario basis reflects
export values and should gradually
strengthen to more closely relate to
import levels over the winter months.
When basis levels changed to the
January soybean futures month, the
full amount of carry in the futures was
reflected in the lower basis levels and
after a further drop we've seen some
slight improvement of 7 cents to 10
cents.
It appears there will not be a
surplus of soybeans in Ontario
because the export activity that has
taken place during harvest as well as
some white mold problems. With
reasonably good demand for crusher
beans from the U.S. and white hilum
beans from the Pacific Rim, crushers
will probably need to import part of
their crush requirements later in the
season. You might think I'm a little
off -base by saying this, if you realize
that the crushing plants in Toronto and
Hamilton are virtually full, but the
over -supply will be temporary as very
few beans were stored by the crushers