The Rural Voice, 1991-04, Page 24GRAIN MARKETS
CORN STOCKS HIGH,
SOYS LOSE VICTORY
Spring is just around the corner
and many producers' thoughts focus
on planting another crop, while statis-
tics tell us that a large portion of the
1990 crop remains to be marketed. I
hope the decision won't be left until
the banker calls for a payment or the
fertilizer bill is due. There have been
some announcements made over the
past month that will have long range
implications to the grain markets in
Ontario. Some may be negative while
others will be positive.
CORN
Over the past month, producers
have been tight holders of corn, as
they have been since early December.
In fact, figures show that less corn had
been sold by the end of January than
was sold the previous year, despite a
larger crop than in 1989. Something
has to give, and I think it will be the
Ontario basis. With almost 800,000
metric tonnes of com still covered by
the advance program and the domestic
corn industry needing about 1,200,000
metric tonnes for the balance of the
year, we appear headed for a large
carryover. Some big export sales will
be needed but only if the local basis
levels drop by 10 to 15 cents, which
won't guarantee any large sales.
When you consider the large crop
from 1990 and the large portion that
wasn't under the advance, you can see
we'll have a difficult time getting rid
of a big quantity of corn if producer
selling is left until the last minute.
The past month has provided one
opportunity to sell a portion of the
crop when futures rallied about 15
cents before dropping last week.
There will likely be more opportuni-
ties in the near term, but maybe not as
big as the last one. We may now have
to wait for weather to play a part in the
futures market, which won't happen
until late June or early July, if at all.
Presently, basis levels for old crop
corn range from 10 to 15 cents over
May futures and could conceivably
fall by 10 cents with any sustained
selling. One approach a producer
could take would be to sell the basis
only and hope to gain some extra
return from the futures market. If you
are more sophisticated, you could cash
the corn out and buy back into the
futures market, keeping in mind the
risk involved in such a move.
It would appear a larger crop of
com will be grown in 1991 because of
GRIP and the unplanted wheat acre-
age. This will likely lead to a weaken-
ing of the new crop basis from present
levels of 10 to 20 cents over Decem-
ber futures. Keep in mind that you
must still do a good job of marketing
your corn with GRIP because, in the
event of a payout, every producer will
receive the same payment, no matter
what price an individual may get for
his corn. If a pricing opportunity is
presented, take advantage of it for at
least a portion of your production.
Statistics Canada just announced a
one per cent increase in corn acres,
which seems rather low, considering
the fact that there are over 400,000
fewer acres of wheat this year. USDA
will release a planting intentions
report March 28, which will give us
some direction as to where markets
might head over the next few weeks.
The last supply/demand report showed
an increase in carryover, but slightly
less than was anticipated by traders.
Now, it will be interesting to see how
stocks will be treated, with higher cat-
tle numbers and lower hog numbers.
SOYBEANS
The Ontario soybean industry was
dealt a tough blow with the announce-
ment that Victory Soyamills in Toron-
to is closing effective immediately.
With the soybean crushing industry
having a tough time right now, it may
be a few years before the plant in
Hamilton is expanded enough to meet
future Ontario production. The total
crush in Ontario amounted to 36
million bushels, with the Toronto
plant accounting for over one-third of
that amount. The other two plants will
increase their crush and the net result
will be a loss of five million bushels in
the total crush. However, production
in Ontario looks as if it may jump by
15 per cent to about 50 million bushels
this year, and that means that our
pricing will be more directly affected
by export prices than by import levels.
As with com, there will be increa-
sed acreage of soybeans due to GRIP
and the fact that less wheat was plan-
ted last fall. Statistics Canada has in-
dicated an acreage increase of 15 per
cent and, coupled with the plant clo-
sing, don't be surprised if basis falls
well below export levels during har-
vest. Today, basis at elevators sits
around 25 cents over May futures for
old crop and 30 to 35 cents over No-
vember for new crop. Unless futures
rise dramatically or the Canadian dol-
lar drops, I can't foresee basis levels
doing any better than holding steady.
The futures market has had a bit of
a roller coaster ride these past two or
three weeks. During the week of
March 11, futures prices gained about
30 cents, but lost it all the next week.
The euphoric end to the Gulf War
along with some dry weather in Brazil
started the ball rolling and speculators
got caught up and pushed the market
further still. It didn't take long for
cooler heads to prevail and realize that
demand is still far from adequate to
remove the surplus that faces the U.S.
In fact, demand is less than expected
in both the export market and the
domestic crushing industry, and it will
take a surprising turn of events to
change the outlook.
My opinion regarding the selling of
your soybeans is very similar to my
thoughts about corn marketing. Basic-
ally, don't get bullheaded. Take a
look at all of the information that you
can find and make a common sense
decision. If you see an opportunity to
establish a good basis, you might want
to try and pick up a few cents by leav-
ing the sale unpriced, or you may want
to cover a cash sale with futures or
call options.
FEEDGRAINS
Feedgrain prices in Ontario have
been rather mixed during the past
20 THE RURAL VOICE