The Rural Voice, 1991-07, Page 24GRAIN MARKETS
FUTURES PRICES
CONTINUE TO FADE
Well, the Soviet Union was exten-
ded credit by thc United States but,
after a very brief flurry, futures prices
continue to fade. Thc credit has been
allocated for June, October, and Feb-
ruary and will likely cover more corn
than soy meal or wheat. Thc reason
for this is that the Soviets have already
purchased Targe quantities of meal and
wheat.
In Ontario, the flow of grain has
begun. Producers have been selling
both corn and beans and the supply
seems almost endless.
CORN
I probably sound like a broken re-
cord, but corn stocks arc very high and
usage certainly isn't improving. As a
result, basis levels have eroded and
will likely soften further. Elevators
dropped to basis lcvcls ranging from
zero in the south to five cents over
July futures in the north. Off farm
corn basis has fallen to 18 cents over
July futures from the mid -twenties and
we aren't able to ship too quickly.
With basis lcvcls softening in the U.S.,
we're not going to see any strength in
the Ontario basis levels if we arc go-
ing to export any corn this summer. In
fact, we arc very close to new crop va-
lue and it appears even these values
are too high considering the potential
size of the 1991 crop.
In a nutshell, with the light demand
for corn in Ontario, we're going to
have to depend on exports to get rid of
the excess stocks and production, and
don't be surprised if the market is tra-
ding new crop values in early Septem-
ber.
The last USDA supply/demand re-
port showed no big changes from the
May report other than a small drop in
wheat carryover stocks. The next ma-
jor USDA report is out on June 27 and
will focus on planted acres. The trade
expects slightly less corn acres than
forecast last March.
Thc only news that can make fu-
tures go higher is the weather, and
prognosticators arc at odds over what
the next 60 days will bring. Today, a
couple of weather services are point-
ing to a blocking ridge forming over
the midwest but others are not so sure
the ridge will stagnate. The next four
weeks are critical to corn and the di-
rection prices will take. I feel produc-
ers should definitely try to get rid of
old crop corn and some new crop on a
rally in futures.
SOYBEANS
Once again, futures prices plunged
over the past month but at this writing
have recovered in ten cents of the loss.
The only changes in the recent USDA
supply/demand report were slight
drops in soy oil and soy meal carry-
over stocks as well as a slight drop in
the South American production esti-
mates. The biggest problem from the
demand side of the picture is the poor
export demand and that the countries
in need have no money. If more credit
is offered to the Eastern European and
to the third world countries, more
export demand would be created, but
only on an ad hoc basis.
In Ontario, large quantities of soy-
bcans are still owned by producers and
even though the two crushers are pro-
cessing at an excellent pace, we will
still have a carryover unless some
more beans are exported this summer.
On top of this, there is an excellent
crop in the field and we'll see produc-
tion up 15 per cent to 20 per cent.
Basis levels dropped by five cents last
week and could drop further depend-
ing on the crop progress, the strength
of thc Canadian dollar, and the fact
that elevator basis levels are quite high
relative to crusher bids.
As with corn, strength in the soy-
bean markets will be dependent on the
weather over the next month or so,
and, if there is a move up in futures
prices, my thoughts are the same as
for corn. Sell your old crop and a por-
tion of the new crop.
FEED GRAIN
Feed grain prices have softened
again over the past month due to the
large quantities of barley, oats, and
mixed grain being offered. Western
grains have softened as well and
because of the availability of Western
grains in Ontario, it is difficult to get
decent prices for Ontario grain.
Ontario barley would trade at about
$80 per metric tonne (mt) and mixed
grain has dropped to about $70per mt.
As you can see, prices have really hit
the skids, and if you have an opportu-
nity to sell grain to local feed mills at
prices higher than these levels, go
ahead and get rid of it.
Right now, there is also a lack of
demand for oats of any quality. Feed
oats have been replaced by cheaper
mixed grain and the milling oat pro-
cessors have bought out well ahead.
But I think there is hope for new crop
oats because of the much smaller than
normal crop size this year, and the fact
that millers have a steady demand
throughout the year.
At the time of this writing (June
20), the outlook appears very bleak
and depressing, and it's one of those
times when a farmer's optimism is
needed. One thing to keep in mind is,
don't be short sighted; don't just look
back at last year and say you won't
ever store grain again. Rather, look
back further at what has happened to
markets in years similar to 1991.
What precipitated moves in the futures
markets in those years? In what direc-
tion did the market move? A tendency
over the years is for the market to
change direction around the July 4
holiday. The past two years the mar-
ket has fallen after the holiday, after
gaining strength in June. Does this
mean stronger cash markets in July?
Possibly. The only hope for stronger
prices this year will likely come from
the futures market. So, keep yourself
tuned closely to the markets.0
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