The Rural Voice, 1994-11, Page 17normal crop and, as a result, basis
levels will be highly variable across
the province.
There could still be a temporary
storage problem and a need to move
corn quickly that could result in a
lower basis for a short time. Right
now though, sellers can lock in a good
return for storage and interest with
winter sales. The downside, however,
is the fact that our market is fairly
close to import values so any upside
basis move will be rather limited. Any
strength in the Canadian dollar will
also limit any upside potential.
It does appear that Ontario will
have to import some com in 1995 if
demand from the feed industry reaches
historical levels of 1.2 million tonnes
now that feed wheat prices are
uncompetitive with corn prices.
Currently basis levels range from
50 cents to 65 cents over December fu-
tures and when you realize that Michi-
gan farmers are seeing current basis at
35 cents under December futures, you
will see that Michigan com is almost
priced low enough to be imported.
Will the Ontario basis levels fall?
Only time will tell. It will take a com-
bination of factors coming together at
the same time to test the downside.
SOYBEANS
Soybean harvest in the U.S. is
nearing completion and the USDA
raised the production estimate to 2.46
billion bushels indicating average
yields of more than 40 bu/acre. Since
there has been little hedge pressure
from farmer selling, futures prices
have remained fairly stable. The
carryover is projected at 465 million
bushels, second highest in history.
However, with the weak U.S. dollar,
export demand for U.S. soys and soy
products is strong and should improve
even more. The key price factor in the
coming months will be the size of the
South American crop. With world
demand for soys and oil so high, the
large U.S. carryover can be reduced
quickly if South America fails to
produce a normal crop.
In Ontario, soybean harvest is
almost complete and the largest crop
ever will soon be in bins. Basis levels
have been weak during the brunt of
harvest but did help to export several
vessels of soys. Right now, most
Grain Markets
elevators are paying a basis of $1.15 to
$1.20 over November futures but this
should strengthen after harvest when
the pressure to ship soybeans is off. In
fact, right now processors are posting
bids that will provide a good return for
storage into the winter months.
If producers have to decide whether
to sell some soybeans or some corn to
make, space in the next three weeks,
they should look at the relative basis
levels. In U.S. funds, the soybean
basis is below export levels while corn
basis is within five cents or 10 cents of
import levels. If the scenario doesn't
change over the next month, a com
sale would be better than a soybean
sale. However, you will need to make
that calculation when the time comes.
FEEDGRAINS
The main reason that corn demand
has improved so much in Ontario, is
the fact that Western feed wheat and
barley prices continue to go through
the roof. Western feed wheat is
currently trading for about $155 and
Westem feed barley is trading for
$135 to $137.
Ontario barley is selling for about
$120 with very little being offered and
mixed grain is selling for $112 to
$118. The demand for these grains
will be limited and specialized at these
prices if corn prices continue to stay
around $120/mt.
In ending this month's comments, I
think producers should be aware that
even with record corn and soybean
crops in the U.S., there is excellent
world demand and prices don't have to
drop anywhere near the lows of the
mid -80s. As I've already stated, the
market is showing a good return for
storing both corn and soys and
producers should hold on to as much
grain as possible until after harvest is
complete. I realize that harvest could
be done by mid-November and this
should mean that basis strength will be
felt by late November. Be sure to stay
abreast of basis changes over the next
six weeks.0
Information supplied by Dave Gordon,
LAC, Inc., Hyde Park, 519-473-9333.
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NOVEMBER 1994 13