The Rural Voice, 1998-04, Page 23corn have dropped mainly due to the
improving Canadian dollar. In fact,
basis levels have held relatively strong
because of slow producer selling. If
producers continue to hold out through
this period of strong basis, uscrs will go
back to the U.S. to meet their needs and
the market could be saturated when
producers get to the trough. However,
if producers begin to sell, further
importation will be unnecessary over
the next few months.
Brian Doidge has been widely
quoted regarding his predictions for
corn prices this summer, but any
producer I've spoken with has missed
one of his main points. He said that
basis levels from here on will not pay
for the extra storage and that producers
should sell now on a basis contract and
let the futures ride or cash the corn and
buy futures or call options because the
big gains will not come from the basis.
I agree with his thinking although I'm
not willing to stick my neck out on
futures prices. I will say that drought
and hot weather will be the only
catalyst for higher prices.
SOYBEANS
Soybean futures have been able to
hold above $6.50 despite harvest in
South America and in fact rallied in
early March for four or five days. But
after Sparks released his ideas on
planting intentions, the market lost 17
cents over two days and there are still
some thoughts that soybean acreage
could reach 74 million acres. As with
the corn picture, weather will play a
huge part in futures price direction,
albeit with a much larger acreage than
in any previous year. I also have the
feeling that livestock numbers over the
next six months will drop in the U.S.
with cattle replacements already down
from a year ago. Certainly, present day
livestock numbers are at an all-time
high but with weak meat prices, herds
will likely be reduced. We could easily
drop from record high soymeal use and,
as a result, lower the crush.
In Ontari6, basis levels have dropped
as a result of the higher Canadian dollar
and lower futures prices. Lately,
soybean crush in Ontario has slowed
because of poor crush margins and if
this continues, basis levels will need to
drop to export levels on the soys. But
circumstances can change, and with
soyoil prices strengthening, the crush
levels could improve again. For the
time being, the Ontario plants are
concentrating on crushing canola.
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APRIL 1998 19