The Rural Voice, 1986-02, Page 20• SUPREME 19
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18 THE RURAL VOL( I
FARM COMMODITY WATCH
Prices as of the market close
January 24, 1986
Payment -In -Kind Concerns
Pressure Corn Markets
CORN — March corn futures traded
in a sideways pattern for the month,
but lost ground sharply on January 24
with traders expressing concerns about
an advance payment in kind program
increasing available stocks. Details per-
taining to the 1986 Farm Bill will be an-
nounced over the next few weeks.
Negative fundamentals in the corn
market include:
— South African production could
reach the 8.0 million metric tonne level
if no weather problems develop.
— Recent rainfall in Brazil has
alleviated dry weather concerns.
— Rumours abound regarding a pay-
ment in kind program from CCC held
corn stocks.
— Soviet corn buyers have been pro-
testing the high moisture content of
U.S. corn. They want corn with 15 per
cent or less moisture.
— The new crop loan rate was made
official at $1.92.
Positive fundamentals in the market
include:
— entries continue at a strong pace in-
to the government loan program.
— farm selling has been light at levels
below the $2.55 loan price.
— Brazil is expected to be a buyer of
4.0 million metric tonne of corn from
the U.S.
**HEDGERS** may consider
lightening up on cash positions and
repurchasing an equivalent amount of
limited risk CALL OPTIONS. The
CALL OPTIONS would provide the
hedger with limited downside risk,
while still maintaining a position in the
market for possible gains later in the
spring.
SOYBEANS — March soybeans clos-
ed Friday, January 24 at 2.41, a gain of
about 16 1/4 cents from levels of a
month ago. Prices have been trapped
in a narrow band, with traders wat-
ching several different fundamentals in
the market, on a daily basis.
The most current estimate of
Brazilian bean production comes from
the Brazilian weekly newsletter
SAFRASE MERCADOS which
lowered its estimate from 13.4 -14.5
million metric tonne to 11.8 -12.8
million metric tonne. Some positive
features in this market include:
— continued U.S. dollar weakness
enhancing export interest
— improved export prospects from
buyers who normally deal with South
American suppliers
Most traders look for a reduction in
the 1986 loan rates on soybeans, to the
$4.77 level. By law, this reduction can
not be made official until August 1,
1986.
**HEDGERS** have some difficult
decisions in front of them as far as
1986 planning is concerned. With the
proposed loan rate of 1.92 for corn,
and assuming a 4.77 loan rate for
beans, the bean/corn ratio will be ap-
proximately 2.5:1. This will still favour
the planting of soybeans. With
November futures currently trading in
the low $5.30 area, one wonders about
the profitability in the bean market.
Hedgers with stored beans might con-
sider selling cash and repurchasing call
options to limit risk and improve cash
flow.
Ir
LIVE CATTLE —February Live Cat-
tle finished the market on January 24
at 60.17, a loss of 1.98 from levels of a
month ago. Weakness has come from a
soft cash market and from speculation
that marketings in the
January/February timeframe would be
heavy. The monthly Cattle on Feed
report, released on January 24 showed:
Cattle on Feed down 9 per cent
Placements down 4 per cent
Marketings down 6 per cent
Initial reaction to the report was
friendly, with most of the numbers
coming at the lower range of the
guesses.
Statistics indicate that U.S. cattle
slaughter in January will be the highest
level since January 1978. The problem
of heavier weight cattle does not seem
to be as major as a concern as last year,
and marketing intentions for the
January/March timeframe suggest
fewer cattle to be marketed than a year
ago. If cattle feeders remain current,
and weights continue to subside as a
result, beef production this spring
could decline in total by 5 per cent. The
abundance of cheap feed, plus con-
tinued profit expectations will pro-
bably continue to support the feeder
cattle market.
**HEDGERS** might consider
several strategies;