The Rural Voice, 2001-01, Page 47State of flux
remains in grains
By Dave Gordon
The state of flux that I wrote about
last month has not left the grain
markets yet, but there is Tight at the end
of the tunnel. As far as "Starlink" is
concerned, it appears that an agreement
of some sort is near. The countervail on
U.S. corn going into western Canada
will stay in place for the next few
months and wheat and barley prices
have certainly continued to be strong.
The ban on meat and bonemeal in
western Europe has been reflected in
stronger soy meal prices in North
America but for how long, as South
America is experiencing excellent
growing weather so far.
CORN
Corn futures have been very soft for
the last month because of sagging
export sales. In fact export clearances
out of the U.S. are lagging last year let
alone the optimistic USDA projection.
In the latest USDA report, the
projected exports were reduced by 75
million bushels, which directly led to
an increased carry over of same
amount. The next major report will be a
stock report in January based on
surveys done on December 1.
Even though exports are lagging
because of the "Starlink" situation, we
must keep in mind that the U.S.
provides over 70 per cent of the
world's corn exports and no other
country can replace more than a token
amount of what the world needs. There
may be double trading (where the U.S.
exports to country A who in turn ships
their own production to country B) but
that shouldn't reduce U.S. exports in
the long run unless other coarse grains
replace cornus a feed. In the U.S. basis
levels have been relatively firm until
recently when some areas of the
country have seen a distinct softening
as more feed users become
unconcerned about "Starlink".
In Ontario, basis levels have
Grain Markets
remained very strong in both the old
and new crop markets. At $1 over
March futures, old crop corn is at
import prices especially with the
Canadian dollar gaining some strength.
Corn imports will continue throughout
the winter months as the major users
continue to cover their needs. Right
now, there are some excellent
opportunities to forward sell old crop
com and producers should continue to
feed the market. The new crop basis is
also strong because it will take better
prices to attract corn acres in Ontario
with fuel and nitrogen costs staying
strong.
SOYBEANS
The USDA raised both domestic
crush and exports in the December
report, which lowered the projected
carryover by 30 million bushels. The
soybean market consists of strong
demand and low prices, which should
lead to lower stocks by spring 2001.
Both China and the E.U. will likely
need to .depend on the U.S. for
soybeans until April when South
American soys will hit the market. We
saw fairly strong soybean prices last
spring in the U.S. in the face of a
record South American crop and I can
see the same scenario in the spring of
2001. There should be some good
pricing opportunities for producers this
winter.
In Ontario, basis levels continue to
be very strong at $2.25 to $2.30 over
January futures. The crushers are
experiencing good soymeal demand
and as a result will continue to need
soys as indicated by bids that reflect
import values. Statscan has reported an
Ontario crop that is down only one
million bushels, with yields down more
than 3 bu/acre.
I haven't seen figures, but I believe
that the portion of the crop grown as
food grade quality is growing, leaving
less soys for the crushers. However,
producers need to provide a continuous
supply to the crushers rather than
holding out until the bitter end. If there
are gaps, processors will have to import
soys to keep their plants running.
Many producers are calling with
regards to food quality soys as they
make plans for 2001. It is very
important to get information now
regarding varieties and premiums
available. Keep in mind that the highest
premiums are for soys grown from
certified seed and the supplies are not
endless.
I think producers can look forward
to prices that are stronger than we've
gotten used to, especially in the corn
market. As I stated last month, it will
take higher prices to attract more corn
acres. In Ontario, we have a relatively
weak dollar making our prices look
relatively good. It's interesting to note
that since our present Governor of the
Bank of Canada was appointed, the
Canadian dollar has dropped from
$0.79 to a low of $0.63. Today, it sits
at $0.66.
The U.S. futures market will have
the biggest impact on prices. December
futures have held above $2.50 for a few
weeks, not much of a price to attract
corn acres. I feel we will see some
action during the winter months and as
we get closer to planting. At present
usage levels, the U.S. will need to see
another 10 billion bushel crop unless
world production suddenly increases.
In the 1980s, analysts always looked at
a soybean -to -corn ratio of 2.5:1 as a
point which determined whether
producers planted corn or soybeans.
Today that ratio is probably in the 2.2:1
area and dropping as fertilizer and fuel
prices continue to rise.
I think soybean growers will have
some good opportunities to forward
contract 2001 production and the time
frame will likely be prior to the South
American crop coming to market. As I
stated earlier, the weather in South
America has been excellent for
planting and at the time of this writing,
soybeans in the northern growing areas
are flowering. This small portion of the
crop will be harvested in January.
However, the main harvest thrust will
begin in late February.
I hope producers in Ontario don't
back away from forward contracting
the 2001 crop because of poor yields in
2000. I just can't imagine that the
coming year will resemble the past one
and I think we all need to look forward
to a better crop year. Just don't get
carried away and oversell.
As this is my last commentary of
2000, I just want to take the
opportunity to wish everyone a happy
holiday season. Even though the past
year wasn't a banner year for prices or
yields, I believe all of us need to face
2001 with renewed hope and
optimism.0
Information supplied by Dave Gordon,
LAC, Inc., Hyde Park, 519-473-9333.
JANUARY 2001 43
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