Loading...
The Rural Voice, 2000-05, Page 50Waiting for the weather market By Dave Gordon Last month when I wrote this commentary, corn futures were strong but topped out quickly and have since faded while soybean futures were reaching some new heights that have been retained. In fact, the soybean market seems to be quite resilient in the face of a huge crop in South America. The USDA's planting intention report of March 30, 2000 contained no market-making surprises. Corn acres did show an increase of 450,000 acres while soybean acres were increased by 1.09 million acres. Neither of these figures had much longer-term effect on prices. The market is still following the drought maps and short-term weather patterns. As rain is predicted, markets fall but when rain doesn't materialize markets rebound somewhat. As I write this column, the most recent 6 to 10 day outlook is calling for fairly hot, dry conditions over the next two weeks (into early May). CORN: As I mentioned, at the time of last month's writing, corn prices were peaking and have not been back to those highs since. However, a weather induced market usually takes some time to develop and probably too much emphasis has been put on weather too early this year. A strong weather market needs news every day to keep an uptrend intact and we just haven't been able to get a steady stream of dry news. Basis levels in the U.S. strengthen dramatically over the last half of April due to lack of producer selling. In fact, the U.S. producer may hold on to old crop corn until the 2000 crop is well translated into higher basis levels in Ontario as we have gone from 46 THE RURAL VOICE Grain Markets import values to export values with a lower Canadian dollar. Basis levels in Ontario have ranged from $.55 to $.60 over May futures but just switched to $.65 over December futures and likely won't change until the Ontario crop size is known. Stats Canada came out with a bit of a surprise on April 20 when they indicated a 12 per cent increase in corn planting. Most people anticipated a slight increase but not to this extent. SOYBEANS: The soybean futures prices have held quite strong through reports from both Argentina and Brazil that their crops will both be higher than previously anticipated at 51.5 million tonnes. With the strength in soybean prices relative to corn prices, I wonder if the U.S. farmer might plant a few more soys at the expense of corn. Just something else to keep an eye on. Basis levels in both Ontario and the U.S. have softened over the past month in U.S. terms which may indicate that last year's crop size might be larger than we have anticipated. However, futures prices may rally enough to offset basis weakness. When one looks at all factors affecting soybean prices the only really p-sitive one is demand. We will likely see the largest acreage in U.S. history and therefore a potentially record crop while South America is completing harvest of a record crop. Despite these negatives, most traders are anticipating some drought problems to push prices higher. FEEDGRAINS: Feedgrain prices haven't changed too much from last month although one positive point is the fact that barley is now being exported. Ontario barley is trading in a range of $100 to $1 10. However, mixed grain is another story. It's selling for about $70 to $80 and is difficult to move mainly because of the lack of consistency. Feed processors don't have the ability to switch formulations with each load of mixed grain and it gets to the point where Logistics dictate a reduced price for the product. Small grain growers really need to think hard and long about their crop selection. Are you growing cereals for the grain or the straw? And, what is the value of the grain if it's not being fed at home? The futures markets reflect what buyers and sellers think will happen weeks or months down the road and the market seems to have been on edge for the past two months. The fact that prices have held at critical support levels and bounced off those lows several times gives indication that there is good underlying support. Traders seem to be waiting for the "2000 drought" to begin. They know. that a portion of the Midwest is already suffering from drought conditions and so far, rainfall amounts have not been sufficient to relieve the dryness west of Chicago. Now, we have the two latest six -to -l0 -day weather forecasts predicting "above to much above normal" temperatures with below normal rainfall from April 27 to May 4. One one hand, this will allow planting to proceed quickly but, on the other, the area from Illinois to Nebraska will likely not see any relief. By the 'way, as of April 23, 19 per cent of the U.S. corn crop is planted, well ahead of both last year and the five-year average. I have said many times in past writings that producers usually always get an opportunity to sell crops at a profit. The main problem is timing and trying to optimize their prices. I think an opportunity is developing and whether the market will peak early in the season or late in the summer is not known. However, grain producers need to know their costs before they can determine the price they need. I've already seen some new crop corn sold too early and those sellers will need to be more patient before making further sales. Those who haven't sold any new crop grain are luckier and can go ahead anytime now to lock in some pretty decent prices. And, don't forget about the year 2001 crop. An opportunity will present itself to contract that far ahead and it will be time to pull the trigger on some 2001 production.0 • Information supplied by Dave Gordon, LAC, Inc., Hyde Park, 519-473-9333.