The Rural Voice, 2002-10, Page 49Grain Markets
Lack of bad news stalls market gains
Dare Gordons
isa
ommodities
specialist
with LAC,
Inc.. Hyde
Park. 5/9-
473-9333. /9-
47 3-9333.
By Dave Gordon
September 20, 2002
The USDA report of September 12
confirmed the production numbers
from the August report. but traders
went into the report owning corn.
soybeans and wheat and since
production wasn't cut to meet their
expectations. they exited their positions
quickly.
Grain prices moved higher from the
August report and peaked just prior to
the September report. Now, the market
needs new news to fuel any further
moves higher and that news may not
come until the U.S. is well into harvest.
Remember that marketslneed a
continuous flow of bullish news to keep
prices moving higher. In. the absence
of news, prices will sag just as we've
seen since the September report.
CORN
The USDA lowered corn production
slightly to 8.859 billion bushels, which
was a little higher than the trade was
looking for. The projected carry-over
for 2003 is the number the I feel will
direct market prices in the coming
months. With the carry-over projected
to be the lowest since 1996 at about
700 million bushels, prices will have to
go higher to ration the supply. Several
ethanol plants were built based on low
corn prices and one has to wonder if
these plants will all start up as
scheduled if prices go higher. But. first
we need to get more combines in the
field to see how good or bad yields will
be.
Basis levels in the U.S. are very
strong with the demand coming from
the southeast livestock market. It is
expected that this demand will continue
well into the new year.
In Ontario, there is still a premium
for old crop corn but it is fadint
quickly. As we approach harvest, there
will be peaks and valleys in demand
until a steady supply of new crop corn
is available.
The Ontario crop has lost bushels
over the last six weeks and it now
appears that the crop will be under 200
million bushels or about the same as in
2001. Because of the crop size, 1 think
the Ontario new crop basis will
probably get a little stronger especially
if yields confirm a sub -200 million
crop.
Currently old crop basis is sitting at
$1.30 over December futures while
new crop is at $1.15 or a discount of
5.15 to old crop. Any producers with
old crop should be looking at this price
difference and not be caught holding
old crop stocks into harvest.
SOYBEANS
The USDA increased soybean
production by 28 million bushels but
raised the projected carry-over by only
five million. Any way you cut it.
production will come in less than total
use for the year and it looks like ending
stocks will be well under the 2002
stocks. Basis levels are very strong in
the U.S. for both old and new crop soys
because of the uncertainty of the size of
the 2002 crop. Many traders think the
next report will cut production back
again as a result of a generally hot, dry
September.
In Ontario. soybean harvest has
begun with yields running from 25 to
55 bushels per acre. Some producers
think the longer -day soys will yield a
bit better but taking the whole province
into account. a 30 -bushel average may
be what we're facing. This is a little
better than in 2001 but not near the 36
to 38 bushels that we were once
looking at. The quality of the soys in
areas that had adequate moisture is
quite food but in the dry areas the seed
is very small.
Basis levels are holding relatively
strong with elevators offering $2.65 to
$2.70 over November futures putting
the cash price over $8.30 bushel. If a
producer has the space to store soys at
home. there is about .35 carry to sell for
January shipment.
In summary, wheat prices have
finally started to gain strength after
years of relatively low prices. Smaller
wheat crops in Canada. Australia and
the U.S. have contributed to the steep
price rise. Smaller wheat stocks mean
less feed wheat to compete with corn in
feed rations. However. as 1 said earlier.
no market can continually move higher
without fresh news every day .o we
will see wheat prices fluctuate in the
months to come
Com futures prices have seen a huge
pullback from the high made on
September 9 Prices are back down
close to the point where the market
broke out from. which is considered
good support It's been hard to get a
handle on yield because of the extremes
in yield Howeser, it looks like Iowa
will yield Netter than expected and
Sparks is rumoured to he raising the
corn crop by three bushels per acre
which would add about 200 million
bushels to the carryout. 1 think some of
this yield information is now in this
drop in the market and the market may
not rebound until harvest is well
underway. As long as the projected
carry -oyer is under one billion bushels.
there should be some long-term
strength in the corn market
Soybean production in the U.S. may
drop a little but the longer-term focus
will be on demand and the potential
South American crop. There appears to
be no slackening in worldwide demand
although the USDA lowered•exports for
the coming year by 200 million
bushels. This should lead to better
prices but the higher prices go. the
higher the acreage in South America.
so. we have a bit of a double-edged
sword. In Ontario. basis levels should
remain firm for the coming year if
yields end up around 30 bushels per
acre.
If my thinking is correct. Chicago
prices should peak by early in the new
year and producers will have the
opportunity to sell both 2002 and 2003
production. Some selling was done by
producers on the last run-up in prices
and there should be another opportunity
at or shortly after harvest.
Some areas of Ontario may
experience weaker basis levels during
harvest for both corn and soy s than
other regions. but 1 think there will be
an evening -out after harvest. With
strong basis levels for both corn and
soys. cash sellers need to keep their
eyes on the futures market. Now is not
the time to get greedy. but be
disciplined.0
Information .supplied by Dare Gordon.
LAC. Ing Hyde Park. 519-473_9333
OCTOBER 2002 45