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The Rural Voice, 2003-01, Page 40el& Grain Markets Keep focussed on marketing Dave Gordon is a commodities specialist with LAC, Inc., Hyde Park, 519- 473-9333. By Dave Gordon December 13, 2002 As we draw closer to the end of another year, we can look back at a year of highs and lows depending on where one lives. Early in 2002, grain prices were still relatively strong after a poor corn crop and a disastrous soybean crop. But prices faded and did not recover until August when there was some question about the size of the U.S. crops and drought in parts of Ontario looked like it would decimate our crops. Prices peaked in September and with the good hindsight that all of us seem to have, a lot of grain should have been sold at that time. Now with harvest completed, some areas of Ontario had the best yields ever while southwestern Ontario endured another disastrous year. Overall, both soybean and corn yields were below longer term averages for the province although they were better than in 2001. CORN The USDA issued their monthly supply/demand report for December and lowered the 2003 carryover slightly. However, some other analysts think the carryover could be reduced more if ethanol production keeps increasing at the present pace. The carryover is relatively low but Deadline for the , February 2003 issue of The Rural Voice is January 15, 2003 36 THE RURAL VOICE the market seems to be taking no notice and I think this is due to the fact that there is plenty of corn to supply the for the next few months. Basis levels in the U.S. have softened over the past month as users get coverage. Now, I have heard that some producers realize that they are not going to get a cheque from the government before the end of the year and need to generate some cash — so they are starting to sell some corn. With the drop in basis that we have seen in Michigan, corn will start to move into Ontario once again. In Ontario, the crop is in the bin and it looks like a bigger crop than 2001. Stats Canada estimates the Ontario crop at 216 million bushels, probably 15 million more than last year but still 25 million short of local demand. Basis levels are still extremely strong and are just begging to be sold. I think a lot of corn will hit the market during the winter months and again just prior to wheat harvest which will soften the Ontario basis. Currently elevators are showing a range of $1.35 to $1.50 over March futures and I can certainly see the higher basis levels dropping to the lower end of the range. SOYBEANS The USDA reduced the 2003 carryover for soybeans by another 10 million bushels to 175 million. This was all due to an increase in exports and the USDA export estimate of 900 million bushels looks like it will be light since export sales have already reached 630 million with 38 weeks left in the marketing year. With the U.S. carryover projected to be quite low, speculators continue to stay long soybeans in case there are any weather problems in South America, which some analysts think could add $2 to futures. Even though planting progress is normal in South America, everyone will be keeping an eye on the weather through the critical January and February period. All oilseed crops should maintain their value in spite of reduced world oil stocks. In Ontario, harvest is complete and yields were certainly better than what we saw in the disastrous 2001 crop. Basis levels are strong and as I have said before, will remain at or close to import levels. The total supply of food -grade export soys is much better than last year, so a larger portion of the crop will be exported. Expect crushers to remain aggressive throughout the coming year. Generally speaking, Ontario producers need to keep focused on marketing. As I mentioned, the corn market is telling producers to sell a portion of the crop especially if nothing has been sold to date. Those producers who are so inclined probably want to own some call options. Right now I cannot get too excited about new crop 2003 corn prices. We do not know yet how much potential corn ground went into wheat this fall, but there is the thought that most of the additional wheat acres were intended for corn. Also, the December 203 futures have traded in a very narrow range of $2.40 to $2.50 and usually December futures will approach $3 during its lifetime. Basis levels for new crop are reasonably good if we look at history and the potential of a large crop. However, Ontario needs to produce 230 million bushels to be considered decent and we have not seen that production in the past few years. It seems that producers have sold a large percentage of the soybean crop and since basis levels should hold firm, I do not think there is any urgency to sell unless prices make a good move higher. And I think the new crop prices should be watched but like corn, there is plenty of time and there should be plenty of opportunities. Finally, I want to wish all readers a very happy holiday season. Hopefully this is a time of the year when we can all leave the stresses behind and enjoy family and friends.0 Information supplied by Dave Gordon, LAC, Inc., Hyde Park, 519-473-9333.