The Rural Voice, 2004-12, Page 51Dave Gordon
is a
commodities
specialist
with LAC,
Inc., Hyde
Park, 519-
473-9333.
By Dave Gordon
As harvest gets into the final stages,
it's becoming obvious that we have
monster crops in North America. The
U.S. has record corn and soybean
production and it looks like Ontario
will have a record soybean crop and
possibly a record corn yield. The
USDA's latest report showed corn
production at 11.741 billion bushels or
1.6 billion more than the record crop of
2003. And, the soybean crop will likely
end up over 3.10 billion bushels.
Another fact is that world
production and projected ending stocks
were both increased in the latest report
as it becomes more evident that world
grain production rebounded a great
deal from 2003.
CORN
The USDA raised the U.S. corn
yield once again to amazing 160.2
bu/acre. Now think about that figure. It
is phenomenal. It covers all of the U.S.
including poor ground, flooded ground
and frosted acres. There was no stress
on the crop this year and in fact, I don't
think any area suffered from drought
stress. On the plus side, usage is
projected to increase by 640 million
bushels to 10.95 billion bushels, but I
feel this may be a little optimistic.
Export projections of 2.05 billion are
not likely to be met unless there's a
rabbit in the hat. If the world is flush
with feed grains, it follows that the
U.S. will be unable to ship enough via
exports to make a difference to their
ending stocks. North America is
moving to ensure that domestic usage
becomes more dominant in the overall
demand picture rather than having to
depend on exports but it will happen
two or three years down the road.
In Ontario, harvest is progressing
fairly well and the yields are generally
outstanding. I have heard of a few
Grain Markets
Great /fields, rotten prices
instances where yields are down, but
these are few and far between. The
biggest problem facing the industry
today is the lack of space for storage.
Compounding the problem is the lack
of producer selling and the resulting
inability of elevators to sell some corn
in order to open up more space.
realize that the basis and futures are
both deemed to be low, but the choice
for producers in some areas will be to
sell some corn in order to get harvest
completed. And, even as low as prices
seem to be, it may be a reasonably
good move given the fundamentals of
the marketplace.
SOYBEANS
The USDA once again raised the
production figure for soybeans with an
average yield of 42.6 bu/acre.
Unfortunately. usage wasn't increased
as much as yield and as a result, the
2005 carryover is projected at 460
million bushels, or virtually four times
last year's ending stocks. The one
aspect of world soybean production is
the fact that two crops are grown and
both are needed to meet demand. There
is a possibility that a problem in the
South American crop will strengthen
demand and prices for North American
soys. China has bought several cargoes
in the last week.
A problem has caused great yield
losses in Brazil and has been
confirmed in the southern United
States. Asian rust probably knocked 10
per cent off the soybean crop in Brazil
this past year. and now it appears that
Hurricane Ivan has transported rust
spores to Louisiana. Mississippi and
Florida. There is spray available to
combat Asian rust but it is costly and
must be applied in a timely manner to
be effective. It will be interesting to
observe the extent to which rust will be
a factor in planting intentions in the
southern U.S.
In Ontario, the crop is mostly
harvested and yields are outstanding,
especially given the crop we believed
we had in August. Some traders think
the Ontario crop is close to 90 million
bushels which would be a record and
with a domestic crush of 60 million
bushels, this market will need to move
towards the export side in the next six
months. There has already been some
shipments of non-GMO beans as well
as food -grade beans. The huge quantity
and good quality of food -grade beans
has resulted in reduced premiums
already.
What started out looking so bright
last spring has turned very gloomy. A
combination of the Chicago grain
prices sliding and the Canadian dollar
strengthening has sent Ontario prices
for a loop and to be quite honest, 1
don't see a lot of hope of change in the
next three or four months. Corn prices
may see a small gain going into the
year end, but with the amount of corn
in North America, I don't see prices
being able to sustain any sort of rally.
The final production numbers will
be released by USDA in January and I
don't expect it to be a report that will
push prices higher. Typically, a big
crop gets bigger and we've certainly
seen that this year. So, I don't expect
the final production figures to be less
than already reported. The. planting
intentions report will be out by the end
of March 2005 and this is one report
that may give the market some hope
depending on what it says. With input
costs going up, the U.S. producer may
opt to switch to soys, but we would
need to see a substantial decrease in
corn acres to have a positive impact on
prices.
The discovery of Asian rust in the
U.S. should give soybean futures some
support, especially in the new crop.
There is a great deal of uncertainty
about how far the spores will disperse.
and how quickly rust is treated when it
is found. At times, these concerns will
be reflected in futures prices. And. will
some of the southern growers switch to
corn in order to avoid rust problems?
Time will tell.
At the time of this writing. the
despair is almost palpable. Corn
futures dropped under $2 once again.
our governments don't seem to care
about farmers and there is a sea of
grain staring at all of us. Are we too
pessimistic in a down market'' Maybe
— but. there just doesn't seem to be any
good news right now and this may he
the case for the next three or four
months. I hope Fm rong.0
DECEMBER 2004 47