The Rural Voice, 2005-12, Page 54Grain Markets
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So much is happening in agriculture
Dave Gordon
is a
commodities
specialist
with LAC,
Inc., Hyde
Park, 519-
473-9333.
By Dave Gordon
November 21, 2005
There is so much happening in
agriculture these days that it is hard
to decide where to begin to write this
column.
For starters, the Canadian dollar
dropped 250 points in the first two
weeks of November, which is great
news for Canadian farmers. Energy
costs have dropped with crude oil
down $14/barrel from its high and
natural gas is down from 30 per cent.
Avian flu is on all of the newswires
as Asia struggles to bring the
epidemic under control before it
becomes a pandemic and in Canada,
the complaint launched by corn
producers will continue on
unprocessed corn to a conclusion on
December 15 when CBSA will
announce an interim countervail
amount. The grain and oilseeds
coalition continues to work feverishly
to get a support program in place for
Ontario growers.
CORN:
The USDA released its monthly
supply/demand report and to no one's
surprise raised the size of the corn
crop and the projected carryover.
Domestic usage is very good in the
U.S. and world demand should be
good if the threat of more avian flu
does not cut into demand for
poultry by consumers. World stocks
of coarse grains are down
substantially from last year so the
potential exists that exports will take
care of the excess corn stocks in the
U.S.
In Ontario, the size of the crop is
certainly higher than we thought it
would be back in July. The acreage
figures used by both Statscan and the
OCPA are very questionable but
yields in general seem to be well
50 THE RURAL VOICE
above normal — edging towards the
140 bu. area. Total production will
likely come in at about 200 million
bushels.
Basis levels in Ontario never
did drop off as they did in much
of the U.S. and for a period,
Ontario probably had a $.30 to $.35
premium built into pricing. But
now, that premium has mostly
disappeared as U.S. basis levels have
strengthened with the crop pretty.
much in the bin.
SOYBEANS:
The USDA took the soybean crop
above three billion bushels for the
second straight year using a record
yield of 42.7 bu/acre. But, this is old
news and now the market will focus
on South America where the crop is
not off to a spectacular start.
Brazilian farmers have had trouble
getting credit to plant the crop and as
a result, less fertilizer has probably
been used. On top of this, rust has
already been found in early -planted
soys and the late plantings are not
even in the ground. This discovery
could mean that five or six spray
applications will be necessary for
good control.
In Ontario, basis levels for soys
have improved gradually and
producers have been selling small
quantities for cash-flow purposes.
Exports have been brisk with several
vessels of Ontario soybeans moving
out in the last month. With Ontario's
soybean acreage up from last year
and'yields that could approach a
record, these exports will leave us
with a historically average crop to be
dealt with by the processors.
I started out by mentioning some
of the factors or events that are being
or will be felt by Ontario grain
producers. One very important
factor is the Canadian dollar.
One year ago, economists were
talking about a U.S. $.75 to U.S.
$.77, which would have been good
for producers of all commodities in
Canada. However, the reality is that
today, we are all dealing with a
U.S. $.84 and it is my belief that our
dollar could easily go to U.S. $.90 or
to the level that we saw in the late
1980s. Of course there will be large
fluctuations and producers should try
to take advantage of dips such as the
one we just experienced.
Another factor that needs to be
considered is the cost of diesel,
natural gas and heating oil. Crude oil
and natural gas are commodities and
as such will go up and down with
supply/demand and speculation.
Those pundits who said that oil prices
would stay strong sure do not know
how markets work — or they had a
position in the market. We may not
see oil prices drop to the levels of
three or four years ago but at least the
panic buying is not a factor right
now.
And finally, the main discussion in
Ontario concerns the countervail
action on U.S. corn and all of the
misconceptions that Ontario corn
growers have about the effects of a
duty.
First of all, an interim countervail
duty amount will be announced on
December 15 unless an extension of
45 days is granted. I am counting on
a decision on December 15.
Secondly, some producers have
the impression that the amount of the
duty will get added on to the Ontario
basis level. This is not the case. As I
mentioned earlier, we grew about 200
million bushels this year plus
producers carried over a lot of 2004
crop and U.S. corn has been trickling
in. So, the bottom line is: there is lots
of corn in Ontario to meet the market
needs for the near term!
Now, it is up to the producers.
How long will they wait before
selling? Will they hang on into the
New Year? If producers do not sell,
there will come a point in time when
basis levels will strengthen. On the
flip side, there is also a point at which
basis levels will curtail or reduce
demand for corn.
My own sense is that we will not
reach that point and that politicians
will finally see the light and agree to
a support program for grains and
oilseeds. After all, a decent support
program is good for all parties
involved and will trickle down to the
whole rural community.0