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14 THE RURAL VOICE
GRAIN MARKETS
MARKETS SHOW
IMPROVEMENT
If I had written this column last
week, I would have been talking about
contract lows and, in fact, the lowest
prices since 1987. But the markets
turned higher on July 12 and there's
improvement. September corn futures
had a limit up close on July 16 with all
other markets showing good strength.
Weather has been the focal point
for the past week, very hot and dry in
some states, causing concern among
traders. To add fuel to the fire, large
sales of corn, soybeans, and soymeal
to Russia were announced, which will
further decrease old crop supplies in
the U.S. Since these are credit sales,
Canadian prices are not likely to stay
in step with those in the U.S.
CORN
Basis levels softened once again
over the past month with elevators
bidding from five cents under Septem-
ber futures to option price for old crop
corn, and five cents to 10 cents under
December for new crop. Demand
remains very sluggish except for rail
corn which is being shipped to the
U.S. Off -farm corn bids have fallen to
zero to eight cents over September fu-
tures and shipment is not very prompt.
In fact, many users have enough corn
to keep their plants running until
September, and even though Ontario
values have dropped to levels compa-
rable to U.S. values, don't expect too
much in the way of exports. The main
buyers in the export market need
credit, and the U.S., not Canada, has
extended the major portion of credit in
the world, and most of that to Russia.
The sluggish demand, lack of
exports, and the large stocks available,
leads me to believe that old crop corn
will still be sitting in elevators when
the 1991 harvest begins.
I've talked about the large stocks
for several months now, and the fact
that producers should be aiming for
any basis or futures strength to sell
into. Now, it appears the only hope
may come from futures, as I don't see
any strength in the basis. And, we've
just seen a fairly good reaction to
weather over the past seven days.
The last USDA reports maintained
1991 production at 8.275 billion
bushels, but didn't increase the 1992
carryover by as much as many traders
thought. As a result, the market, at a
four year low, was very sensitive to
any hot, dry weather reports, and
jumped on the bandwagon, both get-
ting out of their short positions and es-
tablishing new longs. The market will
still be sensitive to news, but I think
this rally is probably one that should
have been sold, simply because it ap-
pears to be a rally in the bear market.
As far as new crop is concerned, I
hope that we are able to export large
quantities out of Ontario this fall,
because with favourable weather, we
will see another large corn crop, and
once again corn will be competing
with Ontario wheat.
SOYBEANS
The last USDA report was odd to
say the least. Production was in-
creased by 90 million bushels, but the
1992 carryover did not follow suit.
One market analyst surmises that the
U.S. government does not want prices
to fall any further because of the extra
cost in direct payments from the
treasury. This analyst wonders of the
USDA might be signalling an aggres-
sive approach in the form of export
enhancement on meal and oil sales,
because of the fact that exports were
increased in their projections despite a
very sluggish export market at present.
In Ontario, soybeans are moving at
a steady pace and are being both
crushed in Ontario and shipped to the
U.S. by rail. We may still have old
crop stocks around when harvest
begins, albeit not to the extent of the
corn supply. But, here again, with
favourable weather, Ontario could be
set to produce a record crop this fall.
Basis levels have dropped slightly in
both old and new crop markets, and