The Rural Voice, 1991-10, Page 20GRAIN MARKETS
EARLIEST HARVEST
EVER, DECENT CROP
Wow! That is all that can be said
about the 1991 harvest. Never in my
memory can I remember soybeans be-
ing combined in August, and corn
harvested under 15.5 per cent before
September 15. The corn quality is
excellent with test weights close to 60
pounds, far superior to the 1990 crop.
Old crop soybeans seemed to be sold
before harvest began, and the crushers
were ready for the early new crop.
CORN
The last USDA report came out on
September 12 with no great surprises.
Production for 1991 was reduced as
expected and, with no change in the
demand side, a corresponding drop in
the 1992 carryover to 1.1 billion bush-
els was shown. The significance of
this carryover is that the demand side
is likely a "worst case" scenario. Any
extra demand for corn will directly
impact the historically low stocks.
Today, the ending stocks as a per-
centage of use is almost at a record
low level of 14.3 per cent, and any
further drop in that ratio will serve as
the spark if any planting problems
emerge in 1992. I think the demand
side is showing exports smaller than
the quantities that will be shipped, gi-
ven the fact Western countries have
already indicated they will not sec the
Soviet people starve. This, then, could
lead to stronger markets in 1992.
For now, we arc contending with
both old and new crop corn coming to
market at the same time. If harvest
hadn't started until October, we would
have had more time to get rid of the
1990 crop. However, as it is, produc-
ers arc still trying to dump old crop on
to the market, and combined with the
new crop corn being offered, basis
levels have suffered a hammering.
Elevator prices reflect a basis of five
to 15 cents under December futures,
while on farm bids are even to 10
cents under December
It is very difficult to get many us-
ers to take old crop because of the as-
sociated quality problems. If you still
have old crop in your bins, and the
quality is still good, you might as well
hang on to it if you have room, or feed
it. If the quality is at all questionable,
sell it into any market you can fmd,
because it will be impossible to keep it
in storage any longer.
SOYBEANS
Soybean harvest got into full swing
last week (September 9) in many parts
of western Ontario, and generally
yields are excellent from the London
area north. In the southwest, yields
are quite variable, ranging from 15 to
30 bushels per acre.
Early shippers were able to get a
premium, but with crushers starting to
fill up, basis levels have settled back
to general harvest values, which are 10
cents over November in the north to
25 cents over in the south.
The USDA report showed a reduc-
tion in both crop size and carryover,
and the 1992 ending stocks are now
projected at 100 million bushels lower
than three months ago — at 250 mil-
lion bushels. Once the main harvest
pressure is off, the market should be
able to respond to any new demand.
FEED GRAINS
Feed grains in Ontario have re-
mained steady after the price run up
that followed harvest. Ontario barley
is still trading in the $80 to $85 range,
while mixed grain has actually streng-
thened slightly to about $80. Western
grains have stayed fairly firm, and I do
not expect to see too much weakness.
Over the past year, I have been
painting a relatively negative picture
concerning grain, and encouraged
producers to sell grain early because
there were ample supplies, a weak de-
mand, and the outlook appeared bleak.
It appears that producers held on to
more grain than normal in 1991, be-
cause thcy just could not bring them-
selves to accept the price of grain no
matter what opportunities were pre-
sented, with painful consequences. If
history repeats itself, producers will
look back at what they did last year
and vow not to be caught in the same
situation again. However, I feel you
will be doing yourself a disservice if
you remember only the last 12
months. Successful marketers take a
look at the total picture and refer to
years of similar circumstances.
What I see for the next 12 months
are very volatile markets and much
stronger prices than today. The world
supply/demand situation is changing
quickly from one that is dominated by
large supplies to one that will focus on
much smaller supplies. In years such
as these, prices generally spike quite
high, but do not necessarily remain
high for extended periods, because
farmers will produce more than the
market can bear in a very short time
frame, unless weather throws a wrench
into the proceedings. Another major
reason prices do not keep going higher
is a rationing factor where prices that
are too high drive certain users to use
other less costly feedstuffs.
I know most producers will have to
sell some grain to meet cash needs,
but if we look at the size of both the
Ontario and the U.S. crops, there is
plenty of evidence to show us there
will likely be some shortfalls. For
instance, if the 1992 carryover in the
U.S. drops any further, the stocks to
use ratio will fall to near record num-
bers, and I think Canada, the U.S., and
the E.C. will be very willing to ship
foodstuffs to the Soviets.
This year, I think it would be very
prudent for producers to sell a portion
of their crops every month. This ap-
proach will allow you to better hit the
average price for the year, which will
be necessary under the GRIP, and
avoid selling everything at depressed
prices. As well, there will be an op-
portunity during the year to forward
contract next year's production at rela-
tively good prices.
I hope that I have given you some-
thing to think about. and I hope you
will take some time to study the grain
markets, even if it only entails follow-
ing cash grain prices in the local news-
paper or TV station on a daily basis.0
Information supplied by Dave Gordon,
LAC, Inc., Hyde Park, 519-473-9333.
16 THE RURAL VOICE