The Rural Voice, 1992-02, Page 20GRAIN MARKEPS
USDA REPORTS
CAUSE JANUARY
JOLTS
Well, give the USDA credit for
brightening up the new year with
their surprise reports. The reports
of January 10 and 13 were expected
to be fairly major ones and boy, did
they ever provide some jolts. Over
the last couple of months, I have
been somewhat friendly to futures
prices and now I think that we are
seeing some confirmation of my
thinking. The USDA winter wheat
plantings provided the initial shock
on January 10 with lower plantings
than last year, while most traders
through the acreage would be up
about 6 per cent.
CORN
USDA's second set of reports on
January 13 added fuel to the fire by
reducing the 1991 com crop size,
reducing com stocks and lowering
the projected 1992 carryover. In
fact, with ending stocks now pro-
jected at 1.076 billion bushels, the
carryover represents only 13.5 per
cent of total usage which is the lowest
since 1976. Coupled with wheat
carryover projected at 390 million
bushels (the lowest in over 20 years),
we could have an explosive market if
any problems develop with the 1992
crop.
Basis levels in Ontario have im-
proved significantly over the last
month at elevators from 15 cents
under March futures to 5 cents under
to option price (CH -5 to CH -0).
Given the present demand situation,
which is not particularly strong,
producers have an opportunity to sell
a portion of their stored corn and I
would suggest the futures pricing por-
tion be left for the time being.
Last crop year (October to Sept-
ember), 142,000 metric tonnes (mt)
of corn was exported out of Ontario
and Quebec, while this year, exports
to the Soviets alone have totalled
450,000 mt along with approximately
125,000 mt that was shipped to the
United States. We have continued to
ship smaller quantities to the U.S.
since mid-December and this will
likely continue, especially out of
Quebec.
Over the next few weeks, I don't
expect basis levels to improve any
more, given the flat demand and
the fact that rail basis has faded
slightly. We may not see any more
strength in basis until the spring rolls
around and then only if more ex-
ports are booked for the open of
navigation.
I do, however, feel the biggest
price gains will likely come from the
futures market and we have already
seen more than 10 cents per bushel
(c/bu)in January. If we see any prob-
lems with the 1992 crop weatherwise,
there should be some stronger volatile
markets.
SOYBEANS
The USDA report increased 1991
production and increased the pro-
jected carryover by 10 million bush-
els, but this still leaves the carryover
smaller than in 1991. The latest re-
port showed an increase in expected
exports of 15 million bushels and ex-
port demand for meal should remain
fairly strong.
In Ontario, basis levels have once
again strengthened considerably from
30 cents over January futures to 45
cents over March futures in southern
Ontario. When the spread between
January and March futures is in-
cluded, this is a gain of another 18c/
bu at the elevators. Crusher bids have
not quite kept pace and as a result the
FOB farm bids are only slightly high-
er than the elevators' at 50 cents over
March futures.
The Canadian dollar has dropped
from last month to the mid -86 cent
range and now some analysts think it
may eventually drop even more. If
this happens, basis levels will hold or
even improve slightly.
The basis for new crop soybeans
has started out at 40 cents over No-
vember futures FOB farm and with
futures prices hovering near $6/
bushel, we are already seeing better
prices for new crop soys than for old
crop. However, there is plenty of
time to consider booking any new
crop sales given the potential for
some volatility in the late spring or
early summer.
The market today is presenting a
good opportunity to sell a portion of
your stored soybeans, at least on
basis. If South America remains wet
and has harvesting problems, we
could see some strength in the market
during the spring which would give
you an opportunity to price out any
sales.
FEED GRAINS
Once again, feed grains have
maintained relatively strong prices.
Ontario barley is still selling in the
$100/mt area while Western barley is
trading for about $115/mt. Mixed
grain is being tightly held by produc-
ers and the grain that is being sold is
paying $100 to $105/mt. Western
oats are still not readily available and,
as a result, good -quality Ontario oats
are in demand. Depending on test
weight and brightness, Ontario oats
are worth as much as $115/mt FOB
farm.
Feed grain prices are still stay-
ing strong relative to corn prices,
although corn values are certainly
gaining. Usually, when corn prices
strengthen, other feedstuffs will be
substituted but, right now, replace-
ment feed by-products and ingredi-
ents are in good demand and not
readily available. So the feed value
of corn should remain firm unless
cheaper substitutes surface or until
we get into wheat harvest.
I still feel much better about the
potential for prices than I did a year
ago and 1992 should provide more
pricing opportunities than we have
seen for several years. 0
Information supplied by Dave
Gordon, LAC, Inc., Hyde Park, 519-
473-9333.
16 THE RURAL VOICE