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The Rural Voice, 1999-06, Page 56Set targets but don't get greedy By Dave Gordon Markets have been very dull for the past four weeks with producers concentrating on getting crops in the ground. In Ontario, that hasn't been a problem but in the U.S., it's been hit and miss although the latest planting progress report showed corn 77 per cent planted and soybeans 28 per cent done, both above the five-year average. The question now is, will growers in the U.S. be quick to switch the last acres intended for corn to soybeans because -of the attractive loan rate. Sparks came out on May 14 with corn acreage reduced 1.4 million acres from the USDA figures but by the time you read this, there should be some general consensus about acreages. CORN The corn futures market has been very quiet lately with a range of about nine cents. On May 12 the USDA released a supply/demand report for the 1998/99 crop year and a preliminary report for the 1999/2000 crop. Ending stocks for 1998/99 were reduced by 25 million bushels while for 1999/2000, trend line yields of 131.8 bu/acre were used to boost production to 9.445 billion bushels and increase carryover to 1.829 billion bushels. Generally speaking, corn planting in the U.S. is ahead of schedule with the most noticeable lag in the western Corn Belt. The question that still remains is how many acres will actually get planted and what will we see for weather in the next two months. In Ontario, basis levels moved higher by 15 cents in late April and very early May in real terms but backed off into mid-May. Producers 52 THE RURAL VOICE Grain Markets may not have seen the strength in Canadian dollars because the Canadian dollar was gaining strength at the same time. A good part of the recent weakness resulted from a slowdown at Commercial Alcohol, which caused a large quantity of corn to be re -offered into the marketplace. The extra corn in the market will keep a lid on basis levels well into July unless demand picks up. Presently, old crop basis ranges from 65 - 70 cents over July futures while new crop ranges from 65 - 70 cents over the December futures. With the present futures prices and Canadian dollar value, new crop basis is still relatively strong. SOYBEANS The USDA issued a supply/demand report that made no changes to the 1998/99 ending stocks for soybeans but the preliminary report for 1999/2000 took ending stocks to 595 million bushels, an increase of 165 million despite a higher usage projection. However, these figures were close to expectations and futures prices did move immediately but new crop futures have since faded by 10 cents. The question about acreage won't be answered until June when we will see how much, if any, corn acreage will be switched to beans. The loan rate for soybeans is looking better and better, so I wouldn't be surprised if U.S. soybean acreage increases from the predictions of 73.1 million acres. In Ontario, soybean basis remains relatively strong although futures prices have not. At today's basis level, crusher soybeans can be imported even though specialty beans are being exported. Elevators are generally sitting at $1.95 over July futures for old crop and close to $1.65 over November futures for new crop. FEEDGRAINS Western feed grain prices are still strong relative to corn prices but some Ontario wheat is finding its way into poultry rations. Western feed wheat is selling for about $172 per mt while Ontario feed wheat is selling in the $133-$135 range. Western barley is trading for $140 per metric tonne for the small quantity that is selling. However, Ontario barley is worth about $115 with slightly better demand. Some areas have reported fairly large acreages of small grains being planted this spring, so producers should look at getting rid of any old crop grain well before harvest. Planting progress in Ontario has been phenomenal with virtually all soybeans and corn in the ground by May 18. However, parts of the western U.S. Corn Belt have been wet and depending on how quickly the ground dries, we may see a shift from corn to soybean acreage quicker than normal. The soybean loan rate should encour- age a quick switch considering where prices are right now. We won't get official acreage figures from the USDA until July, so estimates you hear before that date are only speculative. Historically, new crop'prices gain an average of 15 per cent from the lows by July 1. Very seldom does the increase come after July I. These market moves are generally inspired by dry weather rumors. It takes actual drought to drive prices higher in July and August and there hasn't been a major drought scare since 1988 when yields were actually affected. It's anybody's guess as to what weather conditions we will see this year so producers will have to be very attuned to markets this summer. Keep in mind that the 'Canadian dollar will have more and more impact on basis levels especially if futures prices don't move. As I'm writing this, the Canadian dollar is trading about .685 cents U.S. and looks like it could easily top the 70 cent mark. Without a major drought scare, futures prices are not likely to run although, as I mentioned earlier, there are normally some gains in June as a result of weather scares. It's important to have some target prices set at least for a portion of your crop but don't get greedy if prices get close. Let's hope that we start getting some rain soon in Ontario to replenish reserves that were reduced in 1998 and ensure decent crops this year.0 Information supplied by Dave Gordon, LAC, Inc., Hyde Park, 519-473-9333.