The Rural Voice, 1999-07, Page 37Will there be a
weather market?
By Dave Gordon
Will it rain or won't it rain? Will it
get hot or temperatures moderate?
These are the questions that traders
are asking and as a result, the markets
have stagnated.
In Ontario, we've been part of the
hot, dry eastern Corn Belt while areas
West of the Mississippi have been
deluged with rain. Trading volume of
grains has been quite low with
speculators sitting on the sidelines
where they will likely stay until
pollination time in July.
The wheat market may give us the
first sign of price direction. Up until
June 18, rains have slowed harvest in
the U.S. as well as planting in the
northern plains and the Canadian
prairies. Some traders are pointing to
quality problems and reduced
production as reason for the market to
move higher. However, world wheat
production will need to be reduced if
higher prices are to be sustained and
if wheat prices do move higher corn
prices are likely to follow to some
extent.
CORN
The USDA released the monthly
supply/demand report and increased
exports by 50 million bushels the
result of relatively low prices and a
weaker U.S. dollar. On June 30 the
USDA will report their best guess of
the final 1999 corn acreage and this
should go a long way in giving more
meaningful supply/demand reports in
the coming months. Basis levels in
parts of the U.S. are at all time lows,
an indication how much corn is still
in storage. Keep in mind the corn
under loan will start coming to
market in late July and carry on
through into late September. This fact
34 THE RURAL VOICE
Grain Markets
doesn't bode well for stronger U.S.
basis levels in the coming months.
In Ontario, basis levels have
hovered around the 60 to 65 cent area
over July futures at the elevators and
trade has been so slow that it has
been tough to get a feel of any
strength of weakness. There seems to
be a lot of corn still in bins but it is in
"strong hands". If the U.S. corn
comes out of the loan program in the
late summer, Ontario basis levels will
have a tough time moving higher.
New crop basis at 60 to 65 cents over
December futures is a relatively fair
value especially when compared to
last year's harvest lows.
SOYBEANS
The USDA left soybean carryover
unchanged for both old and new crop
by increasing domestic usage and
reducing exports. The final acreage
report on June 30 will be very
important in determining 1999
production. With the wet weather the
western grain belt has been
experiencing, I have to wonder if
soybean acreage has increased from
the original intentions. If so,
production and carryover could
increase substantially.
In Ontario, old crop basis levels
are still relatively strong at $1.95 to
$2 over July futures. This strong
basis runs counter to the fact that
Ontario producers are still holding on
to very large stocks that will
eventually come to market. Keep in
mind too, the crush plants will likely
shut down for maintenance some
time this summer and this could also
put pressure on basis. New crop basis
at $1.50 to $1.65 over November
futures is strong compared to what
we may see at harvest if the large
U.S. crop materializes.
FEED GRAINS
The word on feed grains hasn't
changed in weeks, although we could
start seeing a shift in interest in the
coming months. First of all, Ontario
has. a fairly large crop of barley and
mixed grain. Secondly, western grain
planting has been delayed by wet
weather and there is fear that this will
result in a higher proportion of feed
wheat that could compete with corn
in Ontario feed rations. However, it
won't come in to play until this fall if
in fact it does happen.
Grain prices had a slight pop in
early June on the talk of hot weather.
However the heat didn't last, and in
fact was limited to the eastern Corn
Belt. Rains fell west of the
Mississippi until mid-June and so far
there is no indication that extreme
heat will come into play in the near
future. The mid-July corn pollination
period will be the most critical time
frame to watch for heat. If heat and
drought of any duration does hit in
the western belt, the results could be
devastating because of the shallow
root system that corn has developed. I
am not suggesting that a drought is
probable — only possible.
Weather conditions will direct
grain prices over the next two months
and I don't expect hot, dry weather
will push prices very much higher
because of the current carryovers.
However, until the crops are "made",
markets will likely give producers
opportunity to price. Still, if no
problems develop, prices could easily
be depressed going into this harvest
season.
P.S. Just as this column was being
completed, soybean futures rallied by
11 cents U.S. per bushel ($4.04 per
metric tonne.) and corn by three cents
U.S. ($1.10 per metric tonne) on
thoughts of dry, hot weather 15 days
out (July 3). Could this be the start of
our weather market?0
Information supplied by Dave Gordon,
LAC, Inc., Hyde Park, 519-473-9333.
The RURAL VOICE
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