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46 THE RURAL VOICE
Grain Markets
Have speculators
gone too low?
By Dave Gordon
The month of July has been tough
on futures markets because there
have been no weather threats. All.
grains fell to new life of contract
lows by July 13 but we've seen some
rebound in the past few days. The
speculative funds have held a record
number of shorts but with weather
deteriorating these shorts were quick
to buy out of their positions.
The USDA added to the negativity
by raising corn yield by 4 bu/acre and
soybeans by 2 bu/acre. However,
with the recent dry weather in Ohio
and Indiana, bushels are being lost
every day and now some analysts are
wondering if the USDA will drop
their yield projections in August.
I think grain prices were bound to
drop under the weight of huge
production at some time but
speculators took the market down
before the crop was made. Now, with
crops deteriorating, these same
speculators are bringing the market
back up to equilibrium prices.
CORN
The weather report on June 30
predicted, hot, dry weather and the
thought was that markets could
explode on July 1. However many
weather people discounted the
National Weather Service and
markets headed south. Between July
1 and July 13 corn futures dropped
33 cents with the final six cents
coming after the USDA report was
released. However, weather concerns
started to kick in and prices stabilized
and as of this writing (July 23) prices
have gained about 25 cents in the
face of heavy producer selling in the
U.S. We keep getting reminded that
one billion bushels of corn will come
out of the U.S. loan program over the
next two months and that basis levels
in the U.S. are weakening.
However in Ontario, basis levels
for corn held steady even as futures
dropped and as a result more corn
was brought in from Michigan to
cover positions in Ontario. Old crop
basis -currently ranges from 60 - 70
cents over September futures while
new crop is 50 to 55 cents over
December. There seems to be a fair
amount of old crop corn around and I
think we will have an early start to
harvest so the time frame to sell old
crop is shrinking quickly.
The corn crop in Ontario looks
very good and with a little rain in
Western Ontario, we could be
looking at another record sized crop.
Storage could be very tight especially
if a good part of the wheat crop isn't
shipped prior to corn harvest.
SOYBEANS
The USDA raised 1999 soybean
yield by 2 bu/acre but also raised
both 1998 and 1999 soybean usage
and as a result the 2000 ending stocks
dropped slightly. The soybean futures
actually bottomed prior to the USDA
report and started to rally when it
appeared that hot weather would
cause damage to the U.S. soybean
crop. Since that time the shorts have
been forced out and so far the rally
has been 60 cents on the November
futures. The forecasts show heat
extending through the end of July
and into the critical flowering and
podding period and as long as this
hot forecast holds, prices will
continue to rally.
In Ontario, old crop soybeans are
coming out of the woodwork as
producers try to get their bins cleaned
out before harvest and this year we
will likely see some new crop soys
harvested by September 1. Basis
levels in Canadian funds have
strengthened with the higher soybean
futures and lower Canadian dollar.
Right now elevator basis ranges from
$1.90 - $2.02 over August futures for
old crop and $1.65 - $1.74 over
November for new crops.
The soybean crop in Western
Ontario needs rain very soon if we
are to meet last year's yields. With
the heat and lack of moisture we are