June 1998
Market Trends
By Brian Doidge, Market Analyst, Ridgetown College/University of Guelph

U.S. & World
Last month we mentioned that the 30-day forecast was calling for the U.S. Eastern Corn Belt to be wetter than normal with the Northern Plains to be dry. The U.S. National Weather Service certainly got that one right. The Western Corn Belt has made quick planting progress thanks to reasonably good weather. Iowa was a bit ahead of normal (38 per cent planted as of May 3 versus 34 per cent 5-year average for the date), but Nebraska was 43 per cent vs 26 per cent average. The stellar performers were Wisconsin at 26 per cent vs 10 per cent and Minnesota at an incredible 81 per cent versus 26 per cent normally. Such rapid planting suggests new crop corn in the Northern Corn Belt stands a very good chance of maturing ahead of any frost risk. However, the Eastern Corn Belt generally has been having a miserable time. Illinois was slightly behind normal (30 per cent versus 35 per cent average); but Indiana and Ohio were only 10 per cent planted versus 23 per cent and 28 per cent normally. Worse yet, the Eastern Corn Belt has had nothing but rain since May 3 so not much progress is likely to have occurred in the week since. The USDA releases crop progress reports every Monday and they are closely watched at this time of year. Chicago expects that the report May 11 will show better than 50 per cent planted overall; however, the key will be progress in Iowa, Illinois, Indiana, and Ohio which might approximate “the good, the bad, and the ugly”. Forecasts currently call for a dry period next week, but many private forecasters are calling for more rains in the Eastern Corn Belt from mid-week onward. If so, Chicago’s recent rally will resume.

Longer range forecasts call for above normal rains May 12 - 16 across the mid-west with the Northern Plains remaining dry. Last month we suggested that you keep an eye on a dry area in North Dakota that was featured on the 90-day forecasts. Current long-range charts do indeed show that area expanding. The Long-Term Palmer Drought Index shows a broad band of mild to moderate drought condition as of May 2 across the entire northern tier of states and extending into most of northwest Ontario. The current spate of forest fires in northern Ontario likely confirms very dry conditions. This is the indicator that Chicago contracts will be trading, so keep in touch. The next three weeks will be crucial for price levels with the key being actual planted acreage in the east and moisture patterns west of the Mississippi.

Ontario
In Ontario, draw a line along highway 402. South of it has been wet and corn planting likely stands at only about 30 per cent done as of May 8. North of it has been dry and corn planting has been rapid. Sources indicate that north and east of London is perhaps 75 per cent to 90 per cent done. For the province as a whole, we are guessing perhaps 50 per cent - 55 per cent complete which is almost exactly the completion percentage for Michigan.

U.S. corn continues to move into the province with two ships out of Toledo in April alone; 410,000 bushels into Port Colborne, and 600,000 bushels into Cardinal. More vessels are scheduled. Additionally, truck movement out of Michigan has been heavy. In fact, 28.3 million bushels in total had been imported into Ontario by the end of February and there obviously has not been much slackening off since then. What is especially curious is that there are indications, as we mentioned last report, that there have been sales made of Ontario corn into the Northeast U.S.

The message in this is the same as for the last several issues: sell more old crop corn, especially if you can get FOB farm basis offers of $1.10 - $1.20, and replace that corn with Chicago “call” options. Had you done so even last month, your call has already picked up over a dime.