By Brian Doidge, Market Analyst, Ridgetown College/University
of Guelph
September 13, 1999
U.S. & World
The USDA reduced its new crop average yield estimate as expected
for corn, soybeans, and wheat which reduced total supply for all three crops. However, the 2.5 bu/ac reduction
in yield for corn to 132.2 bu/ac, and the 1.3 bu/ac reduction in yield for soybeans to 37.9 bu/ac, were less than
the market had been anticipating. The 9.381-billion bushel corn crop, 2.778-billion bushel soybean crop, and 2.307-billion
bushel wheat crop were all slightly larger than expected.
On the demand side, all three usage categories for soybeans (crush, exports, seed/residual) were down from the
August report; two of the three categories for corn usage (food/seed/industrial and exports) were down with only
feed usage holding firm. But only one of the four usage categories for wheat (exports) was down while the other
three (feed, milling, and seed) were firm. The common denominator is a reduction in export activity as overseas
markets tap into competitive suppliers: Chinese corn, South American soybeans, and wheat from just about everywhere.
Overall, U.S. carryout stocks as of end of the new crop year (May 31, 2000 for wheat; August 31, 2000 for corn
and soybeans) – although smaller than estimated last month – are 86-million bushels or five per cent larger than
year ago for corn, 95-million bushels or 26 per cent larger than year ago for soybeans, but 44-million bushels
or 5% smaller than year ago for wheat. Strange as it may seem, even though wheat stocks are smaller than year ago,
USDA’s average price estimate for wheat was lowered to $2.60/bu; and while even corn and soybean stocks are larger
than year ago, USDA’s average price estimate for corn and soybeans was increased to $1.95/bu and $4.80/bu, respectively.
The report was taken as neutral to friendly for soybeans (smaller crop), neutral for wheat, and slightly bearish
for corn (less of a reduction in crop size than expected). The market expects that crop production estimates for
corn and soybeans will be reduced slightly again in the upcoming October 8 USDA Supply and Demand report.
However, the key to market direction for the next little while will be exports...and the pace of U.S. export sales
in particular. An apparently larger-than-anticipated Chinese corn crop is the likely explanation for very aggressive
export sales activity over the last two months. The USDA increased its guess of Chinese exports to four-million
tonnes which directly accounts for the reduction in U.S. corn exports into the Asian market. Chinese activity this
fall will be key for corn. South American soybean exports have been very aggressive following their big crop in
1999; but the U.S. might enjoy declining competition in world soybean markets this fall and winter as South American
supplies begin to dwindle. The key will be strength and sustainability of the economic and financial market recovery
in Asian markets, especially Japan. With Japan recently posting two consecutive quarters of growth for the first
time in over two years, it’s projected that Asian economies are on the rebound and that all will post positive
growth in 1999 and 2000.
Ontario
Following a meeting of corn industry participants on September
8, a listing of grain elevators receiving all corn hybrids this fall (including hybrids not approved for use in
the European Union) was released by the Ontario Corn Producers’ Association at its semi-annual meeting on September
9. This situation is fluid with many locations suggesting their policy is subject to revision on short notice (depending
on major processor decisions). Many dealers advise they will work with producers to arrange shipment directly to
alternative markets and away from processors such as Casco, NACAN, King Milling, etc. Producers are strongly advised
to check with potential buyers to ensure the marketability of their crop and to check this list for marketing opportunities.
It seems that a quick and efficient test (i.e., a ‘strip test’ as is available to detect Roundup Ready soybeans)
will NOT be available this fall for use either in the field or at the elevator to detect non-European approved
hybrids (essentially Roundup Ready corn) or approved hybrids inadvertently cross-pollinated by non-approved hybrids.
However, since only about two per cent of provincial acreage was planted with non-approved hybrids in Ontario in
1999, and both producers and the grain trade have been very pro-active in channeling non-approved hybrids to appropriate
markets, the actual threat of this corn or products made from it reaching Europe is extremely low and virtually
non-existent. PCR/DNA testing to detect the presence of non-approved genes and protein is available, but is time
consuming and costly. This implies that processors are likely to use it only to test final product prior to shipment
to ensure suitability for European markets. Only about 10 per cent of Ontario-produced corn oil, 20 per cent of
wet-milled corn gluten feeds and meals, less than two per cent of dried distillers grains (by-product of ethanol
and beverage alcohol production), a small percentage of wet-milled starch, glucose, fructose, and dry-milled corn
meals and flours are actually shipped into Europe. It would seem possible that in the unlikely event product testing
detects the presence of non-approved genetic material, shipment of affected processed products would be routed
to acceptable markets.
Casco appears to have finalized arrangements recognizing segregation protocols with Anderson’s in Maumee, Ohio.
Despite being a dual receiving location (i.e., Anderson’s, in an April news release, indicated that non-approved
hybrids would be received on designated days while approved hybrids would be received on other days), Casco is
prepared to accept boatloads of U.S. corn from Anderson’s this crop marketing year. Casco has not, however, indicated
publically to Ontario grain elevators that it is prepared to accept corn from dual receiving locations in this
province.
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