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Ontario Grain Farmer

Ontario Grain Market Commentary

All of these reports include a weekly Ontario Wheat Market Commentary for the current season. Beginning with the September 16, 2009 report, Ontario Corn and Soybean Commentaries are also included; reflecting the overall Grain Farmers of Ontario perspective.

For previous reports, look in our Ontario Grain Market Commentary Archives.

Ontario Grain Market Commentary for: August 19th, 2010
By Seamus Hoban, Grain Farmers of Ontario

Grain Market Wrap

Wednesday, August 18th, 2010

Commodity	Period	Price	Weekly Movement
Corn CBOT	Sep	4.1875	↑ 23 1/4 cents
Soybeans CBOT	Nov	10.3075	↑ 15 1/4 cents
Wheat CBOT	Sep	6.5600	↓ 38 3/4 cents
Wheat Minn.	Sep	6.9675	↓ 16 1/4 cents
Wheat Kansas	Sep	6.8500	↓ 27 1/2 cents
Canadian $	Sep	0.9711	↑ 162 points

CORN
December corn futures traded to the highest level since January during the week. The corn-wheat spread experienced a fundamental realignment in a delayed response to the Russian drought.

US national corn crop ratings were down 2% for the week to 69% good/excellent vs 68% last year. The trade is also reflecting on the possibility of the US crop failing to reach full yield potential due to summer heat causing premature crop dry down.

Chinese corn demand is growing at 3 to 5mmt annually, while stagnated productivity struggles to keep up. Traders expect China to become a larger corn importer later next year and beyond.

The trade continues to grapple with questions regarding Russian crop size and its implications for both wheat and coarse grain markets worldwide. Many suspect the USDA is significantly overestimating world wheat demand and underestimating world coarse grain production. While others expect further declines in Russian production estimates in September and October.

With ample supplies of feed grain, the US is primed to pick up the export demand created by the production constraints in Europe and Russia. However the trade is becoming concerned that US logistics will be unable to meet this almost unprecedented demand. Ground and ocean transport rates are expected to rise considerably as a result.

SOYBEANS
Soybean futures rallied during the week as Chinese new crop sales continue at a rapid pace. As of last week, US new crop export sales to China are at 7.6 mmt vs 6.4 mmt last year. China is aggressively booking basis and freight to lock in US logistics as another record China import program unfolds.

Chinese demand is being driven by improved wages, with the average Chinese worker now earning US$3,900 a year, up from US$1,900 in 2005 and just over US$1,000 a year in 2000. The improved standard of living is expected to continue to drive meat consumption and soy meal demand.

While US stocks will still build year to year suggesting lower price potential, longer term values need to be maintained at levels that will stimulate over 7 million acres of soy expansion annually in the Western Hemisphere. Traders expect soybeans to continue to follow corn price trends for the time being.

WHEAT
Wheat futures lost ground this week as the trade continues to process the implications of the Russian and European drought.

With current USDA world and US projections, US stocks remain at burdensome levels suggesting significantly lower prices. The possibilities of larger exports clearly exist but US export capacity may be a limiting factor. With the US almost three months into the crop cycle, many now see it difficult to achieve the required US shipments to satisfy a dramatically higher world wheat demand.

Ukraine will limit wheat exports in the coming year and there is speculation that Kazakhstan, which has also suffered from the heat wave, might also restrict grain sales outside the Former Soviet Union.

The trade continues to watch developing dryness in Western Australia and Argentina.

Contract prices for August 18th, 2010 at the close are as follows:
SWW at $219.54 per tonne ($5.97/bu.), SRW at $174.20 per tonne ($4.74/bu.), HRW at $206.31 per tonne ($5.61/bu.), and HRS at $217.93 per tonne ($5.93/bu.).

Chart of the week