U.S. CORN MARKET SKEWED BY SOVIET BUYING
Recent purchases of U.S. corn by the
Soviet Union have skewed the domestic cash market by increasing
the price difference between the premium price paid at the Gulf
export point and interior levels, cash grain dealers said.
    Many dealers expect the USDA will act soon to reduce the
cash price premium at the Gulf versus the interior -- which a
dealer in Davenport, Iowa, said was roughly 20 pct wider than
normal for this time of year at 25 cents a bushel -- by making
it worthwhile for farmers to move grain.
    By lowering ASCS county posted prices for corn, the USDA
could encourage farmers to engage in PIK and roll corn sales,
where PIK certificates are used to redeem corn stored under the
government price support loan program and then marketed.
    If the USDA acts soon, as many dealers expect, the movement
would break the Gulf corn basis.
    "The USDA has been using the Gulf price to determine county
posted prices," one dealer said. "It should be taking the
average of the Gulf price and the price in Kansas City," which
would more closely reflect the lower prices in the interior
Midwest.
    "But we don't know when they might do it," an Ohio dealer
said, which has created uncertainty in the market.
    The USDA started the PIK certificate program in an effort
to free up surplus grain that otherwise would be forfeited to
the government and remain off the market and in storage.
    Yesterday, USDA issued a report showing that only slightly
more than 50 pct of the 3.85 billion dlrs in PIK certificates
it has issued to farmers (in lieu of cash payments) had to date
been exchanged for grain.
    With several billion dlrs worth of additional PIK
certificates scheduled to be issued in the coming months, the
USDA would be well advised to encourage the exchange for grain
by adjusting the ASCS prices, cash grain dealers said.
    A byproduct of the Soviet buying has been a sharp rise in
barge freight costs quoted for carrying grain from the Midwest
to the export terminals, cash dealers said.
    Freight from upper areas of the Mississippi have risen
nearly 50 pct in the past two weeks to over 150 pct of the
original tariff price. The mild winter and early reopening of
the mid-Mississippi river this spring have also encouraged the
firmer trend in barge freight, dealers noted.
    The higher transportation costs have served to depress
interior corn basis levels, squeezing the margins obtained by
the elevators feeding the Gulf export market as well as
discouraging farmer marketings, they said.
    "The Gulf market overreacted to the Soviet buying reports,"
which indicate the USSR has booked over two and perhaps as much
as 4.0 mln tonnes of U.S. corn, one Midwest cash grain trader
said.
    But dealers anticipate that once the rumors subside,
freight rates will settle back down because of the overall
surplus of barges on the Midwest river system.
 Reuter
