A week ago a mini-uproar occurred in Southwestern Ontario, the place where I’m from. Word came that cheap subsidized US corn was about to be imported into Wallaceburg Ontario by barge on the relatively small and environmentally fragile Sydenham River. It set off a fury of media speculation on whether this was really true and who might be behind it.
What the truth is I don’t know. However, if cheap subsidized US corn ever shows up in this port, it’ll be a symbol like no other. Just think about it. My local area is awash in old crop corn. Plus there is the new crop coming on. So what should we do, import more? Makes sense to me.
When all the hub bub was going on I was at a local elevator. It just so happens this grain company was one of the last to “handle corn” on the environmentally sensitive Sydenham River. So as the pitch of the conversation rose, the manager went into his photo archive and came up with a 1988 photo of a ship being loaded with Ontario corn. It was being loaded to export to Quebec.
That’s how the world has changed. Ontario has been in an import basis for corn for some time now. Back in the day there were export opportunities such as those in Quebec. Now things are seemingly in reverse. Quebec doesn’t need the corn. Ontario doesn’t either. Cheap US corn whether it’s a big ship on the great lakes or a potential barge on an Ontario river comes in at its leisure.
The question is will it continue into perpetuity. Or will prices rise in Ontario, Quebec and Manitoba to a point where corn acreage will start expanding again? Will Michigan accelerate its ethanol production putting them into an import position sooner than we think? Will this eventually stem the flow of US corn into Ontario?
Nobody knows, but clearly the buzz in North American farm country is to grow more corn and see where the chips fall. On your Dtn boxes on September 21st was a story out of Farm Futures magazine. Farm Futures surveyed American corn growers and they found American farmers intended to grow more corn in 2007 than anytime since 1950.
Quoting from the story, farmers said they would like to increase corn acreage by 7 percent to as much as 9 percent next spring. That means plantings could reach from 85 million to as high as 86.6 million acres. So if you use the 154.7 bu/acre predicted by the USDA in the September 12th crop report that means a possible 13.397 billion bushel 2007 corn crop. Whoa!
For the skeptics like me keep in mind this company has a pretty good track record. Their prediction before the USDA’s March 31st prospective plantings report was the best of any other survey. So for Canadian corn producers it has ominous ramifications. Does cheap, cheap, cheap come to mind?
13.397 billion bushels of corn is a lot. If you look at the history of USDA corn production it shouldn’t surprise you. This past winter in some of my presentations I would often look at past corn production history. The last two years we’ve had crops of 11.1 and 11.8. This year we are sitting at 11.114 billion bushels. However, pre 2002 we were under 10 billion bushels of corn. We were under 8 billion bushels in 1993 and 1996. So we’re on an upward trend. 13.397 billion shouldn’t surprise us.
The question is, “is it likely?” I don’t think so. Yes, there is a difference between planted acres and harvested acres. At some point we’re going to get over that 13 billion bushel level. However, even if the math works a production number like that just seems out of this world. However, it gives a good indication that farmers are much more optimistic about corn prices than they are soybeans, wheat or just about any thing else.
It is all so arbitrary to write and speak about. Keep in mind these grain markets right now are like shifting sands. We all know that there is something big going on. It’s called ethanol, bio-fuel, whatever. However, I haven’t even mentioned the proverbial production problems, which invariably always hit. I haven’t mentioned China’s eventual importing stance for world corn. There are a myriad of risks. The smart money might want to buy their corn now. Growing it next year will certainly not be for the faint of heart.