Wheat prices are down right freaky. Corn prices are behind but not by much. Soybean prices are like the ugly duckling. Nobody likes them but they are tagging along for the scraps. This morning’s USDA world agricultural supply and demand estimates have thrown the bulls some more hay. Finding our way in this market will surely challenge our marketing acumen.
The USDA estimated corn production came in at 10.9 billion bushels, down from the 11.114-projected last month. Somewhere within the last 30 days we lost 209 million bushels. This was due to a lower harvested area and reductions in yield. Yes, that crop was big out in the field, but it seems to be decreasing as I write. With wet weather currently barnstorming across the Corn Belt, some of that corn may hit the ground. This “big crop” just might get smaller. Surely the futures price action of the last month has been a big clue to all of this. (A 55-cent increase)
The USDA lowered global wheat production to 585.1 million metric tonnes. Global ending stocks declined to 119.3 million down from 147 million last year and the lowest in 25 years. The big red rock, Australia cut their wheat production severely setting off the free for all in wheat. The resulting panic has permeated the grain complex in Chicago.
Soybeans have benefited but the bottom line is there are “beans everywhere.” There is no “bio-diesel gold rush” to match the pandemonium set to play out in corn. Cash soybean prices in Ontario at $5.80 put producers directly into the poorhouse. The USDA listed crop size at 3.189 billion bushels with increased harvested acreage by 600,000 acres putting yield at 43.5 bushels/acre. Soybeans prices continue to grind sideways.
Is all of this good news? I think so. How can it not be? For Canadian producers not only have we seen huge gains in corn futures, but basis levels as well. The Canadian dollar can’t actually decide what to do, but it’s currently at 88.22 cents US, down from breaking through 91 cents last June. So even though cash prices are not near where we’d like them, it’s far better than where we were this past spring.
There is only one problem if you are in Eastern Canada. That’s water and lots of it. It has put harvest close to a month behind. In my own case I started soybeans last Monday. The ground was iffy, very iffy. However, I waited until the afternoon and then set sail into my 2006 soybeans. The next day I worked until rain shut me down again. Then splat, another inch of rain poured down. The next day it snowed. Capturing some of these higher market prices is proving very difficult.
However, the biggest agricultural policy emphasis among my readers has not been necessarily on the 2006/07 crop. Many Canadian farmers are still looking toward some type of income support or price stabilization from the crop in our rear view mirror. Mail from readers and listeners have been pouring in.
For my American readers this must seem so strange. You have long taken care of that crop with your LDP’s and counter cyclical payments. In Canada producers are still waiting with no guarantees whether there will be any support come from the discredited CAIS program for 2005, 2004 and even 2003. It’s no way to run an agricultural policy, but unfortunately that’s the hand we’ve been dealt.
Federal agriculture minister Chuck Strahl chimed in last week with his politically disastrous view of CAIS. The following is a direct quote from a Barry Wilson Western Producer piece citing Chuck Strahl published today.
“Canadian agriculture ministers recognize they must create a safety net program that supports farmers facing chronically low commodity prices, says agriculture minister Chuck Strahl.
But it cannot be based on cost of production as suggested in Ontario and by the Liberals, or acreage-based as often suggested on the Prairies.
Strahl said the new program, to be ready by 2008, would have to be affordable for governments, immune to trade challenge and not market distorting.
“Part of the guiding principles will be that we don’t have endlessly deep pockets, we don’t want to have our entire package declared amber (under World Trade Organization rules) and we don’t want to make a bad situation worse by distorting markets,” he said in an Oct. 5 interview.
For that reason, he rejects a risk management program embraced by virtually all Ontario farm groups because it would be cost-of-production based and therefore expensive, trade-sensitive and production distorting.
Likewise, proposals for simple acreage payments do not pass the test, said Strahl.
“If all that is doing is encouraging more money-losing acres, there is no upside to it. It is not sustainable and not the right thing to do.”
Clearly, Strahl is misguided, and dead wrong. Not only that, his latest musings represents political deception at its best. Conservative candidates in the last federal election piled on at farm rallies looking for support. Stephen Harper promised to scrap CAIS. We know the rest of the story. Clearly farmers have been deceived, rural Conservative MP’s will be taking the blame in a federal election within 12 months. How could it be interpreted any other way?
As with anything, nobody can predict the future with any type of certainty. An example of that are corn futures, which soared since September. In fact those futures markets just might redefine what a “resistance level” really is in the next few months. With our current agricultural policy environment reduced to shambles, our only hope might be a once in a decade futures spike to price commodities far into the future. Yes, that’s a stretch. In a country like Canada, it shouldn’t have to be this way.