Symbolism is big this week for more reasons than one.
It is a week after a bloodbath in the grain markets. Futures plummeted last week after the USDA came out with their prospective plantings report showing the largest corn crop since 1944. Also too, it’s the first anniversary of the day your loyal scribe co-chaired the 10,000 person Ottawa Solidarity Farm Rally with Pierre Rheaume of UPA.
I’d like to say, “we’ve come a long way baby”, but I’m not so sure. As my seed corn salesmen said this morning, “Phil, do you think we are any farther ahead? With black Friday fresh in my memory from last weekend’s grain market, I was searching for words to say.
The March 30th USDA Prospective Planting report dropped hard in farm country. We all knew the market was buying corn acres. Last year we had 78.33 million in the US. Last Friday the USDA came out with 90.45 million bushels for 2007/08. Soybeans dropped to 67.14 million down from 72.10 million last year.
Grain markets tanked. On March 29th the May corn contract finished at $3.94/bushel. On April 3rd the May contract finished at $3.46. However it’s a good $1.02 below where the May corn traded at on Feb 22 at $4.48 bushel. Prices recovered slightly in the last couple of days however the rare air we enjoyed over the winter seems to have retreated. It looks like we won’t run out of corn or beans before another big supply comes this fall.
I know. Most of us have become very emotional about our corn and beans. With futures at ten-year highs and much of the media hyping bio-fuel demand, nobody wants to believe the ethanol gold rush is over. However it looks like $4 corn futures did ration demand. Usage came down and prospective plantings are down right scary. Now we need a mind bending wet spring and a scorching summer to bring those futures levels back. It’s still a long and winding road until harvest.
So what price levels can Canadian producers expect as they go into the middle and late part of 2007. In short the grain markets will kill you every time. Nobody knows. However if all that grain gets planted and we have reasonable weather, will we go back to the bad old days of yore? With our dollar catching some wind will cash grain prices sink further? Is it all pointing that way? Has the ethanol gold rush turned into the ethanol gold fraud of 2007?
Hmmmmmmmm. Of course nobody really knows that. What’s clear though is somebody has body odour in the room. The psychology of the grain market has changed. With basis levels putting corn and beans seemingly everywhere, getting that ethanol hype back is going to take a little work.
Of course nobody wants to go back to the days when prices resembles something in a museum. For instance like a year ago when 10,000 farmers gathered in Ottawa on a cold early spring April 5th day. Gathering that day, I couldn’t be prouder to be a Canadian farmer. Standing before that throng seeing Quebec farmers massing onto the Parliament Hill lawn is something I will not forget. At the end of the day, many Canadian farmers thought they made a difference.
We forget now but things got worse after that, a lot worse. In May we were greeted with what was thought to be a farm friendly budget. Finance minister Jim Flaherty even said that “Farmers Feed Cities” in the House of Commons. However, this money was distributed unevenly across the country with no semblance of fairness a mile wide and an inch deep. At the same time grain futures went lower, doom and gloom wafted through farm country. In Ontario, cornfields were even invaded by vomitoxins. As September rolled around and the rain started falling, it couldn’t have been much worse.
Then we had that big price rise which doubled corn prices. Our whole world changed and the government’s obligations regarding safety nets got sideswiped and deflected. Meanwhile last Friday when grain markets tanked, American farmers were inundated with news of “what the matter” we’ve got our revenue insurance anyway. It was a bitter pill for Canadian farmers who live and farm without that.
So it’s not over. We still need that agricultural safety net. Prime Minister Stephen Harper did announce new policy to put together “NISA” style accounts in our future with an immediate infusion of $400 million into the farm economy. That’s a start. Our commodity organizations are working toward something better.
At one time over the past few months I said price movement in 2007 wouldn’t be for the feint of heart. Remember that. Last Friday proved it. As the weather warms up we’re surely in for quite a few more price fireworks.