Soybeans Move West, Corn Acres Increase: Canada’s Grains Economy Adjusts

     Putting spring work in the rear view mirror is always a good thing.  I always think when I start planting corn on some cold April day, it will be an eternity until I run a harvester through the following November.  In the springtime there are all kinds of tasks to perform.  I often think in spring I live on a sprayer.  So as the last spray droplet shoots out the boom onto foot-high soybeans usually around Canada Day, it is a very good thing.  Putting spring work behind you always represents such a monumental task.

It has been a busy spring for Canadian farmers and especially those who grow corn and soybeans.  If you have read many of my musings about commodities the spring you will know that I have predicted 2.1 million acres of corn and 2.7 million acres of soybeans to be planted in Ontario the spring.  Last week we found out from Statistics Canada that Ontario soybean production is pegged at 2.7 million acres, so I hit that dead on.  However, Statistics Canada believes that Ontario farmers actually planted 2.3 million acres of corn, 200,000 more than I predicted.  These are huge crops for Ontario with the lack of wheat acres showing up from last fall.

What I found particularly interesting from a Statistics Canada soybeans number was a 52% increase in soybean area in 2012 in Manitoba.  Last year Manitoba had 575,000 acres of soybeans in this year that figure is 875,000 acres.  I have often made the statement that Western and Eastern Canadian agriculture do not know each other, but with soybeans catching a tailwind in Manitoba, maybe that will change naturally over time.  Having one crop in common goes a long way.

Manitoba also saw a 66% increase in corn acreage from 2011, up to 300,000 acres.  Our Québec friends planted one millions acres of corn up 13% from 2011.  So its pretty clear that Canadian grains in 2012 are enjoying a type of renaissance.  Sure, last year had some pretty tough growing conditions and that might account for some of this.  It’s obvious that Canadian farm country is poised to take advantage of the strong markets leading into the summer of 2012.

Of course we are on the precipice of marketing change as I write this.  Tomorrow, June 29th represents the 1st time that there will be live trading during the release of such a large USDA report. Let’s just say that market action tomorrow, June 29th will be fun.  Everything that we have talked about for the last 6 months will be laid bare.  We will see if all those corn planters rolling this past spring made any sense whatsoever.

It is all interesting stuff and surely we will analyze it extensively.  In many ways it is all amazing.  Take corn for example, over the last few years we’ve seen an explosion in acreage.  It was only 2010 when we planted 88.192 million acres and this year we may be thinking of planted acreage of 97 million.  So clearly, when we are talking about the supply of grains our ability to turn it on is impressive.

It is so impressive that you could have large parts of the Canadian prairies growing soybeans like we see in Manitoba.  Sure, there are limitations with the lack of moisture and probably many other things, but we should never underestimate the ability of technology to hurdle over some of these obstacles.  We have already seen a huge increase in “eastern grains” within Western Canada.  It also would change the face of Canadian agricultural policy.

Interesting, but some pundits would say how about demand for all this grain?  Take corn for example.  I often think of corn as the sexiest grain, because everybody loves talking about it.  Where corn goes, so many other agricultural commodities go too.  At least leading up to tomorrow’s report, corn prices have increased significantly based on a supply scare.  However, oil prices are down, gas prices are down and ethanol margins are taking a hit.  There is also a huge competition in corn from offshore as well as a decrease in feed demand from the livestock sector.  So despite the rosy blue skies for corn supply, the demand side will need some work.

Ditto for all grains.  It’s clear that we can produce but we have not seen a widespread decline in demand for grains in quite some time.  We still have that European slowest moving train wreck and sluggish global economic growth.  So at the best of times in 2012, this rosier grain outlook might be just a white-hot mirage sizzling away because of an early summer drought.  When the rain finally comes, it might be the long way down.  Demand is price sensitive and always, always fickle.  We are in the agricultural commodity business.  Sometimes, it is not for the faint of heart.  Getting the right balance between supply and demand is always the great harbinger of our farming existence.