My heart goes out to Lac Megantic Quebec this week. It is not often that a disaster impacts my readers but I am very aware of our DTN subscribers in southern Québec. Who knew that a train parked north of the town would somehow move into the town, derail and explode vaporizing many people. Québec farm country is a beautiful place, one of the most unique farm areas in the Western Hemisphere. I am sure there are many Québec farmers with connections to the Lac Megantic disaster. I say Godspeed. It was a terrible tragedy.
The totals right now say 24 people killed and 26 missing for a total of 50 people. The explosions were so devastating that many of those 26 people missing may have been vaporized in the initial blast. In fact, there is even one individual from my home community here in southwestern Ontario who is missing. He is said to have been performing at the Café Musique when the train rolled in and exploded. For southern Québec, it sure will become a terrible iconic moment in their history.
I have never visited Lac Megantic, but I’ve spent much time in southern Quebec farm country nearby like Saint Joseph-de-Beauce, Ste. Ange, Sherbrooke and Granby. I’ve always said that Québec agriculture is the strongest in Canada. Québec farmers feel something in their soul, which the rest of us will never feel. They are Quebeckers first, but Canadians too. I don’t think you’ll find anybody from Ontario who would say that.
At one time in Québec there was a freeway of hogs and pork product shipped to Boston. I have no idea if that is still happening as the Canadian dollars is much higher than it used to be. Needless to say, I always keep my eye on the Québec corn crop as it has a direct effect on basis levels in Eastern Ontario. Some of this Québec corn even finds itself being shipped to Prince Edward Island at a premium cost. There are advantages to having the most northern supply of feed grains in North America.
Who knows what the value of those feed grains will be after today’s July USDA reports. Maybe our friends in Prince Edward Island will be enjoying much cheaper feed grains this coming year. The USDA actually pegged new crop ending stocks at 1.96 billion bushels. The USDA is actually saying production will be 13.95 billion bushels with harvested acreage pegged at 89.1 million acres with an average yield of 156.5 bushels per acre. There’s enough nervousness in the market now that there was an initial selloff but markets bounce back later in the day.
Of course the nervousness is about summertime weather, something that I talked about last week. It almost seems the market knows that crop fundamentals are bearish but it still doesn’t want to commit itself too much the other way based on reports of less than good crops in many areas. There are also others that are talking about drought in the Western corn belt. Nobody really knows, and that’s what keeps things interesting.
With soybeans there were no changes at all. The USDA maintain soybean ending stocks and 125 million bushels. The USDA even increased the domestic new crop ending stocks by 30 million bushel to 295 million bushels because of a bump in production. In many ways we are splitting hairs here with soybeans. The old crop is running out fast and the new crop is getting closer, ever closer in the United States. There is going to be a scramble when the two come together. In my mind soybean numbers from USDA are much more mysterious than the corn numbers. The answer to that riddle is blowing in the wind.
All of this will have futures prices adding to their volatile character over the next few weeks. For us back here in Ontario and Québec the condition of our crop will only have an effect on basis values moving ahead. In southwestern Ontario the soybean crop is in terrible condition, while the corn crop is doing much better. It’s no secret; I see much lower harvest basis levels ahead, especially if the Canadian dollar doesn’t bail us out.
Having said that, our old friend US federal reserve chairman Ben Bernanke told us this week about another stimulus package sending the stock market soaring, the US dollar down and the Canadian dollar up. Oh, how we love those US Federal Reserve chairman. You never know how they’re going to upset the apple cart.
Of course this is the week when upsetting any type of cart is no joke. The derailment in Lac Megantic Quebec is something that will not go unnoticed in these pages. From southwestern Ontario to southern Quebec, you will be remembered.