The snow is finally melting and it can’t come a minute too soon for me. It seems like eons ago that I pushed my combine for the last 6 rows of corn in front of me. Then the winter of 2013 came along with such consistent cold and miserable weather, it was hard for the soul. With April Fools’ Day behind us, we can only hope the weather gods will be kind this spring.
Then there was March 31s, always an important date with the release of the USDA Prospective Plantings Report. Just like the January USDA report was a game changer, so was the March 31 report. The USDA forecast that US farmers would plant 91.7 million acres of corn in 2014. This was the lowest projected corn planting in the United States since 2010. This represents a drop of approximately 3.67 million acres for a decline of about 4%. The market was ready for less corn acres, but not that low. This was combined with the a quarterly stocks report which came in on the low side at just over 7 billion bushels. With the corn demand renaissance continuing to blossom it sent corn futures higher. In many ways, it’s a new day for corn.
Soybean acres won big in the USDA report. USDA projected soybean acres to come in at 81.5 million acres, which represents an increase of 4.97 million more than last year. Soybean plantings were projected up in every major soybean producing state and actually expanding in places like North Dakota, which is expected to produce 1 million additional soybean acres this year. It is also intriguing, as soybeans prices have been rarely this high. In fact, they haven’t been this high in two decades. So in many ways, farmers are just following the money, even though the money is in old crop versus new crop.
The soybean market reacted in its typical Jekyll and Hyde manner. The old crop price seems to have no ceiling and all the new crop can think about is burgeoning South American supplies as well as higher US soybean acreage. At a certain point you would think that these prices would meet but as we go on there is just such differences within these 2 different markets I don’t know if that is going to happen. It will make for an interesting September when combines start to roll in Ontario’s and Quebec’s soybean belt.
So the scenario now is a lot less corn to be grown and a lot more soybeans to be grown in the United States. With corn planters already rolling in the United States, you would think that some of this is set in stone. However, in Québec and Ontario I do not see it that way. Where at one time I expected a 30% decrease in corn acreage across Québec and Ontario, I no longer expect that. I can see in Ontario in 2014 that we may grow as much corn as we did last year despite what I have said in the past. Corn prices continue to be buoyant, much beyond the expectations we had even a few months ago. Of course Ontario weather will be very key in that determination.
What we have now is a marketing opportunity we never thought we’d get. The geopolitical events in Ukraine, which are far from over in my opinion plus the USDA March report have added a little bit of life to futures prices. Of course, we know that the story of the year in Ontario grains has been the Canadian dollar. It has led to some profitable opportunity and surely many of us have pounced on it. It is just one of probably a few more that will come along on the road to Canada Day.
On that day, I expect to have all my crops up and looking good and corn headed toward pollination. Typically, back in the day the July 4 weekend was a litmus test for commodity markets. I expect many of us to have our hedges in place by then. Needless to say, up until that time we are going to be trading the numbers that the USDA gave us on March 31st. That will be enough to chew on within those tractor cabs, but have those standing grain marketing orders ready. The funds are stoked. It’ll be price volatility in a blink of an eye. Our hands are too slow to pull those triggers. Having some nameless computer do it for us needs to be our new marketing management strategy.