Writing the Story on This Year’s Crop Prices: Risk Management Never Gets Old

Phil Planting Beans 510     It is that time of year where I get to sit back a bit and reflect.  Planting ended for me last Friday after a hair-raising run from the 1st corn kernel I planted until the last soybean ran down the seat tube.  It was a very late start to planting in southwestern Ontario, but weather has been very benign lately.  Unlike last year where I planted one field 3 times, I’m hoping this year all the soybeans get up through the ground without a fight.

So it is very good for me to have that all done but at the same time marketing our crops is a daily task.  As we move into the June 30 USDA report, this is the time of the year were markets can become very explosive.  I have always considered the July 4 weekend to be a tipping point for grains and over the years that has changed much.  Check your calendar, that is coming up to us in warp speed.

We all know that the June 30 USDA report will be critical.  However, the USDA did release its June report last Tuesday.  The core numbers were left almost identical to the main numbers with yield still projected 165.3 bushels per acres.  With corn acres projected at 91.7 million, we are looking at a total crop up 13.935 billion bushels.  The soybean production number is still the same at 3.635 billion bushels on 81.5 million acres at 45.2 bushels per acre.  You know the drill.  This all gets changed on June 30 and that’s where the fireworks will come from.  The Bears do not completely own the day, even though it seems that way right now.

In Ontario is a bit of a mixed bag.  We have the cheapest old crop corn in the Eastern cornbelt.  In fact, we might have the cheapest new crop corn in the Eastern corn belt too unless Ontario farmers planted less than 2,000,000 acres in the crop is not stellar.  At one time I felt that Ontario would gain over 2 million acres despite the lower corn price.  However, now I feel that might have been a bit too optimistic.  I’m now expecting 1.9 million acres or less of Ontario corn, which depending on our crop yield this year may put us in back into import pricing around April or May of 2015.  Much will depend on the weather in the next 8 to 12 weeks.  However, isn’t that always are constant.

It is no secret that we have shaved off about $.70 or $.80 from the corn futures price over the last several weeks.  So you would think that the bottom has to be found somewhere.  Market bears might think that that would be this fall with harvest rolling into full swing.  Nobody knows the answers to these questions and much will depend again on what happens with the weather.  Despite our projected onerous supplies, demand still remains very strong for not only corn and soybeans.  Of course our job is to roll the dice for another words apply some good risk management strategy with our production techniques.  And then we let the chips fall as they may.

I say that because I think sometimes we forget the vagaries of our own agricultural economy.  Unlike many other facets of the economy, farmers work with biology and whether in the hope of producing bountiful crops.  Despite that, often times it doesn’t happen.  Everybody takes their turn having a bad crop from weather events.  Last year was my turn in many ways as monsoon 2013 room and my soybean yields.  Simply put, there are no guarantees in this agricultural business and if we choose to farm, we have to accept some of the ups and downs in our production and price cycle.  I don’t like it any better than the other guy, but I do accept that I gladly volunteer to throw thousands of dollars into the soil each bring, hoping something will grow.  Is just what we do.

Of course there is always that unexpected Tuesday, which I haven’t mentioned it lately.  Right now we have Iraq splitting into sectarian pieces  despite billions of dollars spent by the United States patching that place together.  It is got our oil market a bit nervous.  The question is does we look out on the summer of 2014, how many other unexpected events might rear up to shake our agricultural markets.  It will not only be the weather, there surely will be something else come along.

The important thing for us as farmers is to continue to work our risk management plan to come out at harvest time on the winning side.  This is never easy and sometimes not very pretty.  The June 30th USDA report will surely be a grenade along that road.  However, it will not be the end of the story for our crop prices this year.  It will only be a chapter.  We still have a very long time to go before combines roll.