I’m Planning On Farming in 2015: A Look Ahead

Chatham, On. Photo by Tammy Foster/Brent Foster Photography     For many farmers in southwestern Ontario we’re just getting ready to harvest fall crops.   Here in southwestern Ontario crops got planted late, for instance I started planting corn this year on May 22nd and soybeans on June 6th.  That usually doesn’t turn out to be too much of a problem, but this year we had a very cold summer.  So as I look at crops on September 5th, I need a wide-open fall to get those crops to mature.  Give me a frost-free time frame until Canadian Thanksgiving and I think I will take that.

If I make it to the maturity finish line, I think I will a bin buster of a yield.  In this part of southwestern Ontario, we had very good weather post May 22, although we would’ve liked to have more heat.  We know prices are down and that is not a good thing.  However, the last time I checked I am planning on farming in 2015.  So at this early stage maybe we should take a look into next year and see where prices might be going.

One of the cruelest places to grow grain in North America over the last year has been in the US northern plains and of course in Western Canada.  I often post cash prices for corn across US corn belt on twitter.  If you look at the cash prices you will see a zone in western Minnesota and North Dakota and parts of South Dakota where the price of corn is extremely low.  For instance tonight on September 4th one local elevator is reporting cash bid of $1.96 a bushel.  Most of the prices are in the $2 range, but it is been obvious all year because of a lack of rail movement cash basis has been abysmal.

I used to have a saying that cash prices are King.  I don’t tend to say that much anymore but I still think that a good understanding of cash markets are important even though futures prices are always more sexy.  At the end of the day if that elevator is only offering a dollar 96 a bushel for corn on September 4th that means that it’s all they have to bid.  They are offering that bid because they can.  Ditto across much of the northern plains as cash prices reflect the reality that they need not been anymore.  There is grain everywhere and if it can’t be moved, it is what it is.

My question is why would you even entertain the notion of planting corn in this area in 2015 was such a big crop in the offing and basis levels which are saying we don’t want your corn?  The same thing can be said in Ontario Québec at a much different level.  It’s pretty obvious that you can’t be growing corn when you get a $1.96 bushel, but in Ontario and Québec maybe you can grow it for $3.50 a bushel.  I know it’s a stretch.  The point is the choice might be not to grow corn in 2015, so acres will go down significantly.

Of course you could say the same thing about soybeans or even wheat for that matter.  We find ourselves in a situation where the world has a big grain surplus situation, even though demand is quite strong.  The difference is corn costs a lot more to grow than soybeans and so it becomes much easier to grow soybeans versus corn in tough financial times.  These times aren’t tough compared to the days of 23% interest rates, but for many it’s all-relative.  In Ontario the variable costs alone to plant corn are between 400 and $500 an acre.  Soybeans are much less, but outcomes are never guaranteed.  Corn has always won the day because of its superior productivity.  However, even that grows old when the price goes low.

At the same time our South American friends are planting more soybeans come this fall.  Brazil is set to produce 91 MMT of soybeans, another record year according to USDA.  Sure, our Brazilian friends still have all kinds of logistical problems, but at the end of the day they always find a way to get those soybeans to port.  There are other problems in Argentina, Paraguay and Uruguay but if all these soybeans reach market and China has a hiccup, it could definitely be a make or break year for soybeans in 2015.

If I didn’t know, it’s almost like I’m writing this piece back in the bad old days of the 1980s, minus the interest rates.   There could still be a myriad of weather related and geopolitical problems that sets the Bears on their posterior.  This is agriculture, where change is the only constant and the unexpected is the expected.  In 2015, most of us will be out there just like we were last year planting crops.  It just looks from here crop prices maybe in a completely different world.