It is one of the latest harvest starts in several years for me. A late spring and a cold summer means my crops are very late this fall and as Canadian Thanksgiving is upon us, my combine hasn’t moved. My crop looks pretty good but I will have to rely on a benign late fall forecast to get it in the bin. Even though I’ve been here a few times before, it’s always so much better when you get the crop off early. So maybe next week the sun will shine and the crop will finally get mature. I look forward to my combine office for the next 6 weeks.
Of course it is the eve of another October USDA report. Analysts have all chimed in and everybody is on the bearish side of the ledger. The hype is so strong that the high side of the ledger is putting US corn at 178 bushels per acre plus and soybeans at 48 bushels plus per acre. These are record crops by a country mile and we all know the drill. We’ve been hearing since late June that this is the mother of all crops. It’s almost in the bin and maybe tomorrow the USDA will chime in with some of these big numbers. Of course, there are always surprises and there surely will be on Friday.
Digging out from those big crops will certainly take a long time. I was interested in the Statistics Canada numbers this past week for Western Canada pegging total grain production of 57.3 MMT (million metric tonnes) versus the whopping 68.9 MMT last year. That is still huge crop but much less than the mega crop of last year. Of course, we’re splitting hairs as the US numbers and the Canadian numbers add up to some very onerous grain supplies looking forward.
The October USDA report is pretty important, as it surely may possess some big numbers. However, the January report always serves as kind of a litmus test for the fall season. I don’t expect it to be any different this year. Big crops get bigger, but I think the other thing that you can take back from this year is that we get huge yields on cold summers, especially when the United States gets planted early. There is something about 80°F nights which doesn’t work for corn production. Where once we said rain makes grain, I think the new axiom should be cold summers make grain.
On the ground in Ontario and Québec it is a bit of a mixed bag. There is a fair bit of frost damage throughout the eastern parts of Ontario and into Quebec. There is also frost predicted for tonight, October 9th, which is unlikely to have any effect on soybeans but surely will end the growing season for much of Ontario and Québec corn which needed more time. This means low-test weight corn and lower provincial yields. However, until those combines start to roll through corn in Eastern Canada it is hard to know.
The question is on everybody’s mind is how are we going to dig out of all this? When will conditions come to bring us back to $5, $6 and $7 corn? Or is that simply a historical aberration only to come along about every 20 years. When I look at the predicted yield of 170 plus corn bushels per acre this year in the United States, something tells me those prices might be a thing of the past. Of course, this past summer Mother Nature played nice. That’s put us here in North America behind the eight ball on prices. Mother nature never really plays nice. Cold summers, who knew?
The supply and demand numbers are staggering. For instance, corn demand currently sits at approximately 13.605 bushels. It was only a few short years ago I could remember total production at 8 billion bushels. Now total demand is 5.6 billion more than that! Of course, that was back in the pre-ethanol days, which in akin to the Stone Age compared to now. Still, 13.605 billion bushels of corn demand is nothing to sneeze at. It means if there is any production calamity at all in the next 12 months we will have a strong possibility of a turnaround.
Of course in Canada the Canadian dollar is helping currently trading at .8926 US. That is boosting our cash values, effectively cushioning the optics of $2 range corn. Needless to say, in US dollar terms, we’re all in the same vote, saddled with prices, which simply don’t add up. It is a place, where I have been many times and is commonplace for our grains economy. It’s just that for the last 5 years we’ve become accustomed too much higher prices.
The challenge of course is to keep your powder dry and look for future marketing opportunities, which makes sense to you for the new crop year in 2015. The Canadian loonie surely will be part of that equation. The bottom line is, just like I will get this late crop harvested, we all will dig out of this low price environment someday. For the moment on both counts, its “hurray up and wait”. Patience and management will be key.