The USDA held its annual Agricultural Outlook forum this week and gave its first estimates of how many acres of corn and soybeans US farmers would plant this spring. According to the USDA we’ll see 89 million acres of corn in 2015 and a paltry 83.5 million acres of soybeans, much lower than some analysts expected. I don’t know if they are right about soybean acres, but they sure are drinking the same kool-aid as I was. Visions of 89 million acres of soybeans bandied about over the last several months, never seemed to make much sense to me.
Last year, US farmers broke their previous planted record by 7 million acres, a huge jump, which eventually turned into the biggest US soybean crop ever. Although the March 31st USDA report might give us a better number based on actual surveys, it would seem that soybeans have had their riens pulled in.
We’ve still got South America to weight in with their big crop. Recent rains have slowed harvest, but eventutaly those beans will get to market. I think we all know the drill when we have the changeover in supply from US to S American soybeans going to China.
In Ontario and Quebec, the cash grains market has changed much from last year. Of course the biggest change from last year is the 80 cent Loonie. It has redefined cash markets, as well as provided a stimulus for the Eastern Canadian economy. In Ontario and Quebec last year’s cold summer hurt corn yields. Despite the Agricorp yield of 165 bushels/acre, which would make it one of the biggest crops ever, quality issues presented problems. Large amounts of US corn came into the region to fill in the utilization.
No one every hopes for disaster and I’m certainly not going there. Clearly, the loonie has given us some advantages on farm prices, but $3.86 is really nothing to get excited about with regard to futures values. These prices are less than half what they were 3 years ago, spreading less revenue per acre across the land. Demand for grain is at record levels and when the supply hiccup comes, like it invariably will, demand will not be easily deterred. Whether mother nature decides to rein in production this year is up for conjecture. However, it will happen and prices will eventually improve.
The savings grace in my opinion continues to be the low interest rates environment we find ourselves in. It might get more interesting this summer as I believe the US Federal Reserve will be raising interest rates. This comes after our own Bank of Canada cut rates to .75 of 1%. So if and when the US makes their move, it’ll be good for the US greenback, bad for grains futures prices, but force the loonie even lower. Depending on whether we get a crop scare of “hot and dry”, that scenario will make Canadian cash grain pricing very tricky. $5 and even $6 corn in Canadian dollar terms could be part of that scenario.
Of course that’s assuming a heat dome of doom and the loonie dropping even more. The crop mix in Ontario will likely be 2 million corn acres with soybeans topping over 3 million acres. I’ve even heard rumblings with only 600,000 acres of wheat acres in the ground, barley and oats are going to make a huge comeback because livestock regions need the straw. So it’s a bit of an ecletic crop mix going into the Ontario and Quebec spring of 2015. Weather of course at the end of the day, is always king when it comes to those decisions.
Our American friends constantly talk about the “crop insurance period” as one critical for cropping decisions. I don’t understand totally, but it has to do with crop insurance revenue guarantees, which we don’t have in Canada. Here, any semblance of an agricultural safety net is in shambles.
None of this is very good for us in Canadian agriculture. However, in 2015, you hear nothing of the days ten years ago when farmers were rallying across the country for an agricultural safety net that works. It would seem the higher prices of the last ten years have produced a younger Canadian farmer who doesn’t care about income stabilization. It is definitely priority zero of our federal and provincial governments.
Needless to say, in this February of 2015 with bitter cold temperatures on my farm, visions of spring planting seem so far away. However, with low interest rates as our farm management adrenaline and the loonie as our agricultural Viagra, there is hope ahead. Whether Mother Nature plays nice this year, will be another question.