I’m getting a little bit too old to hand bomb 25 kg bags of soybean seed into a 20 foot no till drill. However, sometimes in a pinch that’s what you have to do. Believe it or not, on June 25th I was making a decision on whether to patch up a field of soybeans, which had emerged unevenly over the last month. Rainfall has been so frequent and violent at times that only today was it dry enough to replant. A couple years ago I replanted on June 29th, so June 25th is somewhat old hat. Hopefully at the end of the day sometime in October my efforts will be rewarded.
Why I had to replant those soybean acres is a bit of a mystery to me. However, there were microbursts of thunderstorms in the area, which inundated that field at obviously the wrong time. Sometimes in agriculture its difficult to know exactly what happened. Needless to say, a month of wet weather hindered my progress in fixing the situation.
At the same time that I was doing that, there were similar situations occurring all across the Eastern American corn belt. It is finally showing up in market action. The November soybean contract posted its highest close in three months as it broke through its 200 day moving average. Markets have shown a little bit more resilience lately and this is starting to become very real. Noncommercial traders are actually lessening their short positions and it would seem at least for the moment that momentum shifting.
Of course the problem is supply is at risk. We are not talking a 2012 calamity here. For the last several weeks’ torrential rains have swept across the parts of the US corn belt, effectively taking away record yields. We still are looking toward a decent crop, but with waterlogged fields in many parts of the Eastern corn belt, any farmer will tell you that’s not good. Just as I have got whacked by rain on some of my fields, so have many others. Yield is taking a hit across the board. The market seemingly is waking up to that.
It’s interesting stuff for sure. Heavy rains are not like “hot and dry”. One reason that I was in such a hurry this morning to get my replant done was because rain had been predicted and I was planting into heavy clay soils. In fact, often, when I walk those fields I hear a “gulching” sound, which means saturated soil underneath. Flash torrential rains make that worse. Multiply that across many areas in the Eastern corn-belt and we simply have a picture of decreasing yields. It might not be huge, but the bearish character of this grain market is changing rapidly.
On June 30th, the USDA set corn acreage at 88.9 million acres, which is the lowest corn acreage figure since 2010. The USDA also pegged quarterly corn stocks at 4.45 billion bushels with soybeans pegged at 625 million bushels. Soybean acreage came in at a record 85.1 million acres. The lower corn and soybean stocks were seen as bullish for the market and with the new crop seemingly underwater across the American corn belt it led to a surging market on report day.
The bottom line is that parts of Illinois, Indiana, Missouri, Iowa and Ohio received more than 10 inches of rain in the past month. That says something. In Ontario, Essex County, has actually caught much of this. Many farmers there have not planted for the first time, as there has been record rainfall in May and June. I’m only about 50 miles away from there but at least I got things planted. Needless to say, much of southwestern Ontario crop yields this summer will be uneven. There’s been too much water inundates many areas of this province in an adverse way. However, it’s all about where you are. A decent provincial crop might still be realized, but record yields I believe are gone.
This may manifest itself in some sloppy basis levels this fall for corn. The quality may certainly be there in southwestern Ontario but maybe the yield won’t. Of course, nothing has greater potential to affect basis levels than the value of the Canadian dollar currently trading just under $.81 US. Needless to say, as we head into next July and August we have a bullish twist to our grain markets. What it means is violent volatility will surely be the order of the day going into early summer. For Ontario and Québec farmers this is the time to have those standing grain orders ready. Unfortunately, it’s also the time when you wonder how much crop you might have. For whatever reason mother nature hasn’t been playing very nice. With the big June USDA report in the rear view mirror, we’ll see how it all shakes out.