This week I started soybean harvest, a full five weeks ahead of when I started in 2014. After last year’s harvest from hell, I’ve been hoping for many good things and getting the crop planted early has led to an early start for me. It also helps that we have had a relative heat wave over the last week maturing the crops beyond what you might expect. In the next couple of weeks Ontario soybean harvest will be ramping up big time.
On my farms near the small town of Dresden Ontario I have been expecting about a 20% lower yield than 2014. However, if the first field is any indication I may have been too pessimistic. That particular field, which is in its third year of soybeans, being unable to plant it into wheat last year yielded over 50 bushels per acre. That might not seem like much to the big yields you see on twitter, but I was expecting so much less. So maybe, just maybe, the USDA is up to something when they say that US soybean yields are better than what was expected.
It will be quite a stagger to harvest across southwestern Ontario. I say that even though some corn is being taken off this weekend. For soybeans, I’ve harvested some already and I have some re-plants that are probably a month away. Of course, there is everything in between. However, as I write this I actually have wheat planted in the ground, which didn’t happen last year. So with skin in the game once again I will have to get my wheat marketing plan back on the rails.
If the weather holds and with this early harvest well on the way in Ontario, it is likely that we have a completely different crop mix going into 2016. I didn’t have any wheat planted last year, but I already have a quarter of my acreage planted this fall. If you multiply that across the Ontario farm belt, look for about 1.2 million acres of wheat to be planted this year up from 600,000 last year. I know. Wheat prices at the Chicago futures market have been on contract lows. Once again, thank goodness for our lovable Canadian loonie.
Our loonie actually dipped to an 11 year low this past week below $.75 US. That has mitigated much of the decrease in grain futures prices over the last several months. To quote DTN’s Todd Hultman, the DTN national index of cash soybean prices has fallen from $9.97 on August 10th to $8.18 last Friday. Of course all of these prices are in US dollars and when you make a straight conversion it means that cash prices for soybeans in Ontario off the combine are about $10.80 a bushel Canadian.
So in a very disjointed way, the optics regarding Ontario cash prices for grain prices are still good. I say that in a very categorical way. We’ve got cash corn off the combine at about $4.45 a bushel. These prices are not good especially when you look at the low futures prices for grain, but historically they’re right there with some of the good prices of the past. Sure, things have moved on and production costs are much higher but you do not hear the gnashing of teeth in Ontario like you do in the United States over these low grain prices. Simply put, foreign exchange makes everything better.
Of course, it is doing the same thing for US competitors for grains. In Brazil the Real is down 30% year on year with the US dollar. Where once the USDA was expecting a decrease in Brazil soybean plantings, that is now changing. It is become a primary driver for more soybean acres being planted in Brazil this October and November. Of course this is a bearish factor for the world soybean market.
On the other hand as all Canadian farmers know as our local currency goes down, inputs will be going up. The Brazilian farmer might be seeing a 30% decrease in the value of its currency versus the US dollar but this means that fertilizer will be much more expensive. So maybe our Brazilian friends will have a few more soybeans, but apply fertilizer with a teaspoon.
That will be a debate for this winter, but keep an eye on Brazil plantings coming up in October. A few hiccups down there will help our soybeans futures market. In the meantime here in Ontario, a possible record corn and soybean harvest is in the offing. With a little help from our Canadian dollar, its taking the edge off. Hopefully, those soybean futures prices will see fit to bounce off their lows and create a whole new story going forward.