Markets Flex as Tough Ontario Crop Conditions Face “Hot and Dry”

It has been a tough spring in Ontario.  This past week I finished planting my soybeans, only to take my seed drill back to the first farm where I had planted soybeans before a hard rain a couple weeks earlier.  The soybeans were entombed like they sometimes get under heavy crust and there was little hope for them.  The hardest part about replanting is thinking about it.  After phoning crop insurance, I was in replanting soybeans, which unfortunately is usually an annual event.  Hopefully, those events will not be too frequent this year.

The replant is particularly big in the Dresden area.  However, it does not end in my district.  There is widespread replanting going on across Ontario in both corn and soybeans.  Seeing corn replanted in June is a tough one.  Our seasons are not that long compared to our American friends.  In my mind, it’s shaping up as a less than stellar growing season in Ontario.  Is hard to imagine the corn, which has been planted reaching last year’s provincial yield numbers.

Of course, there is a long way to go until my combine roles through harvest fields.  Needless to say, there is much uncertainty with regard to the Ontario yield as of now.  I know that I find it particularly troubling to be wildly optimistic about a crop until it emerges from the soil.  All of my soybeans are underneath the ground still, I just hope they hurry up and get through.  I’m certainly not alone with this uncertainty.  You can see by market action over the last few days, maybe the computer algorithms are waking up to the specter of a less than stellar North American crop.

With this uncertainty we actually have the opportunity to contract $5 corn in Ontario.  Yes, that is in Canadian dollars and it might be a bit of the mirage, but it is the highest price since last June 18th.  It has responded because of the widespread problems south of the border.  With hot and dry weather moving into the US corn belt this coming weekend, we could see a pivotal time in market action Monday.

With hot and dry predicted throughout the American corn belt this weekend the specter of a Friday USDA report might seem a bit anticlimactic.  However, on Friday we will see the latest estimates from the USDA.  How will the USDA adjust the expected corn and soybean production?  How will they look at the ending stocks for corn and soybeans?  Will they adjust upward the Brazilian corn crop?  Will there be a surprise?  Or, will the USDA simply tread water until the huge actual USDA planting report coming out on June 30th?  With the sizzle getting back into the weather, it should serve a volatile grain market.

Does the phrase; “hot and dry” give you visions of $8 corn?  If it does, I’d ask you to be a little bit more realistic.  In many ways, I think we’re back to the pre-ethanol days where drastic shifts of supply might affect price, but not demand.  Simply put, we have become accustomed to record demand in both corn and soybeans.  Our supply situation has kept pace with that demand, constantly outstripping it over the last few years putting our prices in a low sideways range.  Case in point is the corn ending stocks of 2.295 billion bushels recorded by USDA in May.  That might shift a bit tomorrow, but hardly significantly.  The bottom line is corn ending stocks over 2 billion bushels are a problem for the corn price.

Of course, 100° weather in Iowa this weekend will surely have an effect on the corn price too.  My adage always is, “nobody knows” when it comes to price.  You simply have to measure all the market factors and make the best decision that you can.  Simply put, nobody knows the weather over a wide crop area, which can be a greater determinant of final yield.  Heading into the middle of June we are reaching into the critical growing period for corn.  It’s time to renew those standing marketing orders.  Volatility can come at this time of year when you least expect it.

Looking past the USDA report tomorrow will certainly become sport over the next 10 days.  The June 30th report always comes at a time when the US crop is reaching critical mass.  Add in any acreage surprise such as 88 million acres of corn versus the 90 million said in March might get things going.

Of course, I farm for a living and with most of my crop still underneath the ground I’m hoping for the best.  It is not easy sometimes.  However, when that crop gets above the ground I can see my way ahead.  This tough spring will come to an end.  We can only hope the summer markets will be kinder.