No Time to Throw in the Towel On Corn Prices

One of the toughest parts of a wet spring is being patient enough for the right soil conditions to materialize for planting.  That was certainly the case this year as late April and early May rains made it extremely difficult to get soils into shape to plant.  It finally came around June 1st and then of course since then I’ve been waiting for the soybeans to emerge.  Then you begin the tedious task of measuring how many soybeans actually made it up. I replanted some acres this year, in fact, it is usually an annual event.

Of course as I look ahead, it’s not lost on me that we are in mid June and last year the corn price high was put in on June 18th.  Some of my standing orders have hit and some of them have not.  We are moving into an extremely critical time when the market will decide what happens the rest of the way.  With the onerous ending stocks we have in both corn and soybeans, it’s like I’ve seen this movie before.

Of course in Canada we have that cash price mirage partly created by the low Canadian dollar. It is easy to become comfortable with the dollar floating between 72 and $.74 US.  It’s like we can’t remember the par values from 2013.  However, this past week comments from my twin brother, Bank of Canada Governor Steven Poloz lit a fire under the loonie.  After the US Federal Reserve actually lifted interest rates, he mused that the Canadian economy was doing better and that the lower interest rates of the last two years had done their work.  In other words, Canadians, I wouldn’t be surprised if Canadian interest rates go up.

The loonie rose to 75.62 cents on Tuesday, before settling back to 75.44 cents US Thursday night.  It jumped 1.1 % alone on Monday.  This sent basis levels for corn, soybeans and wheat down in Ontario.  With the sideways futures, it wasn’t the best week for prices.  Of course, it is still important to have the standing orders ready, as there is still a multitude of analysts who are talking $4.25 for Dec corn.

December corn is currently at $3.97 a bushel.  I don’t know if that’s getting anybody excited.  However, our price optics are much better than our American friends.  Farmers can get $4.93 off the combine now this fall, with $5 corn available over the past week.  I would muse that Ontario acres come in around 2 million with the yield the wild card to think about as this haggard crop heads into July.

So where are the corn market bulls?  From my standpoint, it seems they are in our imagination. I was interested in Todd Hultman’s column this past week, “Stingy Corn Prices Try Again”.  In his piece, Todd writes 70% of noncommercial positions were long when corn prices hit the top in 2015.  In 2016, Todd writes, 76% were long, but as of June 6, 2017 only 48% were long.  In other words, even with all the problems we’ve had this past spring in the US corn belt the investment crowd doesn’t have any bullish effervescence in the corn complex.

That was pretty sobering for me.  As a farmer, I always make the point that I’m always long.  I throw tens of thousands of dollars in the dirt each spring hoping my corn will grow.  How can I not be long?  Needless to say, ending stocks projected going from 2.295 billion bushels to 2.11 billion bushels based on 90 M acres and 170 bushels/acre US national yield doesn’t give me confidence either.

So, do we all throw in the towel now with corn prices?  I have one particular friend who is looking at December corn getting to $4.25.  Of course, I ask him when and he says I don’t know but the spark might come on June 30th with a rogue corn acres number.  The point being, nobody knows, but if you are a corn bull, that scenario is at least plausible.

Yield will be a big part of that corn price equation both in futures and in cash prices in Ontario.  It is hard to imagine Ontario corn coming in better than last year over 160 bushels per acre.  However, the last few years in Ontario have seen phenomenal corn yields and it’s hard to bet against it.  Needless to say, if this tough start to the year continues and it turns into a bad year with Ontario corn yields sub 140 or 145 bu/acre, cash basis will increase especially on the new crop end.  So it remains a critical time for market vigilance.

Friday morning there is also a bullish sign for corn bulls.  I’m actually taking my corn head in for service after not spending a dime on it over the last 13 years.  So at least I’m hoping for a big crop to make that pay.  It’s unfortunate that we always have to wish for misfortune in some other corn growing area.  In 2017, we are entering that time when the corn price will be actually forged.  For the next few weeks at least, it should be a volatile time.