The Crop Isn’t Made Yet, But Elvis May Have Left the Building

2019 is turning out to be quite a spring. That is for inaction on my farm. Constant rains including another tonight have meant that hardly anything is done with regard to spring planting in southwestern Ontario. For myself, I have not turned a wheel, even though I’ve been getting ready to plant for the past six weeks. At a certain point, like all farmers know you can only do so much. Putting that planter in the field is the true litmus test for getting things done. Hopefully, hot sun is on its way.

At the same time, there is the constant noise in the background of a grain market being ravaged by the political back-and-forth the trade war. As I write this, our American friends are set to raise tariffs on $200 billion dollars of Chinese products up to 25% from 10%. We already have a 25% tariff on American soybeans going into China. There is also a 62% tariff on American Pork. People that are reading this commentary surely want it to end, but it seems that the American President has a different idea. Just late this afternoon he said he got a beautiful letter from Chinese President Xi. The bottom line is, nobody knows.

When markets are uncertain generally prices don’t go up and that has been the case for grains over the last week. Today, soybeans briefly had a $7 in front of the nearby month, something that I have not grown accustomed to over the last several years. However, I do not hanker for that type of revenue stream. These times are pretty tough now for grain farmers in the United States and Canada. As I’ve said many times, markets work when politicians allow them to. We are not there yet.

In Canada the collateral damage from the trade war with the United States and China continues. We all know about the Chinese not buying canola and pork but this past week we got another Canadian product, dairy semen added to the list. The Chinese have delayed the purchase of Canadian dairy semen. A lot of my Twitter followers joined in and said that they will be denying themselves the best dairy genetics in the world. None of this is a good thing. Geopolitical factors in our agricultural world continue to reverberate.

At the same time the USDA is set to chime in tomorrow with their latest world agricultural supply and demand report. This should give us an early estimate for the 2019/20-crop year. I know that you really shouldn’t hold your breath, especially after my last paragraph. Needless to say, sometimes the USDA does give us a bit of semblance of something going on. All the grain future spread is bearish and that is likely to continue. Hopefully, there is a butterfly fluttering somewhere in the agricultural grain demand arena.

Of course, I don’t have any corn planted yet but I’ve got great expectations. In fact, if I was willing, I plant a lot more corn, but there’s only so much that I can do with corn in the fall. I like to be home for Christmas. Ditto for many American farmers who have just as many wet fields as myself. As a May 5th, we have only 23% of American corn planted and this is the slowest since 2013.

The grain market has been moribund. Soybeans have been the peripheral whipping boy. In the USDA report tomorrow, the Dow Jones per report survey is expecting old crop US ending stocks to be close to 925 million bushels for May, which would be a record high. This is where we could get an even bigger surprise, with the USDA going even higher. Soybeans are looked at as the new wheat, something I couldn’t imagine a few years ago when I constantly talked about China’s voracious appetite for soybeans.

The market reality in the spring of 2019 is almost directly opposite to what we are used to. For instance, in new crop markets, I know lots of you who like to price their corn and their soybeans in the spring or the winter. In fact, many of the highs over the last few years have taken place in May and June. At the present time, we’ve got soybeans as low as they were last September and December corn has got anybody excited either.

The Canadian dollar continues to help Ontario and Québec farmers. However, we’ve been relying on that story for quite some time now and we need a new narrative. Our American friends may be getting another round of Market Facilitation Payments, depending on the success of any potential trade deal. You know in Canada there is none of that for us. The challenge will be to change your expectations, even more so if we haven’t changed them already. The bottom line is, even though the market is acting like the crop is made, it isn’t even planted yet. There is likely to be marketing opportunities ahead within a tempered outlook.

In a perfect world this coming week, I’ll get planting along with all of you. There will be a trade deal with the US and China, where the Chinese will be expected to buy a third of American soybeans. The Canadian dollar will drop a couple of cents. Maybe the USDA will give us a few bullish nuggets. Maybe Elvis is in the building. Hopefully he hasn’t left town.