Canada Day dawned hot and dry last Monday. It is one of my favourite holidays and I often spend it near Fort Malden south of Windsor Ontario. For those of you who don’t know, the British built Fort Malden in the late 1700s to defend against the Americans. It was a very important Fort during the War of 1812 and after. On Canada Day, they often have re-enactments, which goes good with the historical part of my personality. Every time I’ve traveled to far off lands, I’ve always looked at that Canadian flag a bit differently on my return. Sure it gets cold in winter, but I’ll take this beautiful country above all.
The border since 1812 has grown much more friendly even though since 2001 we’ve required a passport to pass. Before that, people could flash a birth certificate or driver’s license on their way to a quick trip over the imaginary line. Well, things have thickened up now. The only thing we probably can’t restrict across that border is the weather. Whatever the Americans send, we’ve got to accept.
Unfortunately, in 2019 that was a load. As all of you know, grain markets have boiled over the last month as traders woke up to the fact that problems getting crops planted in the Eastern corn belt has been real. It was the worst spring in my long career. Many other farmers can make that claim too. However, I still got planted. There were many farmers in the United States and in Ontario, who didn’t get planted. That has sent a ripple underneath the grain market.
On June 28th, the USDA increased their corn-planting estimate to 91.7 million acres from the previous June estimate of 89.8 million acres. This was a shock to the market, as gains in corn acreage were not expected especially in light of the widespread planting problems in the Eastern corn belt. The USDA also announced American farmers would plant 80 million acres of soybeans; 4.6 million acres lower than their March estimate. It left people exasperated. How many corn acres did actually get planted in the United States? Ditto for Ontario and Quebec.
The questions are real. About an hour after the report was released, USDA announced that they would be re-surveying acreage planted to corn, cotton, sorghum and soybeans in 14 states in the first part of July. The results of this survey will come out in the August 12th USDA report. Huh? Like, is this real? On report day, corn was down the limit at one point and since then has gained almost everything back. However, coming two weeks after USDA cut US yield by an unprecedented 10 bushels per acre, it was a weird USDA moment. On August 12th we might learn more.
Obviously, there are issues with the 91.7 million corn acres planted in the US. Even if you believe these numbers, there are obvious compromises in US yield. Market watchers will be looking to how many acres go into prevent plant, a US program that pays farmers for acres not planted. However, the bottom line is, antidotal yield and acres accounts are what they are. For at least the next two weeks, we’ll be trading USDA numbers along with summer weather.
Having said all that, let’s not mistake what we have just come thru. I was ready to plant in April along with a lot of other in the Eastern Corn belt. I actually replanted a very small acreage on Canada Day. For many others, and me it was worst spring of our careers. Large tracts of the Eastern Corn belt are just planted or didn’t get planted at all. In these pages over the last 33 years, we’ve talked about price appreciation because of a production calamity on the other side of the world. This time it was squarely aimed at southwestern Ontario and the greater Eastern corn belt. Our number came up.
Clearly there will be consequences for the Ontario grain economy. Over the last several days, I’ve had many interview requests from media to explain the implications of what has happened. The media was late to the game, which is entirely understandable. A lost dog story rates higher than Ontario agriculture in trouble. However, in a nutshell, there likely will be a corn supply disruption this year in Ontario. Statistics Canada said 2.2 million acres were expected to be planted. I say we might have got 1.7 million acres in, with much of that compromised. That will leave a hole of maybe 80-100 million corn bushels short of normal.
At the same time, soybean yield is likely to take a big hit. Soybeans planted on Canada day are likely going to take a 20-bushel/acre-yield hit vs. being planted in May. Multiply 20 bushels per acre times $11 a bushel and that figures out to be a $220/acre hit on revenue, all things equal. None of this is good I try to explain to the urban media.
The drama in the fields is not over, it’s simply moved into the market realm. USDA in the next 5 weeks will juggle all of the variables, re-surveying, or whatever they do. The weather has changed from constant rain, to hot and dry. Is the corn knee high on the 4th of July? Spare me. We’ve got an eternity left to go.