The soybeans are starting to turn color here in southwestern Ontario. For those of us who planted into Canada Day and after it is a welcome sign. It is difficult to tell whether some other type of nutrient deficiencies might have hastened on the ripening, but it’s that time of year when the shorter days grow more noticeable. Harvest time in southwestern Ontario is right around the corner.
It has been a hectic year getting to this point. That is partly because USDA, as a purveyor of all the important statistics has been somewhat hesitant to get it altogether this year. The end of June production numbers usually serve as quite a benchmark for the number of acres actually planted. However, this year the production season was so difficult in the Eastern corn belt we are coming into September with really no idea what the true picture of how many actual acres replanted or how many will be harvested. Needless to say, the USDA chimed in today with their latest WASDE report.
The USDA pegged corn production to come in at 13.799 billion bushels. This was a cut from last month and down from the 14.4 billion bushels we had last year. The USDA pegged the US national corn yield at 168.2 bushels per acre. The USDA lowered ethanol demand and food, seed and industrial demand. This will translate into a 2.19 billion ending stocks for corn in the 2019-20-crop year.
Corn was up on the day, even though the report was neutral to somewhat bearish corn numbers. Part of the bounce in corn prices had to do with ongoing rumours of Chinese buying soybeans out of the Pacific North West.
Soybeans were up big on the day, up 29 cents, which counts as a bit of an earthquake in our current soybean market environment. The USDA pegged US soybean production to come in at 3.633 billion bushels with a projected US yield of 47.8 bushels per acre. The decline in the soybean yield based on 76.6 million acres means a much lower ending stocks for next year at 640 million acres. Comparing that figure with the 1.01 billion last year is a significant reduction.
For people looking for some type of redemptive epiphany from USDA that they got the yield and acres all wrong for corn and soybeans, its time to stop the dreaming. Despite one of the most difficult springs we’ve seen in many years, the USDA believes the crop is there. You might get some redemptive bounce from when combines roll, but these crops aren’t much different than last year with regard to bushels per acre.
At the same time that soybeans are turning colour here, farmers in Brazil are beginning to plant another soybean crop in specific Brazilian states. This year USDA is projecting another record crop of 123 MMT of Brazilian soybeans, spurred on by Chinese demand. At the same time Argentina has benefited, this past week signing a large agreement with the Chinese to sell them soybean meal. Needless to say, some type of South American production calamity this up coming season would send soybeans prices higher. That certainly doesn’t fit the Chinese narrative, but it remains about the only way to see a big rise in soybean futures prices.
Of course the other way to see soybean futures prices rise significantly is some type of trade peace between the United States and China. Just another unproven rumour today sent soybean prices 29 cents higher. It’s always been difficult to predict what may happen because of the spontaneous nature of the US President. I’ve always taken the position that the Chinese will be gone for a long time. They will only be back if South America gets in trouble.
Corn of course is a bit of a different animal. As it is, the crop is seen now as a bit better than many analysts had imagined. Expectations can be a funny thing. My own crop I think is about as I expected, below last year’s record yield. The spring was so cruel; my expectations were even lower after I pulled out of the mud this past spring. However, at the end of the day, maybe these 2019 corn genetics are superman. Maybe it’s that way across the greater North American Corn Belt.
The redeeming force in Canadian agriculture remains the Canadian dollar, which actually pushed thru 76 cents today. It must remain low especially at a time when grain futures don’t have a lot of juice. The USDA report didn’t give us much. Grain demand is being eroded and the grain supply hasn’t been eroded enough.
Despite these issues, our marketing window is not closed. There are still potential good marketing opportunities ahead. We can’t put lipstick on the pig now after such a horrendous Ontario spring. However, that put our basis at levels where profits can be made. There may be more ahead. Daily market intelligence will remain key.