Are Grain Prices Turning the Corner?

I checked on my soybeans today. It’s a cool time of year, mid-September. Typically, the days are still warm and crops like soybeans seem to accelerate into harvest. It’s just been the opposite here in the deep southwest of Ontario this past week, but the crop is advancing. If I had bright sunny warm weather, I’d be expecting to dip the combine into those soybeans in less than three weeks. It’s been a good year for soybeans in my area. The recent run up in soybean prices is just what the doctor ordered.

I’ve had standing orders hit and more put in place. Grain marketing can be challenging here with the value of the Canadian dollar fluctuating at the same as futures are moving. It’s turned farmers into flat price sellers. Keeping abreast of the risk on futures vs foreign exchange hoping for a perfect pricing storm almost never happens. However, some might argue a Canadian dollar at .7583 US and soybean futures at $9.77 is pretty close. Needless to say, nobody knows what markets will do.

We’ll get the latest estimates Friday from USDA which will look at actual conditions in the field. Remember, the August 12th USDA report came out two days after the Derecho winds and before the devastating drought in parts of Iowa and Nebraska. Surprises could be real in this report, but with late breaking drought and a surging market over the last month, it’s almost if the cat is out of the bag. The market has been speaking over the last month.

Crop weather is one thing, but demand shifts are another and it’s been a large part of the greener grain market over the last month. To put it mildly, agricultural demand for both corn and soybeans has been put through the ringer over the last two years. Not only did we have the Chinese slapping tariffs on American soybeans, but we also had an erosion of the RFS (Renewable Fuel Standard) in the United States. Just as hope starting to arise from a softening in the trade war, we got hit by Covid 19 which fractured much of the agricultural demand picture. This helped send prices south, as grain production numbers were projecting higher. However, that has been changing over the last six weeks.

We’ve still got Covid 19, something I wrote about last week. However, China has started the road back in buying American corn and soybeans. It’s still behind where it should be, but it’s a start. As of September 9th, according to DTN’s Todd Hultman, the US has 685 million bushels of new crop corn sales dialed in, the most booked at this time of year in at least eight years. There are 960 million bushels of new crop soybean sales on the books, which is 45% of what USDA expects for his crop year. Brazil is out of soybeans and the US has beans at a big discount to Brazil ports.

What’s that mean for future grain prices? The answer is always the same from me, I dunno. Remember, daily market intelligence is key. Immerse yourself in market factors on a daily basis and make the best decision you can amid your own risk management horizon. I often chafe on analysts and even farmers who point out publicly their marketing acumen, often citing what should have been done. Needless to say, that’s never true, as nobody can predict the future. Make your marketing decision and never look back. The present and future needs to be managed as well.

The grain marketing world continues to be fluid. For instance, today, the minister of Agriculture in Germany announced that a wild boar carcass found inside Germany near the Polish border had tested positive for African Swine Fever. Germany had erected fences along the German Polish border earlier this year in a hope of stopping African Swine Fever from infiltrating German hogs. Germany is the largest pork producer in Europe. On the news, US lean hog futures surged higher on the news. Slaughtering capacity has been growing ever more aggressive. This can only be good for more US corn disappearing. 2020 had been brutal, but geopolitical surprises can still positively affect our markets.

About a month ago, I was invited to be on a virtual commodity panel with three American analysts at the University of Illinois. The American analysts were excellent, but mainly dealt with the August 10th Derecho damage. I offered that I thought something was amiss in China. It seemed to me their demand was far more robust than I expected especially in corn. Add to the fact now, typhoons have caused widespread crop damage in the north west of China. We might see more and more demand from there and they better hope for no Brazil production calamity this winter. If that happens, prices will have one direction upward.

Of course, we dunno. However, we will know the latest from USDA on Friday, and we also know our Brazilian friends will begin planting soybeans in October. They are expecting another record crop, possibly up to 133 MMT of soybeans for 2020/21. There is much to consider. However, for Ontario and Quebec farmers currently eyeing that ripening crop, its time to recalibrate those standing marketing orders for grain. This world is changing and maybe, after the last few years of uneven grain prices, we’re slowly turning the corner to something better.