I took some pictures today of some of my SRW wheat emerging from a field which is long overdue for wheat. In the deep south west of Ontario, the acreage of winter wheat largely depends on whether mother nature gives us the opportunity to get it planted. This year I’ve been fortunate, getting over half my acreage planted going into October. However, today, while lightening flashed in the west I was chased out of the field planting wheat amid hail and rain. Sometimes mother nature doesn’t make it easy.
There is still quite a bit of time to get wheat in. On my heavy clay land rotation is important and when you miss a year of wheat, it makes things harder. In 2019, I had no wheat and, in the fall of 2020, I’m trying to catch up. I expect to have more wheat than ever in 2021. Much will depend on when the rain stops falling outside.
That will happen it always does. What doesn’t happen is unusual grain price movements you don’t expect. That’s what we got this past week because of dry weather in Brazil and a surprising USDA report, which came clean by admitting the 2019 crop wasn’t as they had advertised.
On September 30th, the USDA released their report on September 1st grain stocks. The USDA announced there was 2 billion bushels of corn stocks on September 1st and 523 million bushels of soybeans stocks. Both of these counts were significantly below the trade expectations. USDA lowered 2019 soybean production 333,000 bushel, while leaving harvested acreage unchanged. 2019 corn production was actually increased slightly. The corn stocks number was approximately 248 million bushels below expectations. Grain prices surged on the news.
The other part of the equation was renewed Chinese demand for American soybeans and dryness in Argentina and Brazil. There is also the spectre of a La Nina weather event once again manifesting itself on South American production fields. Add in the non-commercial demand that has ramped up in the soybean complex and you had a perfect storm, at least this past week to push grain prices higher.
In Ontario and Quebec, this means $5 corn and $13 soybeans off the combine, magic numbers for a farming populace who prefer flat pricing opportunities. As you know, I never offer opinions on when you should price grain. However, I’ve read many commentaries this week about guys who think they priced grain too early. I even had calls from Canadian analysts that should know better. I still don’t know where grain prices are going, but you can’t rule anything out. Immerse yourself in market information and have those grain price marketing orders ready. After that, don’t look back.
Risk management is a funny thing sometimes when you really think about it. If you look at seasonality in grain prices, about right now we should have the lowest prices of the year. However, we have the highest prices of the year unless December shows us more! At the same time, those pictures I took of emerging wheat has to go thru 4 different distinct seasons for me to realize any reward from planting it. Those risks are high, but in the farming world we consider that normal. Add in the subsurface drainage and the whole host of other crop management options to keep that crop alive to next July and the investment is real. There is a lot more to growing wheat than growing wheat.
When you combine the risks, it makes for quite a journey. In Quebec and Ontario, part of our production risks are covered by a pretty good crop insurance system. However, the revenue risks continue not to be, even though the Grain Farmers of Ontario are lobbying hard. This past week they joined forces with the Atlantic Grain Council and the Producteurs de grains du Quebec in a joint campaign to raise awareness with the Canadian public about the consequences of competing in this marketplace with unfair subsidies going to our American competition.
Well, I hope they are successful. I’ve been pounding that rock for over 30 years writing this column and leading numerous protests 15 years ago across Ontario. Needless to say, it’s time for younger people to lead that charge. If they want to dust me off someday for effect, I’m all in. Needless to say, getting a Canadian agricultural safety net that works, remains a big priority after all of this time.
In the meantime, I’m hoping the rain stops and I can get back into my combine again. $13 soybeans and $5 corn doesn’t lie. 2020 had been a mind-bending year, in so many ways, even without mentioning that virus, which continues to dominate. As we move ahead, our risk management horizon is just going to expand. A bit drier weather in Brazil would make it even more interesting. At the end of the day, it’s about the decisions that we make on our farms. Daily marketing intelligence will remain key. Taking that risk off the table incrementally at the appropriate time, will never grow old.