One of the biggest decision I make in the spring is deciding when my soils are “fit”. It’s something that all of us do as crop farmers. In the deep SW of Ontario, every April and May, that is decided as we first put equipment in the field. Of course, “fit” might mean different things to different people among regions. For instance, are their differences between my field being fit in southwestern Ontario and the farmer in central Alberta who is getting ready to plant his canola? Sure, there is, my soil is different and so are my circumstances.
There are rules of thumb. For instance, some people take a shovel and see if the soil crumbles or they work a little bit of land and look for the same. If the soil balls up, it’s not fit, if it crumbles it’s good to go. There is lots of in between. It reminds me of my marketing rules of thumb. Through the years, those rules of thumb have been much more of a moving target. In fact, some of those rules of thumb have crumbled. For instance, back in the day when corn got to $4 a bushel, my rule of thumb said “sell”. Needless to say, that rules of thumb has crumbled. I need some new rules of thumb. Our 2020/2021 grain markets have simply moved on.
Last week we had the USDA chime in with their latest version of their WASDE report. USDA reduced the 2020/21 corn ending stocks by 50 million bushels down to 1.502 billion bushels, which was much more than analysts had expected. They kept yield at 172 bushels per acre and production at 14.182 billion bushels. Total use was increased to 41.625 billion bushels putting the corn stocks to use ratio at 10.2%. USDA increased China’s corn imports by 6.5 MMT.
Soybeans were treated a little differently, with old crop ending stocks reduced to 120 million bushels. USDA increased the export estimate 20 million bushels pushing it to 2.250 billion bushels. China’s import estimate did remain the same at 100 MMT. In essence the soybean ending stocks number unlike corn was within the trade estimates and didn’t surprise. On the release day, corn was down, soybeans were up, followed by more down prices on Wednesday. With Brazil supplies starting to come on stream, we’ll see how China pivots for their supply.
It’s mildly interesting stuff as February grows older. In the next few weeks, we’ll also be getting whiffs of how many acres USDA is expecting for the coming crop year this will eventually be topped off on March 31st when we get the official guesses from USDA on how supply will shift this year based on projected acres. Surely, this will mean an increase in acres and increase in supply of corn and soybeans. However, getting there will be the hard part. Crops need to grow and mature to get to the finish line. Nobody knows the bumps on the road ahead. Que up 2020, very few farmers saw the price road ahead.
That takes me back to the “fit” soil rules of thumb. In 2021 what should our rules of thumb be in our grain marketing world? In Ontario and Quebec, do we sell at $5 corn ($200/tonne in Eastern Ontario and Quebec) or do we recalibrate that to reflect the times we are in. For instance, over the last 5 years, Ontario and Quebec farmers have become “flat price” sellers of grain as we always wrestle with a volatile Canadian dollar along with grain futures. That was a disservice to us in 2020, as flat price plateaus fell in front of us as both corn and soybean prices advanced out of their traditional range. Has the flat pricing paradigm in Ontario and Quebec fallen away? Has its half-life grown tired? What rules of thumb in our marketing world should we be following in 2021 and 2022?
Do we sell when corn when it is $6, and soybeans are $13? Is that the new rules of thumb? Or are “rules of thumb” a hindrance, an old throwback, which some of us are captive to? Do rules of thumb in the agricultural management sense change our trajectory over time, as the world changes? Or am I the only one affected by these paradigms? In our modern 2021 age, with the smart phone in our pocket, does daily market intelligence override these rules of thumbs? Is the soil “fit” or not?
I usually know. I farm a lot of heavy clay soil. However, sometimes nothing is perfect like in 2019 when the soil was never fit. In my experience, nobody ever markets their crop at the very top of the market, which is always apparent after the fact. Nobody knows that, but you can immerse yourself with market factors, something I call “daily market intelligence”. Simply put, seek credible market information, try to understand both futures and cash markets on a daily basis. That will help in your attempt to make good marketing decisions. At the end of the day, it might even lead to some good grain marketing “rules of thumb.”