Que the buzz. Canola futures reached to a record high last Thursday as touching $777 per tonne and Canadian media outlets couldn’t get enough of how things were better on western Canadian farms. It happened after Agriculture Canada adjusted their January stocks figure down 42% from their January numbers. My goodness how does that happen, its mirrors in some ways the overestimation of corn stocks from the USDA over the last year. Needless to say, canola is just another example of a very bullish oilseed sector. For Ontario winter canola farmers, who double crop into soybeans, it’s the best of times.
There is not much of that in Ontario, which amounts to a few fields in the deep southwest. If you have a choice between growing canola and soybeans in south western Ontario, the choice is usually soybeans. They offer similar or better rewards with a lot less risk involved. Needless to say, with canola and soybean prices surging, along with other bullish grain prices, the battle for acres this coming spring is surely shaping up as a good one.
It had me asking a Saskatchewan farmer this week about growing more canola. For instance, he seeds about 8000 acres of crops. With canola prices where they are is it possible to plant 8000 acres of canola based on these prices? In short, he said no and listed a whole bunch of agronomic reasons why that wouldn’t be such a good idea. However, I’m not from Western Canada, but $777 canola can turn heads. You’d expect more canola planted somewhere in this world. It reminds me of the time when corn got to $8. We learned then, everybody in the world liked growing $8 corn. That was a long story.
Needless to say, the USDA came out today with their first unofficial whiff of what we might expect in next year’s production fields. Can you say 92 million acres of corn and 90 million soybean acres? Last year we had 91.0 million acres of corn and 83.1 million acres of soybeans. Clearly, USDA is banking on a lot more soybeans than last year and a bit more corn. However, will we get there? Of course, nobody knows as there are so many outliers left in front of a good crop in 2021.
The soybean corn ratio is currently about 2.58-1.0 as markets are constantly moving. This represents one of the highest levels in many years. It tells us that the markets wants a lot more soybeans and we need them to come out of the woodwork. We have to get at least that 7 more million acres from somewhere according to USDA. That will mean about 4.5 billion bushels of soybeans this fall. With current demand expected to come in at 4.575 billion bushels, that’s not enough and ending stocks should be constricted once more. It’s happening with memories of 1 billion bushels of soybean ending stocks dancing in my ear back a couple years ago.
If we only knew the rest of the story. You know that drill, we’ll be trying to figure that out on a weekly basis on the road to harvest in September and October. Meanwhile, in the great North American farm belt, it’s the deep freeze. Is the wheat still alive? Can we have some epic Chinook winds off the Rockies extend into the Midwest to thaw everybody out? Can we get some relief to Texas? In other words, it feels like an eternity until we can get our tractors in the field to help put some of these crop forecasts together.
Grain futures spreads are still inverted, which tells you that end users still can’t get your grain fast enough. However, the inversions have weakened to some extent in both corn and soybeans. In some ways this is natural, in other ways it reflects the Brazilian soybean crop getting into the harvest as well as the slowdown from China with regard to the Lunar New Year. Needless to say, it will remain a very volatile futures market as we move ahead.
There surely will be shifts in Ontario and Quebec acres as well in 2021. Somebody say canola. Well, good prices will surely spur production in more northern areas. Ontario has 1.125 million acres of wheat, which is more than usual. The critical part will surely be spring weather. It’s easy to say 2.1 million acres of corn and 3.1 million acres of soybeans in Ontario, short of a 2019 spring debacle.
Of course, it’s a long road to harvest 2021 and I’d be remiss not to mention our old nemesis COVID19. Our American friends are getting vaccinated fairly quickly. This past week I learned my friends in Bangladesh were already vaccinated. Meanwhile in Canada vaccinations are slow. However, sometime during 2021, we should get our lives back. We’ll take it, along with those shifting US and Ontario crop acres. If today’s prices are a barometer of the future, it’s shaping up to be a good year.