We’ve had a good stretch of planting weather here in SW Ontario. I should be putting the soybean drill away tomorrow. It’s been a while since I’ve done that in May. Of course, in the deep southwest of Ontario, we often say, we got the soybeans planted the first time, as often heavy rains seals in at least part of the crop. Needless to say, its dry, so dry, that the soybeans I’m planting now will need rain to get up. Ditto across much of the greater North American corn belt.
We all know the drought ends when it rains and invariably in southwestern Ontario, when it rain it pours. In this part of the country, we spend millions of dollars under draining our land with tile. Dry times are usually in between the wet days. Sometimes, like in 2019, it never dried up. It is a world away from conditions this spring. I only hope we can keep Jack Frost away.
This past week, our own Todd Hultman posted a graphic in the daily market video describing the dryness in the greater US corn belt, with states from North Dakota all the way over to Michigan which were short or very short with moisture. The dryness has gotten to be such a thing, I even got a call from the media last week asking me if this is a problem. I quickly explained farmers don’t really complain about drought at planting time as it lets us in the field, while wet does the opposite. I told the reporter to call back next week, and it might be a different story.
It is a long and winding road to harvest time and it will surely be measured to some extent by the December 2021 corn contract which has fallen from its recent highs of $6.38, but now has caught its breath at the $5.52 level. You can make an argument, as goes the December corn futures, so goes crop weather. With USDA predicting 179.5 bushels/per acre out of the gate, it will take some benign weather to keep that going. Is that high of $6.38 going to hold, even for years to come or will hot and dry weather in the next 6 weeks give us another crack at that level? Stay tuned for July 4th, unless it happens sooner.
At least that’s the way we always looked at December corn futures in the past. June 18th will forever live in my marketing mind, as our own DTN’s Elaine Kub once wrote that that day generally speaking usually gives us our best new crop pricing opportunities. That was based on a study that Elaine had done, and I often remind her of it. The weather is always a big story with corn, but let’s not forget what got us to these higher, lofty levels, versus where we were a year ago.
The price of corn now is reflected currently from a smaller Brazilian crop planted late, some nervousness on US acres and dryness and robust corn demand from China. Today, China bought 48.2 million bushels of corn which was the sixth consecutive day China has bought US corn. This is becoming a trend and at these lofty levels, I find it particularly impressive. The road ahead should provide more of the same.
The problem is we really don’t know China’s import intentions although Dalian corn is trading at some lofty levels. I also find a fair amount of antagonism among farmers and some analysts toward China, not playing fair, not publishing true statistics and generally not having a lot of transparency. I often refer to this as chauvinism toward China, like they are supposed to play by our rules. I often answer those calls by saying the “view from Asia” is different. You need to go and listen for yourself.
If you could do that and talk to some of the people on the street, you’d find all the same accusations levelled toward them going the other way. I’m not defending anybody here, just saying, the views from Asia are different, and as they are a huge buyer of agricultural commodities, we need to understand that fully.
As a Canadian, its difficult, especially when two of our own are incarcerated in Chinese jails on trumped up charges. We’ve also seen, Australian farmers lose markets, as the Chinese decide to go elsewhere. However, the US corn market is the biggest in the world and with the Brazil Safrinha crop not as high as once expected, it just seem logical the Chinese will continue to buy new crop corn again this year. However, it won’t be a surprise as it was last year, more like an expectation. Add some adverse weather into the equation and I think we all might know what that might mean.
It might mean higher prices, even with a loonie that seems to want to climb to 85 cents, settling just under 83 cents today. Well, I’ve had about enough of that. However, it’s just another variable Ontario and Quebec grain farmers need to manage. For now, though, how about the right amount of moisture. This dry weather is a tease. That goes for its effect on the corn market too.