Outside markets are getting jittery.  Much of it has to do with the world of sub-prime mortgages.  Others call them “no money down” mortgages, loans given to American borrowers over the last decade with little or no equity.  With housing prices in the United States plummeting and borrowers defaulting en masse, our financial markets over the last few weeks have been on very shaky ground.  In the last week, they even seem to be spilling into the grain markets.

What’s scary about this is we’re talking about billion dollar debts.  This is not as simple as looking the other way and putting it in your rear view mirror.  According to Merrill Lynch, the US Federal Reserve may have to cut interest rates this fall just to stem the tide.  Ramifications from that would be enormous.  While it might stem the tide of bank defaults it would also be a stimulus on the economy setting up the spectre for price inflation.  It would also send the greenback’s value down further strengthening an already strong loonie.

Earlier this summer the loonie marched up over 96 cents US only to fall this past week back into the 93/94 cent range.  With grain and oilseeds currently burning up from drought across Ontario, farmers find themselves in a precarious position with a high dollar, falling grain prices and the uncertainty currently swirling around in our financial markets.

For many Ontario producers the carnage in the financial markets over the last couple of weeks pails compared to the carnage in their fields.  Simply put this year drought stalked everybody this year especially producers west of Toronto to Windsor.  In my own case I was hit hard, with only half an inch of rain between May 14th and August 7th.  Agricorp will surely be busy this fall.  Ontario’s robust corn yields over the past few years are surely set to retreat in a very major way.

With a bad Ontario crop its hard for many to believe the US corn crop looks so good.  However, it would seem the August 10th USDA Crop production report put those concerns to rest.  The USDA estimated the corn crop to come in at 13.054 billion bushels up from the July estimate of 12.840 billion bushels.  Soybeans came in at 2.625 billion bushels, the same as the July number.  Let me remind you last year the US produced 10.535 billion bushels of corn.  Simply put, the Americans have done it.  They got more corn in the ground than I thought and they are in for a record production of corn in 2007.

That simple fact has Canadian producers scratching their heads.  Why was the target on our back this year?  However, the Ontario drought did have its effect on neigbouring Michigan.  According to the USDA, Michigan’s farmers planted 2.5 million acres of corn this year, 14 percent more than in 2006.  The state’s corn output ranked 11th among states in 2006 at 288.1 million bushels and is likely to drop 14 percent this year to 247.5 million bushels.  For some Michigan producers it’ll be much worse than 14%.

So what happened to the “ethanol gold rush?”  Hmmmm, not a good subject for many with burnt up fields.  However there are obvious considerations for the corn basis in Ontario.  With the Ontario and Michigan corn crop suffering, basis levels in 2008 will surely be pressured up.  However, in many ways that’s like having Ontario wheat in 2007.  Most of us don’t have any wheat after not being able to plant it in the wet fall of 2006.  With record wheat prices this summer, it couldn’t be much more cruel.

So let’s look to the bright side of things because right now with all the jittery markets, we are in the dark side.  The optimist would say that grain futures markets are still much higher than last year when the new crop cash elevator cash price for fall delivered corn was $2.15.  Soybean prices last year at this time were $5.50.  Further to that ethanol capacity in Ontario will grow significantly and make a real difference in local basis in 2009.  I know, that’s a world away but it does represent real hope for our future.

For many of you with “nubbins” in the corn field that won’t give you much solace.  Sometimes being a farmer isn’t for the feint of heart and the 2007 Ontario summer didn’t take any prisoners.  Sure the outside markets make things look even more uneven.  However, we’ve been down before.  As we get ready to harvest we need to focus and regroup for 2008.  Hope is on the way.  For most of us, in 2007 its been a long time coming.