The big freeze is coming. That’s right, write it down and tell everybody. I’m starting a big rumour. Somebody said there’s going to be frost next week across the greater American corn belt. Okay, we’ll see how much influence I have. Maybe tomorrow morning or over the weekend everybody will wake up and see the corn market jumping like never before.
This past Thursday I visited the Outdoor Farm Show in Woodstock Ontario. I am always somewhat taken aback when I go to the show with all the new technology both in the machinery area and in the production area. Ontario farmers are surely given a lot of tools to work with. However it just so happens almost everywhere I went at the show somebody was bringing up the specter of a frost event.
If you read my corn commentary last week you’ll know that we are looking at the biggest per acre corn yield on record in the United States coming in at 161.9 bushels per acre. So when there was a frost forecast in the US weather reports this past week we briefly saw corn go up to limit. That’s just how jittery these markets are when you bring up the specter of frost. There is something in those cold nights as we near that event that makes everybody nervous.
Of course I’m made of the same stuff as everybody else who is reading this. So when I got home from the farm show I had a quick bite to eat and I left to do some land leveling before dark. However just before I left for home I went to check my soybean fields to see if they would take a frost. All of my soybean fields are quite yellow right now in fact some are dropping leaves quite rapidly. However one field planted in corn stalks which struggled during the cold June and July was still emerald green. So that means that I need a frost free September and a large part of October before that frost event comes along.
From time to time in the market traders trade seasonal weather events. This time of year its always frost but in the springtime it is usually delayed planting. It is a bit of a cat and mouse game and with my bearish tendencies most of the time everything works out fine. Nevertheless this year it’s pretty obvious that the delayed planting in Ontario plus the cool June and July are manifesting themselves in a little pre-harvest anxiety, which is palpable. Those emerald green soybeans certainly surprised me.
The USDA September report pegged corn production to be 12.955 billion bushels with usage boosted to 13.025 billion bushels. Do you see a problem with this? What it means is basically we are going to use more than we are producing this year so we will have to rely on the 1.6 billion bushel ending stocks to get us through. That’s without a frost event or any other calamity, which may come along. If there is some type of frosty calamity in the next few weeks we should expect explosive price movement. To play on a favorite phrase of mine, this will not be your father’s frost.
There has been quite a bit of research over last few years with regard to low test weight corn and how that figures into a feed ration. Of course I hope we don’t have to go there. I heard from one of my sources in the feed industry this week that he wants nothing to do with low test weight corn going forward. He says he finds it hard to deal with and it lowers his efficiency. With corn feed use down 25 million bushels since 2005/06, we certainly don’t need any hiccups this year.
My days in Woodstock took in several conversations with DTN subscribers. At the noon hour I ran into an Ontario farm leader who was very instrumental in the 2006 farm rallies. Of course our conversation concerned frost but we also talked about the current Canadian agricultural policy world. He’d mentioned his disappointment with regard to the depressed Canadian livestock sector and the dearth in getting a risk management plan for Ontario crop producers. He expressed his frustration that maybe we were not on the same page as we once were. Government unresponsiveness to the farm lobby has been particularly frustrating. Of course our chat ended with a hope we get another month of good warm weather.
As I said before, I’m starting a frost rumour. You bet I’m just kidding but think of the calamity that we would see in our markets right now if something right out of left field came along. It would take that emerald green soybean field out and cause me so much angst I can hardly imagine. Ditto for the whole North American corn belt. If we make it to October 1st and the long-term forecasts look good all bets are off. However, if there is anything else you’ll feel the ground moving underneath you.