Focusing on Payday: A Look Into Our 2010/11 Future

Ontariocornmarch 10thSo where are we going? What is ahead as the weather turns warm? Or even better, where do we want to go?  As I stand in my fields amidst the last vestiges of winter snow to me that’s the real question.  A week from now we will all know if the USDA had a major mea culpa and reduce the size of the 2009 US corn crop.  As a starting point, that should help on her journey toward payday.

For those of you who have forgotten, January 12 represented quite a benchmark in the crop year, which has been 2009/10.  That day I was expecting along with a lot of other people the USDA final corn number of around 12.8 billion bushels.  What we got instead was a mind-blowing figure of 13.125 billion bushels.  Needless to say the market went to pieces.  US farmers with 600 million bushels still in the field were left pointing fingers at each other and the USDA.

The shock of that day has worn off quite some time ago.  However, it is a bit difficult to truly decipher what exactly happened.  We all know about the hype that can be created in Hollywood and surrounding our domestic politics.  Sometimes I think with all the information technology available to farmers today, we create our own little pent up “hype. ”  If everybody is saying that the USDA number is going to be lower, then it must be.  Maybe I fell into that trap, but no more.  I’ve simply come to the conclusion that not only was there 13.125 M bushels of corn but on March 10th next week it may be boosted even more.

It makes me wonder about price and makes the wonder exactly what path we are taking this year.  For instance over the last week I have watched as DTN has asked farmers how much corn they have left to sell.  At the same time I have heard from Ontario corn merchandisers that there is lots of Ontario corn still unsold in farmer’s bins.  Then later I am inundated with some Ontario analysts worrying about if this is the right time to lock in interest rates.  Its almost like in March of 2010 some believe the agricultural apocalypse is coming and we better get behind a rock.

It just so happens that I will be speaking about these corn and soybean numbers at the Western farm show in London Ontario next Thursday.  It doesn’t happen often that you will get a speaking engagement the day after a big USDA announcement. However I’m not expecting big fireworks out of the USDA on that day.

I don’t believe in the agricultural apocalypse in 2010 either.  I heard much about locking interest rates into fixed rates over the long term the last few weeks.  You might say it makes sense because interest rates are going to go less than zero but at the same time at least in Canadian banks there will be a premium paid for such a privilege.  I think with fertilizer prices down 40% from last year and with pricing opportunities this winter for new crop in 2010, our year is shaping up pretty good.  I’m sure there have been many Ontario corn producers over the last week in new crop price values.

Into this mix today we had the federal government come down with their budget.  It was pretty big news for a whole host of reasons; one being it is the first time our parliamentarians have been in the House since December.  Jim Flaherty, our finance minister brought down the budget, which froze politician salaries and put government on a cost-cutting footing.  The $50 billion deficit we have this year is supposed to be whittled down to zero in another four or five years.  The stimulus money continues for another year but cost cutting by government will hopefully bring down the government deficit to zero.  Needless to say, agriculture hardly got a mention.

The one mention it did get was $10 million for new innovations and $25 million for increased beef slaughtering capacity somewhere in the hinterland.  There was no funding for any business risk management programs like the RMP in Ontario.  In many ways that reality takes us back to a time in farm political circles before the big Ottawa farm rally in 2006.

So where are we going?  In the next week market action will surely get stirred up.  At the same time a government bent on cutting spending and cutting costs is jostling our interest rate environment.  I haven’t even mentioned all those soybeans in Brazil and all that pent-up food demand which disappeared in 2008.

Simply put, the road to payday in 2010 will surely be a long and winding road.  The events of this March will surely get it off to a rousing start.