What could we do for world grain demand if we got the Chinese to eat one more pork chop a day? That was the question posed to me earlier today when I talked to one of my former University of Guelph agricultural economic professors. I quickly countered by telling him that there are about 1.1 billion hogs in China. He laughed and told me that one more pork chop a day would blow the world pork market apart.
It was an interesting discussion, which goes way back. For those of you who think agricultural economists talk about these things all the time, it’s not so. It just so happens that my agricultural economist professor is a big basketball fan and the conversation was mostly about hoops. Needless to say, the specter of rising meat consumption in China hovers over our corn market like forbidden fruit. With world grain stocks tightening, next week’s USDA prospective plantings report will surely go a long way in telling us how close we are to supplying some of China’s needs.
For those of you who like to keep track of the numbers, USDA is hoping for about 92 million acres of corn and 78 million acres of soybeans in 2011. In fact, they are hoping for a lot more with a projected 9.8 million acre increase for all crops over 2010 numbers. So keep those numbers as a benchmark when you look at the figures next Thursday. There have been rumours of 94 million corn acres and at the same time I’ve even heard as low as 90. March 31st prospective plantings reports are always important, but with tight stocks this year it’s more like the Magna Carta.
At the same time this is happening, Canadian farmers will have much to consider leading up to Thursday’s report. Sure, we need to be blowing the dust off the planter but it looks like, barring some 11th hour retrenchment that Canada will be going back to the polls in a federal election on May 2nd. I’m wondering how many people will stop planting corn May 2nd to run to the polls?
Are there any big agricultural political issues in 2011? Well, compared to the past the answer is no, as current prices are buoyant across almost every agricultural commodity. However, like always, a permanent risk management program for Ontario producers is paramount for when the tide turns and keeping supply management are rock solid agricultural issues. Current federal agriculture Minister Gerry Ritz has been a disappointment and has cost the Conservatives many votes in rural Ontario.
The election will surely be quite a distraction in Canadian farm country leading up to planting season. Last week I was the guest speaker at a breakout session at the Grain Farmers of Ontario Commodity Classic where I was speaking specifically about cash grain markets. There was no politics at that meeting. Guys are clearly focused on the profit before them. At these cash prices for grains in Ontario, guys were focused on being profitable and comfortable at the same time. There was nothing spoken about the old political wars of farm rallies and 401 shutdowns. It is almost like a different era of agriculture is before us.
Key for next week will be the corn stocks figure in front of the prospective plantings report. Over the last couple weeks it seems like there’s been quite a difference between the old crop corn market and the new crop market. It would seem to me that old crop corn has been rationed into September, at least in trader’s minds. The new crop has shown quite a bit of resiliency and in fact is trading close to its highs. In many ways corn is a reflection of how demanding the 2011 world is. As I’ve said many times over the last few weeks, we’re running out of corn and something has to happen. One of those things is a high corn acreage number in the USDA prospective plantings report.
One of the funniest lines about the grains came to me today from old friend Elaine Kub, who said, “the only thing we can be sure of is that we can’t be sure of anything at all!” I’m still laughing about that after corresponding with her this afternoon. Her point was that even with bullish numbers coming out of the USDA report next week, the noncommercial interests still have a lot of money in grain markets. Our speculator friends are fickle at the best times and who knows what they want to sell off.
Next week at this time, the 2011 USDA prospective plantings numbers will be here. I’m thinking one thing. There won’t be enough corn acres and if for whatever reason our Chinese friends do decide to eat one more pork chop a day, the fireworks may never end.