December 2007 corn futures closed at $3.33/bushel today, a far cry from the $4.25 levels reached last February 22nd and June 15th.   For Canadian corn farmers the double whammy in futures has been negatively impacted further from the cash market.  With our loonie traveling from sub 85 cent US levels in January to over 96 cents US last week, cash basis doesn’t seem to have a bottom.  Cash corn prices to Canadian farmers are beginning to rival levels last seen a year ago.  It’s like the ethanol gold rush never happened.

The 96-cent dollar lost some steam today as it lost over a cent and finished at 94.91 cents US.  However, the damage in the cash market has been done for some time now.  New crop elevator prices to producers have been sub $3.00.  With drought throughout Ontario, “corn” isn’t a good news story.  In 2008, I can see Ontario producers switching away from corn in droves.

It is different for our good friends to the south.  The American farmers surprised me this spring when they planted 92.88 million acres of corn.  They also got rain when I didn’t.  Will the crop make 13 billion bushels or even 14 billion bushels?  We’re still a long way from knowing.  However, with time running out to “kill the crop”, it looks to me those bushels are going to materialize.

We shall see.  While all those acres grow, American farmers are watching diligently as their legislators are getting ready to debate, change and possibly vote over the next few months on the new US Farm Bill.  For corn producers who’ve got all the sexy press this past winter, the debate surrounding the farm bill is critical.  Even in the US, with higher futures prices there has been a call to move the subsidies away from the corn producer.

I’m watching this debate with great interest.  With US replacement price for corn being so crucial for Ontario corn producers, I keep an eye on Michigan and Ohio for clues on their corn supply. I also look to those states as neigbours of mine who have legislators who have a direct effect on the corn policy within the US Farm Bill debate.

One such legislator is Michigan Senator Debbie Stabennow.  Being only 15 kilometres from the Michigan border I’ve followed her career for many years.  Last week she said the following in response to some critics who want to reduce the corn direct payment in the future farm bill.

“I don’t have any problem with $4-a-bushel corn,” said Democrat U.S. Sen. Debbie Stabenow, Michigan’s junior senator. “The positive aspect of biofuels is that we can help our farmers and be energy independent at the same time. I’m not interested in penalizing farmers who want to grow corn to reduce our dependence on foreign oil.” (Debbie Stabennow, Michigan Senator, Booth Newspapers)

She was responding to questions about whether American corn producers should lose their 28 cents/bushel direct subsidy legislated in the 2002 farm bill.  In fact subsidies to commodities in the new farm bill is expected to drop by at least one third.  However, we’re still a long way away from President Bush signing the bill.  Something tells me by the time it gets to his desk; the American corn farmers will be taken care of.

The reason being are just the reasons cited in Senator Debbie Stabenow’s statement.  It would seem the American desire to rid itself of dependence on foreign oil trumps everything.  If that means that the American corn farmer is subsidized in successive US farm bills so be it.

This type of political rhetoric is so foreign to Canadian corn producers.  To be fair though, from an energy perspective our two countries couldn’t be more different.  Canada is an energy exporter, so we’ll never really need corn to produce biofuel.  In the US on the other hand producing ethanol from corn to reduce dependence on an anti-American part of the world is a no-brainer.

So as the American debate on how much to subsidize corn, on this side of the border the political machinations of the last week make it akin to “back to the future.”  In Ontario, farmers have successfully convinced the provincial government to come on board with the Risk Management Program (RMP), which will support corn producers.  However, in the never, never land of Canadian agricultural policy, it depends on 60% of the funding from the federal government.  Federal Agriculture minister Chuck Strahl showed up in southwestern Ontario last week and said no to RMP.  Ontario farm groups have responded by accusing Chuck Strahl of selling out farmers by not signing RMP.  It’s like the Liberals and Conservatives over the last few years have become interchangeable.  It’s hard to remember who promised what because they both have switched sides on this issue several times.

So what should we hope for?  Let’s leave the Canadian policy debate for now.  Something tells me we’re going back to farm rallies.  Maybe what we can hope for is a renewed corn futures outlook based on increased ethanol demand.  My other DTN grain colleagues say that has some resonance.  On the cash side maybe the loonie is going into retreat meaning better Canadian basis values.  With our policy makers on both sides of the border feverishly making policy, at the end of the day let’s hope we get it right.