This week has been all about corn for me. Or maybe I should say the last couple of weeks I’ve been busy at harvesting a very decent corn crop near Dresden Ontario. My corn yields are down from 2012, which was expected. Moisture is a little higher than I’d like to see, but it reflects some of the difficult problems I had this past year with something I called monsoon 2013. When you get about 15 inches of rain between the end of May and July 10th you lose yield. It is certainly shown up in both my soybean and cornfields this year.
Of course is there any joy in Ontario corn country? In fact, is there any joy anywhere in corn country considering some of the lower prices that are currently being offered for cash sales? Cash prices were never really very high for Ontario corn even for contracting earlier in the year. The market structure for Ontario corn is such that it leaves little opportunity to capture attractive forward pricing. $5 Ontario corn was available briefly this past spring and for those that locked in much of the crop, it is certainly looking good now.
In the next week or so we will be getting quite a few export sales numbers from the USDA as well as the big production report on November 8th. We certainly will be seeing many things in those numbers, but one thing for sure is that we’ve seen much demand building back into the feed grain markets. It may take a while to really show up but lower prices do eventually build demand back. Corn will be like that. In fact, I think we could even say we’re seeing a bit of a renaissance in corn demand. The numbers simply haven’t been published yet and may not show up for several more months.
The question is how real will this be and does it hold out any hope for higher corn prices in the long-term future? I say that because I’m not expecting corn prices to rise in the short term. I think we can expect the November 8th USDA report to show higher US corn yields than many of us expected and maybe even a surprise in the acreage figure. So that makes that 14 billion bushel corn crop so much more real. The question is how does this corn market get back into a shape where many of us can make money again?
The answer to that question is proverbially blowing in the wind. We know that in North America we have expanded corn production. I remember quite a few years ago when I was speaking about the grains markets, I made a comment that in future years I may be talking about future crops of over 14 billion bushels of corn in the US. I said that because I assumed that agricultural productivity would continue and corn would benefit from that. Maybe I missed the degree of the whole ethanol thing, but as we move ahead into 2014 and 15 many people are predicting the corn demand renaissance will continue. The question is what happens to corn supply?
I’ve been saying for quite some time that the price of seed corn must come down as well as the number of corn acres in Ontario. I also believe that across the greater United States. The market is screaming out that they don’t want this much corn again and somewhere along the line we’re going to have to learn from that. The September WASDE report told us that there was global production in 2013 of 600 MMT of corn. In 2011 it was only 570 MMT. When you consider South America and the Black Sea region, everybody and their dog has been trying to grow corn and supply has been the beneficiary. In 2014 I think it all stops. Both soybeans and wheat are crying out for more acres and giving us better prices depending on how South American production goes this year.
Of course our friends in South America are planting soybeans right now. The predictions are off the chart, putting Brazil’s soybean production at 88 MMT, and if it happens would be a record. However, we must remember this is agriculture and they have to go through a production season to get there. It may not happen, and even if it does Brazilian ports will be stretched even thinner to ship the crop out. North American soybeans will certainly benefit from that.
In Ontario it would be in our best interest to grow less than 2 million acres. If we continue to grow more corn than that we will continue the race to the bottom and have the cheapest corn in North America. If we grow less than that we will get our import basis back boosting prices in late spring and summer.
So I know it’s early but I’m cutting corn acreage by at least 30% next year. Yes, I’ve got rotational concerns but this is more than that. I expect many more producers to make that decision all across North American corn country. Who knows if we will end up being right? I say that because sometimes on the farm you can do everything right and still be wrong. Mother nature rules the roost.