It would seem that this planting season will never end. In the Deep South west of Ontario planting season started almost a month late. It was pretty difficult waiting and I knew that once planting season hit the window would be so compressed it would be flat out every day. That is exactly what it is, taxing my energy and pressuring all my technology. However, give me a couple more days and I have this crop finally in the ground. Let’s just hope that the weather the rest of the way it’s kind.
Of course, while all this has been taking place we’ve seen a general meltdown in the grain markets that have taken prices much lower than just a few weeks ago. The specter of a huge corn crop in the United States at trend line or above has had the effect of spooking the December corn 2014 futures price. There is no question that we have tremendous capacity to produce corn. That reality and the specter of increased corn acres going into the June 30th USDA report is certainly adding to the pressure on new crop prices. Of course, there is a long way to go.
There is surely a long way to go in Ontario and Québec as well. In Ontario, the crop is mostly planted with only a few stragglers down here in southwestern Ontario still trying to get things planted. The big question will be how much Ontario corn got into the ground versus soybeans. If we continue to plant over 2 million acres in this province we will continue to be one of the cheapest sources of corn in the eastern Corn Belt. At the present time only the lower value of the Canadian loonie is keeping corn prices from being sub $4 a bushel.
The loonie took a bit of a hit today down to 91.37 US cents partly based on the Bank of Canada keeping its interest-rate constant. Essentially, this was and continues to be the story in Canadian cash grain pricing. Grain prices are low relatively in Eastern Canada versus the greater American cornbelt. The question is how willing are Eastern Canadian farmers wanting to produce corn at these prices?
We still have too much corn on the old crop side and way too much production potential on the new crop side of the ledger. This might be the vicious cycle of success piling up on each other. There is no question that Ontario and Québec producers are very good at producing corn and soybeans. We don’t have the domestic processing to keep up with the increasing yields in the fields. It’s making us into one of the cheapest location for grain east of the Mississippi.
The question is what happens next? Of course, nobody knows but there are several scenarios. One scenario has our American friends producing a big corn crop sending futures prices below $4. Of course another scenario is the opposite where they face drought again and futures prices go up. In Ontario if we have over 2 million acres and good weather we are back to export pricing with very low corn prices. However, if we get hit with bad weather and dryness here in Ontario that will eventually put us on import pricing levels in the spring of 2015. Any combination of the above will change the scenario. It’s that simple or that complex. With the crop just barely emerging from the ground it is way too early to tell. There is such a long growing season ahead.
Right now it doesn’t have a really good feel to it. However, we must remember that in the agricultural business this is very normal. Spring represents a time of eternal hope and until the crop gets in trouble nobody believes it can be any other way. If we see good weather going into the July 4 weekend, the US corn crop will have a full head of steam. August is the soybean month. We all know what the lack of or good rains do to soybean yields in August. Simply put, daily market intelligence is key. Pulling the trigger on sales can be the hardest part of the management process.
Of course the great savior for Canadian producers could be our Canadian dollar. Our bank economists were predicting a $.85 dollar this past winter and of course it’s gone the other way. However, if they turn out to be right and $.85 dollar will smooth everything over with regard to our cash prices for both grain and livestock. It might make those quarter million dollar tractors cost a little bit more, but most of us will never see that.
So the road ahead is more of the same. You and I have been here many times. Add a big dollop of Canadian dollar skepticism in the mix and it just might save the day.