It is getting very dry in southwestern Ontario. However, you know how that goes. Droughts can be short lived in the end with the first rain. Every year is different and agriculture in 2015 is surely different for me. I am nearing half planted in soybeans this year, while last year I hadn’t planted a kernel of corn until May 24th. It just goes to show, in agriculture you just never know.
I suppose I could say that almost every week. Just this morning I did something I’ve never done before. It was a very cold morning in southwestern Ontario with frost everywhere. I know my tomato-producing neighbors were surely nervous, always cognizant of tomato seedlings early spring. I thought the early morning would be a good opportunity to spray 100 acres. After the hose that I used to fill my sprayer snapped in half because it was too cold, I thought I better go to Plan B. Needless to say, I finished up those 100 acres tonight in a lot warmer temperatures.
Of course I have plans to sell my corn and my soybeans at or near their all-time highs. In fact, that is the plan every year, but this past week the USDA came out with their latest estimates of crop supplies as well as a look into the new crop year. We can always count on the USDA to keep us on our toes at least once a month.
In the May USDA report the USDA pegged 2015/16-corn production at 13.6 billion bushels, 586 million bushels less than last year. They pegged corn production to come in 166.8 bushels per acre. The soybean production forecast is for 3.85 billion bushels of beans, which is down 119 million bushels from last year. USDA pegged production at 46 bushels per acre. Nothing too much new here, it makes sure that the bearish tone in the market states real. I’ve certainly had enough of that.
Informa Economics also weighed in on Thursday pegging US soybean production at 87.2 million acres, a full 2.55 million acres better than the March prospective plantings USDA estimate. It leads me to believe that the June 30th USDA actual planting acres could be much higher. Once again, a little bit more bearish news never really hurts.
In Canada, the loonie take-eth away what the loonie give-eth. We had our collective butt saved last year when the loonie dove to $.78 US and cash prices rose accordingly. In the last eight weeks the loonie has actually gained five cents trading in the $.83 range softening basis values across the board for Canadian grains. I don’t think anybody really expected that but the US dollar has been faltering lately currently at a four-month low. The loonie has been taking advantage of that.
In Ontario crop-planting progress has been impressive, except for Essex County and the extreme southwest. Statistics Canada actually estimated that Ontario corn acres would be at 2.1 million this year despite poor prices and with the weather of the last few weeks they might have nailed it. With the loonie gaining against the US dollar and basis softening, it’s not exactly what I’d like to see.
So when I saw the nearby wheat futures contract go up $.32 on Thursday, it was almost like a sign of the apocalypse. Chinese wheat estimates have been cut and that was somewhat of a surprise to the market as non-commercials piled in. This comes on the back of India actually reducing their crop. It proves that even wheat, can have its day.
Well, maybe it’s more than that. We’ve come to almost expect the wheat complex to never show us anything. With wheat grown around the world there is always a supply to fill the gap. However, maybe it can serve as a bullish symbol for other grains. I’ve been around too long to simply write off prices. Sometimes it’s darkest before the dawn. The problem is you have to feed the bull every day. That will take a production calamity. I hope it doesn’t hit my farm, but it’s not like I haven’t been there before. There is a lot of production risk ahead right across the North American farm belt.
A little bit of “hot and dry” would go a long way to perking things up. I know on my farm near Dresden Ontario, a forecast of hot and dry hasn’t been on the radar for several years. Hot and dry in July will affect the corn prices and we all know those soybeans need rain in August. I don’t know if there will be a rebalancing this year, but it will come. The grain bulls will return someday. Unfortunately, one farmer’s misfortune will be another man’s gain. I just hope my farm doesn’t have the target on its back in 2015.