It has been a very cold, wet start to spring here in southwestern Ontario. It is the same way in many parts of eastern US corn belt, as heavy rains have delayed planting. The market seems to be shrugging that off, like they have seen it before. I have seen it before too especially in 2011 when I was planting corn in June. However, I never wanted to go there and I think that’s ditto for everybody who is reading this column. Farming can be very frustrating sometimes. It seems that we spend an inordinate amount of time “hurrying up and waiting”. Spring of 2017 has seen a lot of that lately.
While we were waiting last week the USDA chimed in with their latest crop production numbers. The May report always gives us a look at new crop numbers. (2017/2018) Yes, that is the crop that we are all trying to get into the ground now. According to the USDA the new crop ending stocks will come in at about 2.11 billion bushels next year, about what was expected based on a newly planted crop of 14.065 billion bushels. Globally, the USDA pegged ending stocks to come in at 195.27 MMT, which was at the lower end of trade estimates. It was somewhat of a bullish signal for corn, which jumped 7 cents on the day.
Corn has given most of that back in the two days after the report. Needless to say, the USDA report does give us a signal that the corn supply is turning in the other direction. Reduced acres in the US this year are contributing to that and the generally lower price of corn has done that as well. If the weather gods continue to be fickle in the United States this year, we can look to those corn-ending stocks possibly getting even lower. The May report might’ve been the first salvo in corn supply decreasing into 2018 and 2019.
The USDA projected the new crop 2017/18 soybean ending stocks to come in at 480 million bushels, which was about 88 million bushels less than what had been expected. Despite the vast supplies of soybeans currently coming on the market in South America as well as a big crop predicted in the United States projections for ending stocks are already being scaled back. Its true that the USDA is never very good at estimating ending stocks for soybeans as demand always seems a little bit more robust than they expect. It would seem it is the same this year as long as there aren’t any political machinations out of Washington toward China to spoil that party.
That being said the May USDA report didn’t really change a lot with regard to futures prices. July corn is currently fluttering around $3.69, while soybeans have stabilized at about $9.64. None of that should get anybody excited. Of course in Canada that Canadian dollar continues to create the greatest price mirage of 2017.
That 72/$.73 Canadian dollar is translating to cash prices of $4.82 for new crop corn and $12.30 for new crop soybeans. The challenge will remain for Canadian farmers to balance their cash basis values largely influenced by the Canadian dollar along with our grain futures prices. Finding that sweet spot where you win both always seem so elusive.
I find the present delay in planting to be fairly troubling. I know in my own fields it is likely that I will have higher moisture corn come fall based on the 50% of my corn planting I have left. When I look at the rest of the province, hardly anything is planted. With the nature of our northern climate, it is likely that corn acres will be abandoned to soybeans. In my mind, it means that Ontario will be unlikely to get to the 2 million acres mark this year. That’s an issue because if the Ontario crop is less than expected, it will lead to import pricing much sooner than we are used to. The 2 million acre benchmark in Ontario is always significant because of its effect on import pricing. It’s all a flyer now. Will Ontario farmers get it all planted?
I don’t think so and when you look at the flooding and the heavy rains that they’ve had in Québec it’s leading into a situation where that part of the country might be corn deficient inn 2018. The corn supply is always tighter in Eastern Ontario and Québec. It would seem to me based on where we are now to be a real possibility looking ahead.
So as we look ahead, there is a lot of work to do, just getting this crop in the ground. There are also all those standing orders for grain sales that we should have in place. Juggling the many cash price variables based on our tenuous spring planting situation along with futures prices will make it incredibly challenging. Remember, last year the highs for the grain market were set in mid June. Every year is different. 2017 has already showed us that.