Next week at this time I hope to be well into my soybean harvest. September weather in southwestern Ontario has been exquisite for crops planted late and hungry for good fall weather to bring them home. These crops aren’t home yet or in the bin, but hot weather into the end of September has been just what the agronomist ordered.
It has been one of the strangest and toughest soybean seasons for me ever. I likely will be harvesting in September this year even though I finished up planting just before Canada Day. That really doesn’t make sense to me, but I’m no agronomist. Those long hot days of summer with timely rains must have done some good. I’m expecting a less than average crop, but if you had asked me on Canada Day, I couldn’t have imagined even that.
Of course it is one thing to grow a crop and another thing to market it. I was reminded of this by another farmer the other night when I was touring some corn and soybean plots. An argument can be made in 2019 its been hard to grow a crop and difficult to find that magic market price.
In Ontario and Quebec, farmers are flat price sellers. What’s that mean? Well, generally speaking, with our gyrating loonie, cash grain prices are far more volatile than our American friends. Over the last few years the loonie has been a lot lower than the US dollar. It’s difficult to balance a good futures price and a good Canadian basis level. It leads to Ontario and Quebec farmers selling on good round numbers. $200/tonne corn and $425/tonne soybeans are magic sales numbers for many farmers in Eastern Ontario and Quebec. $5 corn and $12 soybeans might do it in Southwestern Ontario.
As most of you know, I write the Market Trends report for the Grain Farmers of Ontario. However, I don’t tell anybody either in that report or on DTN when to sell their crop. I simply try and immerse readers into the different market factors and encourage them to make a choice where they are comfortable and profitable. I often say nobody knows what farm prices will do. I say that because I believe it.
Despite that, we are all human and emotional as farmers. When we sell above the market, it makes us feel good, when we sell below the market, its not so good. In my experience, it’s such a personal journey. Seasonality is a big part of the market experience, but at the end of the day, the road is littered with people who thought they knew where price would go, but ultimately didn’t.
The reason for that is nobody knows. I recently heard from one respected grain analyst that January soybean futures were headed to $10.50 a bushel. He based that on the fact, he didn’t believe the crop was there. As soon as combines started rolling in a big way, the market would react. Is he right? I dunno, we’ll see. Many people get paid to make those predictions. I just don’t know.
If you disagree with me, pick a number and stand in line. There are often farmers who publicly boast about selling a crop at a high price contracted many months ago. It certainly looks good when they say it. However, I often think, how could they be so sure of their price when the market can turn around on the least little thing. Once again, being profitable and comfortable can be a very good thing. Keeping quiet about it also might save a bit of face.
Keep in mind; in Ontario and Quebec we are flat price sellers. What happens in 2020 to our soybean price if Brazil descends into drought and the loonie stays status quo? What happens if Brazil pumps out another record soybean crop and the loonie heads toward 90 cents? What happens to Ontario and Quebec corn prices if frost strikes October 5th? What happens if an unexpected soybean shortfall in Matto Grosso interrupts the China/Brazil soybean romance? There are so many variables.
At the present time, the new corn elevator bid in Ontario for corn is approximately $4.92 a bushel, down about 60 cents from where it was earlier this summer. Soybean prices are sputtering near $11 a bushel. We all know the yearlong soybean price sputter, mostly based on the China tariffs on US soybeans. Apparently, according to some American politicians, that spat is almost over, even though I feel short term to China is 100 years.
This is no slam to good risk management. As a farmer, that’s really what we do, constantly trading off versus what might be around the corner. However, as flat price grain sellers in Ontario and Quebec, we must be open to changes, which will surely come along. We need to be ready when that flat price-selling environment starts to change. We have to be ready when that loonie finally finds the wind at its back.
That’s right, nobody knows when that might be. However, risk management never grows old. As farmers, it continues. Understanding our markets is a constant challenge. Don’t ever worry about being right or wrong. Just immerse yourself in all the market factors and keep at it. Being profitable and comfortable are a good combination.