US Canada Border Thickening May Affect Eastern Canadian Grain Pricing

You know we are in unusual times when the United States briefly considered moving troops toward the Canadian border. This was confirmed by Prime Minister Justin Trudeau in response to a report from the Trump administration about putting troops close to the American border. That will be a first, since 1814, when those American troops were running the other way. Covid-19 has changed our world.

It is almost eerie. Big cities have turned over on themselves as most people are self-isolating except for those who are essential service. For those people, they have to keep 2 metres apart. That’s not too difficult if you are on a Canadian farm. Needless to say, things are different. This past week I received email from suppliers on how commerce will be conducted. Social distancing is the first thing on the docket.

Earlier in March, as per usual in spring, I do all kind of maintenance and it seemed like a good day for me to do some oil changes. I didn’t have the proper oil filters to get that done, so I thought I should go to the local dealer to pick some up. I had just talked with them about the guidance on my tractor, where our conversation transcended into learning from them the challenges, they were having doing business in the age of COVID19. With that in mind, I asked myself the question, well, is it really necessary to get this done today? Of course, the answer was no, I could kick the can down the road. Why put somebody at risk at the local dealer. In the age of Covid19, I can go another day with an even bigger order making all things more efficient and safer.

It is such a different thought process. We are so used to communicating and doing business among each other, to say nothing about social gathering. Now, it’s very different, as we try to maintain some type of public health protocol. Key in this approach is renewed and more aggressive planning. We can’t take anything for granted going ahead. We need to make good plans for spring every day, giving suppliers more than enough lead time. Aside from that, which is considerable, we even need contingency plans if we ourselves get sick. That would likely draw all my 2020 farm intentions to an abrupt halt.

I find all of this particularly alarming. This past week, I talked with my friend Dr. A.K. Enamul Haque, who is a professor of Economics at East West University in Dhaka Bangladesh. He was locked down in his home like we all are. He told me no busses were moving, or boat launches. In a place like Bangladesh, which is the most densely populated in the world, that is amazing. He expressed concern that the poorest people would suffer the most, as health and food resources were scarce. Also, too, millions of people rely on day wages. Give it a month and things could be very desperate.

Ditto around the world, that goes without saying. It’s hard to not get bogged down, but a few weeks ago, I told you my cup was half full. The recent downturn in the loonie combined with a resurgent SRW wheat market, had cash wheat prices in SW Ontario at $7.40 for July delivery late in March. So, there is that, all we need to do now is get some rallies in the soybean and corn markets. That seems so much more difficult, even though there have been issues at Argentinian ports and soybean meal has helped support bean prices.

One thing I’ve mused about without getting much support is the grain world is with thickening borders. Over the time of writing this column, you’ve read my thoughts about trade slowing at the US border post 911 as our American friends beefed up their border security. The fear was always that the US Canada border would get thicker, slowing trade which would ultimately back up on Canadian farms. Translate that into grain pricing. Can the US Canadian border thickening mean higher cash basis levels in Ontario, Quebec and PEI? I think it possibly can.

We don’t know the road ahead. In March the US Canadian border was thickened to a point where non-essential travel was banned. It was a huge move, with cross border trade apparently not affected. However, what happens if it starts to be affected and Canadian grain is no longer competing as much with the possibility of US grains coming across the border? It means higher Canadian cash prices for grain, especially in places like Eastern Ontario, Quebec and PEI. It might even turn out that way in SW Ontario.

Events are moving quickly; Canada and the United States are moving toward peak Covid19 infections. We will get through this, but don’t expect a smooth ride. Make detailed plans. Place your grain pricing marketing orders. Then hold on tight and keep those hands washed.