We Need Some Normalcy Back in Our Lives and Our Markets

Rains came to southwestern Ontario overnight, which hopefully will help some of my entombed soybeans break through the inevitable crust which is always their curse. It seems that has been the mantra of the 2020 growing season in my area. Rain has come along at inopportune times to damage both corn and soybean crops. It would be nice to have seed crust busting ratings for both corn and soybeans, but I don’t think that exists despite the fact there are real differences between varieties. Needless to say, as a new week begins, I’ll begin again to try and help a crop get above ground. You can’t market a crop that doesn’t grow. It seems to be my challenge every year in my heavy soils.

As I’ve said many times, it’s one thing to grow a crop and it’s another thing to market it. As farmers, we know that challenge and we surely know all the bearish challenges we’ve seen in the grain market over the last two years. It’s been a battle to find a price that is even remotely interesting. In Ontario, over the last two years, I’ve sold a lot of crop on standing marketing price orders that hit momentarily on one day of the year. In other words, my marketing goals have been hard to satisfy and incredibly difficult to execute. Ditto across much of North American farm country.

Take corn prices for example. December corn is approximately $3.43 bushel. Seasonally, mid-June is the time when pricing new crop corn is the thing to do. Corn prices tend to peak around that time, before the market can see the crop potential. There is also the weather during the pollination period. So, every year, contract some corn in and around June 18th and you are in good stead. However, in 2020, the gulf between the present cash price versus the past five-year average is approximately 65-70 cents per bushel lower! It certainly doesn’t give you a lot of confidence moving forward. I like to say I’ve been here before, which I have, but that has a pretty short half-life.

On June 11th, the USDA chimed in with their latest WASDE report. USDA actually raised old crop corn ending stock to 2.103 billion bushels, which by default raised 2020/21 ending stocks. The 2020/21 corn ending stocks were 3.323 billion bushels, the highest I can remember in my many years of writing about corn prices. All of the May demand numbers for corn were maintained in the June report, with acres still set at 97 million with yield posted at 178.5 bushel/per acre. On the old crop side of the ledger, USDA decreased production, but also lowered ethanol demand by 50 MMT, which pegged it below 5 billion bushels for the first time in many years. (4.9 billion bushels)

You get the picture? There is a corn mountain out there built partly by our own production but also by dropping industrial demand. Add Covid into the mix, and it just gets murkier.

On the soybean side of the ledger, things were not so dire. In fact, the new crop soybean ending stocks were pegged at 395 million bushels, which was lower than expected and at the bottom end of analyst’s pre-report estimates. The new crop was left unchanged at 4.125 billion bushels based on a yield of 49.8 bushels per acre on 83.5 million acres. Old crop ending stocks are coming in at 585 million bushels, which was about as expected. Robust crush numbers helped with the projected new crop ending stocks going down.

Compared to corn, soybeans are a raging bull, but it’s all relative to where we are now. Remember the days when soybeans ending stocks were under 100 million bushels? Remember just a few short years ago that number was over 1 billion. Maybe there is faint hope that soybeans can bail farmers out on what looks like a tough year for corn.

World wheat supplies were raised in the USDA report, by 5.7 MMT based on an increase in production and ending stocks. Farmers yawned on that news. Wheat is grown everywhere, and supply and demand anomalies are rare. A shortage is quickly filled by supply somewhere in the world. As I stare out on my first wheat crop in 3 years, wheat prices are about $6.14 a bushel. Thank goodness for that Canadian dollar, currently fluttering near 73/74 cents US.

It is not the most flattering of USDA reports posted last week. Bearish conditions have spoiled the party and Covid19 has just made it worse. However, on June 30th, we get new USDA numbers on actual planted acreage. I expect that corn acreage number to go down from 97 million acres. There will also be other surprises. The challenge for Ontario and Quebec farmers is to recalibrate those marketing plans. It’s been a different year. There is much production risk ahead, despite crops looking good in the field. I know. We want some normalcy back to our lives and our markets. In many ways, with Covid and the trade wars, this hasn’t been a fair fight. The road ahead has rarely looked so challenging.