The air was cold today, as whiffs of snow and cold winds whipped across southwestern Ontario farm country. I’m in the midst of getting some of my equipment ready, strategically watching the weather so I can do it in some sort of comfort. It would be nice to have a new shop like a friend of mine in central Saskatchewan. Of course, he works on his farm machinery during winter when its -70 windchill outside. Of course, I never let him forget that. His retort is that western Canadian farmers have all the fun.
As I’ve said many times, Canadian farmers and their situations are not homogeneous. I had a bit of an emersion in that this past week as I was invited to speak on the grain markets in Kiev, Ukraine, of all places. No, I didn’t get to fly over, but via Zoom, the Covid inspired presentation software that can take you about anywhere. I chimed in early, only to listen to a rapeseed market commentary totally delivered in Ukrainian. Of course, I beefed up as much as I could on Ukrainian agriculture.
Needless to say, I described a situation where Ukraine is a burgeoning agricultural dynamo, but also a competitor for North American grain, especially when it comes to wheat and corn. Ukranian farms can be huge, just like they are in Russia and I’m sure having shrugged off the yolk of communism many years ago, their agricultural production will continue to increase. Black Sea grains are surely making their mark in the grain complex. I even got invited to come back in the weeks to come as they will be talking about Black Sea grain futures contracts currently being offered at the CME.
Time changes are always hard for me and scheduling my talk in Ukraine certainly was a battle. We recently changed times here in Ontario, but in Ukraine they were doing the same and apparently, at the last minute the government changed the time change again. At one point I was set to deliver my presentation after the USDA release of their prospective plantings. However, at the end of the day, I delivered before we knew the new plantings numbers and stocks estimates. On top of that, my hosts became concerned I’d miss catching those USDA numbers. Needless to say, we got it all done. Those USDA numbers were released as I said goodbye to Ukraine.
USDA did not disappoint, as minutes later, my new Ukrainian grain trader friends were chiming in. The USDA shocked the market by putting our corn and soybean planting numbers that few expected. The USDA pegged 2021 corn acres at 91.1 million acres and soybean acres to come in at 87.6 million acres. Both of these numbers were below the lowest estimates from traders and below USDA outlook musings in February. At that time, they had been looking at 92 million acres of corn and 90 million acres of soybeans. As is, we’re looking at only 325,000 more US corn acres this year over last and about 5% more soybeans. US wheat acreage was actually increased by 5%.
If I’d had known those numbers before, I started to speak to Kiev Ukraine, it would have changed things. Clearly, when I heard those numbers, I knew those weren’t enough acres, especially in soybeans. Even with bigger acres, the US would need almost perfect crops to increase declining ending stocks. With numbers below expectations, it was pretty obvious prices were going up. In fact, corn was up the 25 cents limit, soybeans were up 70, both old crop and new.
Quarterly grain stocks also added to the bullish surge. Corn stocks as of March 1st were reported at 7.7 billion bushels, the lowest in 6 years and 3% below last year. The soybeans came in at 1.56 billion bushels, which was 31% lower than last year. These stocks were a reflection of demand, which has been so very strong since harvest time last year.
Grain markets retreated a bit on Thursday in front of our 3-day weekend. You might say that was expected, but what was interesting it wasn’t across the board. Old crop values diverged from new crop futures. In other words, while old crop futures staggered Thursday, new crop futures just kept going into the green. It’s clearly a reflection of end-users more sudden risk aversion to supply that needs to build into the fall. Those USDA numbers were simply not enough to get it done. New crop soybean futures are inverted, there is a small carry in new crop corn futures.
So, when do we sell grain? That’s always the question I get, even from my Ukrainian friends I met last week. You know my answer, I never keep it a secret. Keep in mind beyond that, there is so much production risk ahead. I haven’t put a seed into the ground yet and most of the rest of you are the same. We know how difficult it is to get that crop to the finish line. There will be price rallies ahead and there will be slumps. We didn’t get her with our eyes closed.
As we move ahead, new crop pricing will become more of the focus of our grain market and with that, crop weather. To help focus on that, get weather information wherever you can include the excellent weather analysis we have here at DTN. It’s all part of the daily market intelligence which helps us market our crops. The warmth of the sun will soon be on our back. Stop staring at that dirty USDA window and let the sunshine in. 2021 represents quite an opportunity for success.