The Ontario crop continues to move on. This past week your loyal scribe got away to Tobermory Ontario for a couple days. For my American readers, Tobermory is a small town on the northern end of the Bruce Peninsula in southern Ontario. It’s not northern Ontario, but its about as close as you come in southern Ontario based on its unique geography. Bears roam around Tobermory. You know, it’s a place I feel up north at, a place where agriculture is stretching to get a growing season.
Needless to say, there are farms interspersed just south of Tobermory, lots of cattle, lots of hay and surely a lot of ingenuity too. Simply put, crops look good throughout Bruce Country Ontario as I peered across the Ferndale Ontario Flats. With Lake Huron on one side and Georgian Bay on the other side, the peninsula surely offers a unique growing area. All those cattle on grass are no accident and the nice corn and soybeans aren’t either. Northern Bruce County is an example of how crop genetics can move north. Their crops this year reflect an excellent crop across Ontario.
That’s being borne out in private crop tours across Ontario. I recently read the Great Lakes Grain estimates from their crop assessment tour. They are predicting Ontario corn yield to come in at 194.3 bu/acre compared to 169.4 predicted by Statistics Canada. Their soybean yield estimate is a more conservative 53.9 bushels per acre compared to Statistics Canada 48.3 bushels per acre. I know many of the people doing this sampling of the Ontario crops and I’m very impressed with the estimates. Traveling east through Ontario and north to Tobermory, there is no question this Ontario corn crops looks good. The question now might turn how this will affect basis levels going forward and what cash prices might Ontario farmers enjoy for this record crop in the field.
Many of you might say, well Phil, the crop is not in the bin yet. That’s true for sure, and I saw first-hand from my way back from Tobermory today, just what a big white combine can do. There were tornadoes and hail on this route Tuesday night and much crop damage. However, it’s not widespread and if this Ontario crop turns out to be as big as advertised, it will challenge merchandizers to market this crop and farmers to make them pay.
Keep in mind when it comes to determining the price of grain, basis values reflect supply and demand in your local area. Basis is the value which determines when grain is bought or sold. If this big crop comers to a fruition on both sides of our Eastern Canada/US border, we can expect eroded basis values in our future. However, there is so much more to this. Have you looked at our grain futures market lately?
Of course, you have, especially if you see the futures prices, I post every day on Twitter. On May 7th December corn closed at $6.18. On June 16th December corn closed at $6.16. Things softened a bit and on August 12th closed at $5.51. But lately, December corn has softened up a lot, closing today, Thursday September 9th at $5.10. There is a USDA report on Friday which might change how many acres we’re dealing with. Do you get the picture? Yes, things might be changing. Or maybe we’re just getting chronically oversold?
There will be more on that next week after everyone gets to look at those USDA numbers. With the corn acreage set to maybe change, you might call it USDA chicanery, but I won’t go there. Just keep in mind, there is a carry in outward corn futures contracts, but it’s still a bullish long-term situation. However, didn’t we all contract our corn at $7 anyway last May?
Of course, we did! I’m laughing out loud uncomfortably. I say that because over the years I have one farmer always call me to tell me when the high is in, but over the last 8 months he’s been eerily quiet, until today, when he told me the corn high was in. I think the silence had something to do with selling corn too cheap, but I dunno. The bottom line is Ontario and Quebec farmers had opportunity to price corn and soybeans at very profitable and it continues at these lower levels.
We aren’t home yet, as we saw this past week with the great white combine. You know the drill, but we’ll take where we’re at. Combines have already started to roll through some soybean fields in Ontario. That is likely to ramp up over the next few weeks. Basis will surely be in flux, especially with Ontario and Quebec corn. The Canadian dollar down under 79 cents US and down from 83 cents last June has helped.
The bottom line is Ontario is a big place and we’ve got big crops here. Typically, in Ontario, that means lots of supply, right into September 2022. It means basis can become a nagging problem. Of course, it also depends on who you are, because it also represents great opportunity. It’s no time to forget your risk management now.