In southwestern Ontario the weather has been typical late February fickle.  We’ve had a little bit of snow last week followed by cold temperatures followed by rain and mild temperatures and back to cold temperatures today. I could just imagine my winter wheat underneath all the water ice and snow but one thing I’ve learned over the years is you never know until April arrives.   Sometimes what you think might be terrible conditions for winter wheat aren’t so bad at all.

I obviously hope that my winter wheat makes it because as you all know grain prices screamed higher this past week and wheat was one of the leaders. It goes without saying that there is lots of wheat in the world but at the same time we have Russian troops moving into Ukraine or threatening to move even farther into Ukraine as I write this. You remember last year that I was invited to give a grains presentation in Kiev virtually.  I had been invited by a Ukrainian grain trader. This past week she tweeted, “if my grandfather knew that Russia, whose territory he defended at the cost of his life from Nazi troops, attacked Ukraine, he would die a second time.”

I thought that statement was both profound and chilling and because it was said by a friend of mine, it made it that much more real. It is one thing to talk about Ukrainian and Russian tensions regarding the wheat export economy. It is another to talk about it with a friend who is on the ground and has experience there.  Western governments have responded with sanctions, I simply hope for peace. You would think in 2022, we would know better.

Grain prices have screamed higher this week because of the tensions in the black sea region but also because the South American crop is turning out to be much lower than expected.  It’s interesting, in all my years of writing commodity commentary it is rare that the Brazilian crop is less than forecast and 2022 is one of those years. Looking at soybean futures spreads, the May/July spread is telling us how the market feels about South American production. The May spread is up to 6.25 cents over the July contract now which indicates Brazilian soybean production is much less than expected. We know the USDA has weighed in with the lower number, but it is much higher than the Conab number.  Where this will settle out, I don’t know, but on cue prices are much higher because of it.

This past week I was part of a panel that was answering questions after the recent Ontario agricultural conference which was held virtually. I had done a session called “beyond the markets” where I talked about how the market gives clues on what it might be doing. I also talked about the Ontario basis levels for grains as well as some basic agricultural economics. I was asked the proverbial question on what the price of grain is going to do?  This was in a week when I had a new crop soybean market order hit for $18.  Old crop soybeans are $20.75.  That number alone almost seems like science fiction.

As you all know my standard answer is that nobody knows, but we can use future spreads and basis evaluation to figure things out.  I counseled some of the farmers listening that maybe they should have standard market pricing orders set for $21 for soybeans. As I write this tonight, those standard pricing orders are about $0.25 away from being hit. I’ve reminded the farmers present that I wrote a column a few weeks ago saying that this market cannot get enough of almost everything and I mentioned the price of oil.   I also mentioned that we cannot take supply for granted.  Simply put, we are reaching some rare air regarding grain prices, still not at record levels but getting within spitting distance.

Soon, we will have even greater clues into our new crop pricing future when the USDA releases their preliminary numbers on 2022 US crop acres. Also, keep in the crosshairs the May July soybean futures spread. If it keeps widening it means a South American crop has been vastly underestimated. Of course, at the same time take advantage of some of these excellent prices for Ontario cash grain.  There is no glory in finishing second or in other words we’ll know that top is in when it’s already over.

The road ahead will be emotional especially as we head into the March 31st USDA report. It will be emotional because we are close to record cash grain prices in Ontario and maybe even in an environment where we break 2012 highs. Don’t let emotion get in front of what you need to do which is always profit maximization.  Resting standing pricing orders help.   The road is littered with remnants of those who thought they knew what the market will do. I do not, but I do know at these price levels I can put some extra bacon on the grill this Christmas.