As a Canadian I always try to make sure that I never complain about it being too warm in the summertime. I say that because we tend to wear a coat at least eight months of the year around here so when it’s nice and warm like it’s been over the last six or seven weeks I don’t really complain. It makes it so much better this August that here in southwestern Ontario the drought was broken earlier this month.   The soybeans might actually be able to benefit from the moisture.  As I’ve mentioned in previous columns it’s too late for the corn around my neighborhood to be anything close to normal.

Having said that, we are in the dog days of August and some market watchers would say the crop is made. Needless to say, there is a hot and dry forecast for the rest of August in many parts of the United States and soybeans will certainly be affected. Tomorrow we’ll get the latest estimates from the USDA. Will they raise both corn and soybean yield or will they soften the yield based on some of the tougher crop conditions that we’re seeing in the western corn belt. Today, the Dow Jones released their pre report estimated US corn yields at 175.8 bushels per acre and US soybeans at 51 bushels per acre.

The long-term outlook for corn and soybeans is bullish still based on grain futures spreads. I know it might not seem that way too many of you, but it is true. Keep in mind that today December corn finished at $6.27 a bushel and November soybeans finished at $14.48 a bushel.  Historically, those prices are off the chart compared to the last five or ten years and represent profitable prices for farmers.  We are still affected by all the malice in the market caused over the last 12 months.  Farmers are still in a good place despite the farm input inflation that has rocked our world in 2022.

It’s always hard to say what’s going to happen in a USDA report coming up.  However, if you take those Dow Jones yield figures for gospel those are pretty good crops. At this late stage in the year, we’re not talking a disaster even though there might be some regional variations of that. Having relatively healthy prices compared to history is a reflection of the dynamic demand for grain in this troubled world.

I know that this doesn’t give everybody solace with regard to their farm outlook in 2022. But keep in mind we’ve had quite a run and big profits have been there for the taking. I’ve had more than one farmer contact me in the last few weeks lamenting the fact that they still had wheat in the bin or old crop corn from 2021. In fact, I had one farmer from eastern Ontario tell me that there are huge amounts of what he called “stranded corn”.  This is old crop corn still in the bin that can only garner a new crop price now based on local market realities.  In other words, $10 and $11 corn weren’t enough and in the earlier cited case, $15 wheat off the combine was not enough.  Pulling the grain sales trigger can sometimes be so conflicting and painful.

That’s not to say those people with physical grain are wrong, because nobody knows.  However, when we are faced with prices we couldn’t even imagine, sometimes it’s time to sell.  As I’ve said many times in the past Canadian farmers have to balance good futures prices with good Ontario and Quebec cash prices.  This is a reflection of the value of the Canadian dollar but also the unique structure of the cash grain market within these provinces. At times, like 2022 it provides unique premiums as well as unique pitfalls. Deciphering what might happen in the cash market is incredibly difficult because merchandisers keep everything close to their vest.

I had this discussion with an Ontario grain merchandiser this past week on social media from eastern Ontario.  I made the point that it’s difficult to know what the Ontario cash grain market will do especially in eastern Ontario as grain inventories are usually a conjecture and it is discussed privately among the grain buyers. There is very little market intelligence published widely.  I accept that.  It puts me in a position where I have to look at historical cash grains patterns closely, correlated with cash basis levels and try to figure out where the Ontario and Quebec market might be going. One farmer near the Quebec border told me it’s all a bit of a cat and mouse game.  There is lots of farm storage, cross-border trade and there is always a bit of mystery about how much physical grain is out there. It truly is an eastern Canadian market reality.

That’s one reason I’ve always felt that standard marketing orders resting at your buyer are a good thing in Ontario and Quebec.  Grain futures are what they are, but Canadian basis levels in your neighborhood can be very fickle.  It’s not always related to US basis plus trucking. As you go east in Canada, basis becomes ever more creative.

So, we will see what the USDA says on August 12th.  Think of it as another benchmark on the 2022 grain year. Or think of it as the same people pinning a tail on the donkey once a month. We all know Canadian grain prices are fluid. We all know they are a moving target.  They are mostly transparent.   As we head toward the end of August, let’s hope for more rain to salvage a tough year. We’ve still got the prices; the challenge is to capture the futures and the basis at the same time.  It’s a noble goal with a unique Eastern Canadian twist.