Today, was a down day in the grain markets as December corn finished at $6.58 a bushel down 12 cents, November soybeans finished at $13.94 down 27 cents a bushel.  Of course, it’s hard to say exactly why the market reacted the way it did although it seemed to be a down market day worldwide.  Also too, it is no secret that harvest is moving much closer to us, and the algorithms are listening to their programmers saying we’re going to have more soybeans and less corn.  With combines moving toward the fields, we’ll soon find out.

As we look ahead, in the short term I’m sure most of us are hoping for good harvest weather.  Last year, in my neighborhood we got off to a good start in September, but things closed down quickly on October 4th. I only combined for four hours the rest of the month as rain inundated my fields.  It would be a cruel joke on this year if our harvest season turned wet after such an arid summer.  This is agriculture and sometimes that just happens.

That makes our risk management horizon so much more important.  Nobody likes a down year like we’re having here, but there are all kinds of risk management scenarios that prepare you for it. Aside from what you can do yourself there is government run crop insurance and a revenue insurance program in Ontario.  As I’ve documented so many times the revenue insurance in Ontario is without federal participation, which makes it less than desirable. It has always been the hope to get that participation but successive governments at the federal level have denied it.   I’m hoping someday they mend their ways and give us a farm revenue insurance program which works.

In the meantime, farmers keep planning. For instance, I was interviewed today by a Canadian agricultural internet radio program, where the host asked me my opinion about the crop in 2023.  I made the comment that the markets are pretty good right now, but I specifically said I expect lower fertilizer prices next year.  For instance, earlier this spring the price of liquid nitrogen in southwestern Ontario was approximately $1200 a metric tonne. There was a 35% tariff patched on top of that. At the present time the price of a metric ton of liquid nitrogen is approximately $650 per tonne.  There is no way I expect a repeat of 2022 prices in 2023.  If it is, we should all be heading for the hills!

I think this is a reasonable assertion. However, at this time it is just that an assertion. Maybe the answer will be to grow more soybeans instead of constantly weathering the nitrogen price risk.  I expect the war to be continuing a year from now as terrible as that is. That means we’ll still be in a warm market environment with lots of volatility. However, Canadian suppliers should be able to find other sources for fertilizer.

At the same time futures prices are long term bullish going into 2023. The prices I quoted above are certainly a lot lower than we’ve become accustomed to over the last six months. That is partly a reflection of the good crop we have in the fields but also a reflection of the uneven times we have just gone through with war markets. Are the days of asking if December corn will reach $4.25 over forever or is there some market factors in the proverbial apple cart which will bring that back?  Do we sell everything we can off the combine this fall which we haven’t already priced?

It is no secret grain market seasonality tells us both corn and soybeans usually reach their market lows in October. So, we shouldn’t be too surprised if that happens as its happened so often before. We also know that there is so much geopolitical risk ahead. As the weather grows colder there will be all kinds of pressure building in Europe for accommodation with Russia over their natural gas delivery.  As it stands now they are on a collision course with an untenable situation of not being able to heat their homes and run their factories.  At a certain point this could grow even worse and the ramification for agricultural commodity prices might lay in the balance. We must not forget that these markets continue to be war markets, something which are very unpredictable.

I saw today a private Ontario crop tour predicting the second largest Ontario corn crop ever.  I hope they are right.  If they looked at my backyard, they would find the opposite.  It just goes to show we can’t judge things based on what’s happening singularly on our farms.  We need to look beyond where we are.  In 2022/23, this agricultural commodity world is so full of different possibilities and outcomes.