Grain markets are certainly a lot weaker than we have become accustomed to. With both December corn and November soybeans dropping below $5 and $12 respectively it harkens back to days gone by.  I certainly don’t want to get used to it but of course you all know that I’ve been at this game a long time and I’ve seen many things. Where is that seasonal spring rally that we’ve always been told will be there?  Well, who knows, maybe it will start tomorrow.

I wouldn’t hold my breath. Wheat has been taking a beat down especially since the Russians decided to extend the Black Sea grain agreement by another 60 days. This gave the algorithms just enough artificial intelligence enthusiasm to send wheat markets down again. If it wasn’t for the Canadian dollar staying relatively low compared to the US dollar Ontario producers would being a heap of pain. Needless to say, the Canadian dollar fluttering in the 74 cent US level continues to add stimulus to Ontario and Quebec grain prices.

We got here with our eyes wide open. It might not have been the greatest crop in the United States last year, but it was still fairly decent. We have known for quite some time now that the Brazilian farmers were harvesting a record soybean crop and the Safrinha crop looks very good as well.  Add a little bit of demand destruction into the equation and we’ve got much lower prices than we had last fall.  So, when that spring rally starts tomorrow, i think we’ll all be ready for it.

OK, maybe that is a stretch. However, I wrote last week about the seasonal nature of the spring rally in grains. In 12 out of the last 15 years December corn futures have always taken out what the December high was in the previous March. In the three years where that did not happen, one of those years was COVID and the other two years we came within a nickel of getting there. Is 2023 one of those years or will it be a year where we get nowhere close?  If you believe that analogy, corn might be headed back to $5.75 a bushel on a spring rally.

It is also hard to say. Your loyal scribe got started planting soybeans today.  I am hoping for good things, as always but of course with soybeans you never know. They are the great liars and sometimes take forever to come out of the ground if they decide that’s what they want to do. It is so dry in southwestern Ontario now that everybody is planting in a cloud of dust. Let’s hope that’s not a harbinger for things to come.

Of course, we know that we are going into a El Nino weather pattern which generally means good growing conditions for North America.  That is another thing that the algorithms have dialed in, pushing prices lower. However, keep in mind this crop is not even close to being in the bin yet. Heck, we haven’t even got it out of the ground and in many cases, we haven’t even got the seed in the ground. There can be all kinds of things happen to make it better

One of those things might be the El Nino effect in Asia. While the El Nino weather pattern generally means good crop growing conditions for north America it can mean dryness in Asia. At the present time Malaysia is seeing about 40% less rainfall than usual, which could affect palm oil production, a major substitute for soybeans. Who knows, where chaos theory might rear its ugly head next. Surely, there is a butterfly fluttering somewhere in the agricultural commodity world to generate the next great run up in prices.

History tells us it will happen, and history also tells us that will have weeks like we’ve had this past month where prices fall almost every day. Many of you grow something called poverty grass (wheat) which is about $7.00 a bushel in Ontario right now, less than half of what you received last summer for the same wheat.  That’s so crazy, especially when hypersonic missiles are being shot over Black Sea grain country as I write this.  Last year, at the same time those missiles had the opposite effect on the wheat prices.  It will continue to be a wild card for wheat prices.

As it is, grain prices aren’t exactly what Ontario and Quebec farmers have been wishing for. Keep in mind this too shall pass. Oftentimes, grain markets can change very quickly, and it is still early in spring. What happens if non-commercial money decides to get back into the grain market especially with a weather scare? It might mean opportunity to price grain again.  It might mean opportunity for another big run up. It might mean nothing.  However, as always, daily market intelligence will be key to help make these choices. Risk management never grows old.