For those of you who have read this column over the last 36 years you will know that I am a big Detroit sports fan. Yes, it is mostly the Pistons but I’m also a lifelong Detroit Lions fan. Forgive me, as that has been a tortuous existence over time as the lions have only won one playoff game since 1957. So, the other day when I was in my local farm supply centre I was taken aback when one farmer said he was expecting the Detroit Lions to win 13 games this upcoming season. I admonished him and said this was the Lions. He laughed and said he was sticking with his prediction.
Something tells me that there will be a lot of Monday morning quarterbacking come this fall when the NFL fires up. I’ve been beat down too many times as a Lions fan to believe anything different. However, that is not the same with our grain markets as there is always a lot of Monday morning quarterbacking going on with regard to where prices were and where they’re about to go. 2023 has represented quite a year of volatility, but it seems as August has dawned maybe we are getting back to more traditional markets of bigger surpluses and lower average prices.
Of course, I hope the Detroit Lions win the Super Bowl, but I also hope the price of corn goes up as well. What we saw today was corn drop to $4.94 a bushel which puts it down to about the lowest level we have seen since 2021. Cash prices for new crop corn are $6 a bushel in Ontario. Soybeans which have much more bullish fundamentals have a new crop price on them of $16.45 a bushel. Both of these prices you would kill for if you hadn’t had the last 18 months but of course that’s what Monday morning quarterbacking is all about. Sober second thought on days gone by especially when pricing grain can sometimes be very telling.
What we have of course is a super big corn crop in the United States which grew a little bit smaller in July, but it seems the trading algorithms don’t believe it’s that small. For instance, what was a hot and dry forecast has suddenly turned into a much wetter forecast in the few weeks to come. That huge potential for a big American crop seems very real and as August grows old it is likely only to come to fruition. At the present time it seems that commercial interests are growing much more comfortable with the specter of big corn supplies in the United States for this coming year.
The same could be said for Ontario and Quebec even though weather has been very uneven, but on the wet side. One of my Quebec friends told me this week he had never seen old crop corn basis levels in Quebec so low in his career. He said it was a bit better for new crop corn, but the bottom line is there is quite a bit of old crop corn in Ontario and the crop in the field looks quite good. It is true we’ve had a lot of wet feet here in Ontario and Quebec this year, but tall corn can withstand it much better than soybeans. At the present time there is lots of fungicide going on the corn crop this year in southwestern Ontario. This is unlike last year where it was so dry little spraying was done, I haven’t heard the same debate this year. The Ontario corn crop looks good and in fact if Mother Nature smiles on us it might be record year for Ontario corn yield.
The noon rate on the Canadian dollar today was .7493 US which continually adds stimulus to Ontario and Quebec grain prices. At a certain point, this is going to change in a big way to the upside but where that certain point is nobody knows. History tells us this and when it does happen, we will see an erosion of Ontario grain prices further reflecting lower grain futures values. Nobody wants to go there, but when foreign exchange is involved often times it can’t be avoided.
It begs the question what are Ontario and Quebec farmers supposed to do with regard to selling unpriced new crop grain as we sit here in early August? Well, punting is not allowed. However, if we put on our Monday morning quarterbacking hat maybe we should have sold more in February and on June 21st when we had that solstice high. Keep in mind as we move forward that is with the benefit of hindsight. Mother Nature could still have something up her sleeve.
All of this is unwelcome news for Ontario and Quebec grain farmers especially when they’ve been accustomed to war markets from Ukraine and Russia and a huge pent up demand post COVID over the last two years. Keep in mind our Brazilian friends have enjoyed all of these higher prices as well and their production is likely to continue upward. For instance, the Celeres Consultancy pegged 23/24 Brazilian Soybean production at 165.9 MMT vs 157 MMT last year. My question based on history will they be aiming at 200 MMT of soybeans in the next ten years?
Had enough bearish news yet? Well, it’s a long, long story and it’s something that we have seen before. I don’t want to add a $0.90 US Canadian dollar to the mix. However, what I do want to say is remember the optimism of that farmer who told me the Detroit Lions were going to win 13 games this year! If that’s the case, there is eternal hope for bullish times in grain prices. Daily market intelligence will remain key.