We are getting to the end of August and in this part of southwestern Ontario it has being a very soggy summer. If there is one saving grace from all the rain, it’s that it came when crops were quite big and far along.  Corn that is 10 to 12 feet high can handle a lot of water versus when it is in the seedling stage where it can be catastrophic. Needless to say, both corn and soybean don’t like wet feet, but later in the season it can be more tolerable.

I’m hoping for dryer days and that is exactly what some people are getting in the American corn belt as the forecast for the coming week is for very hot and dry conditions.  There are some within our agricultural commodity market that are thinking that this may adjust the needle on supply downward as we head into the fall.  I’m here to tell you I don’t think that is going to happen. 15 billion bushels of corn and over 4 billion bushels of soybeans aren’t going away. As we head into September, without some big, unexpected calamity our grain supply looks onerous enter the future.

That is just another reason why we should be focusing on demand like I talked about a couple weeks ago in this column.  In fact, that value added domestic demand I referred to has caused quite a bit of considerable buzz in social media circles. It seems everybody thinks it’s a good idea, but I think part of that is because supply has grown so large.  In fact, you could put together an argument that demand is stronger than ever, but supply has grown to such an extent it is simply overburdening the record demand which is there.

As it is, our world is flush with grain as we head into the fall of 2023.  Mother Nature hasn’t necessarily played nice this year, but she hasn’t been awful like we saw in the drought year of 2012.  Crops are looking to be enormous at 15.111 billion bushels of corn and 4.205 billion bushels of soybeans.  I don’t even want to talk about wheat.  At the present time the CME’s running average percent of full carry on SRW wheat is closing in on 90%, an incredibly bearish take.

In Ontario the quick math tells us we’ll have about 440 million bushels of corn supply this fall. That is on top of what is left in Ontario old crop stocks where we are nowhere near US replacement values.  Let’s just say that all that rain that I have been complaining about keeping me out of the fields has actually been beneficial in some ways to both the corn and soybean crops versus the arid summer of last year. However, 440 million bushels of Ontario corn would be a record with much of that supply needing to be exported out into the cheap Nirvana of global corn markets on the high seas.  It’s a good thing, but of course it’s a bad thing and will surely show up in old crop corn basis levels for at least the next 18 months.

You get the picture?  Yes, as I said earlier the world is flush with grain. In fact, both corn and soybean world ending stocks have increased over the last year, while wheat stocks have actually decreased.  However, who really worries about wheat stocks when it is planted and harvested every month of the year somewhere in the world.

Keep in mind that this will not be so easy to change. For instance, you could make an argument that it’s more bearish now than last year, but in the corn market at least we’re down two dollars per bushel from last year.  In many ways, that’s intuitively nonsensical. Or it’s simply a reflection of how bearish the grain markets are right now.  Then of course there are friends in Brazil.

I made some of my York region Ontario farmers nervous last year when I told him that Brazil was ramping up corn production. We learned recently that Brazil is surpassing the United States as the world’s top corn exporter. In fact, Brazilian corn exports out of the Amazon northern ports are set to surpass the traditional port of Santos for the third consecutive year according to a recent Reuters report. We all know that they have special arrangements with China to export soybeans, but also to export corn.  So, we must keep that in mind as the United States has become a secondary supplier for both grains to the world’s hungriest consumer of agricultural commodities, China.  The supply just keeps growing and growing and of course there’s lots more farmland available not only in Brazil but other places in this world.

It is all very humbling for this corn farmer from southwestern Ontario, who is hoping to add to this grain supply this fall.  The pendulum will swing back someday when there is a production hiccup either in Brazil or the United States. However, keep in mind the pendulum is far out the other way right now.  Big supply is winning and there are a myriad of characters around the world trying to keep it that way.