It is that time of year again when your loyal scribe finds himself in the field from sunup to sundown.  Now I have often made the argument that the longest days are often the shortest days as time flies by seemingly at warp speed. I’ve often said that getting ready to plant is always much harder than the actual planting. In fact, when I hit the autosteer button it usually much more relaxing than trying to contemplate everything that I might need in the run up to planting. Amid the raindrops this spring, it’s an ongoing challenge.

We will get there; we always do and sometimes the journey to getting the crop in is quite eventful. Needless to say, there will be many more days from sunup to sundown. Interestingly enough, i must say that every time
I see the sun come up and the sun go down I think of my friends from the other side of the world in Bangladesh who see just the opposite. When the sun goes down in Dresden, it is rising over Dhaka. On the contrary when it goes down in Dhaka it is rising in Dresden.  It is all so interesting to me.

Of course, journeying there takes quite a bit of planning and patience and of course we also have to think about the foreign exchange we need to pay to get there. The Canadian dollar does this right here, but when traveling abroad I always need to get the best value for those Canadian dollars in foreign currencies.  Over a lifetime, I’ve seen the best value for our Canadian currency in the strangest places.

Thankfully, for Ontario and Quebec farmers they do not have the same challenges in getting foreign exchange within their grain prices. We live in a place where Canadian dollars are changed every day into U.S. dollars.  So, when we look at American futures prices in Chicago, we always know that there is some type of foreign exchange component in the Ontario and Quebec cash grain prices. For the most part, the actual mechanism is taken for granted. Our grain prices are related to futures prices plus or minus the basis value which reflects local supply and demand as well as our foreign exchange rate. That is the added layer to our grain marketing world here in Ontario and Quebec.

For the most part, we have pretty good grain price transparency in southwestern Ontario. However, as you go east and get into Quebec, they can get a little bit wonky. Some of it might be based on foreign exchange, but much of it has to do with oligopolistic competition for grain.  That is, competition from very few firms.  Needless to say, especially for soybeans and wheat our foreign exchange rates have a considerable influence on our cash grain prices. Keeping abreast of the value of the Canadian dollar versus the US counterpart is sacrosanct for increased profitability for marketing our grain.

Simply put, we are not exchanging Canadian dollars on some dark alleyway in Trinidad, Dubai or Bangladesh.  Our currency market here is solid.  If you want an antithesis to this, just ask your Argentinian farmer brethren who produce soybeans and corn, which is always more tangible and valuable than the Argentinian peso.  Here in Ontario and Quebec, we prefer Canadian dollars versus physical grain.

At the moment I write this, the Bank of Canada is quoting the Canadian dollar just under $0.73 US. This value is quite low historically for the Canadian dollar, but we’ve been fluttering here for the last two years.  Ask yourself what your Ontario grain prices would be if the loonie suddenly went to 80 or $0.85?  We all know that just through foreign exchange our cash prices would be much lower especially for soybeans and wheat.   Understanding this thoroughly is key to putting together a successful “made in Ontario or Quebec” grain marketing plan.

Now you know that I love my American friends. However, keep in mind that most of the commodity narrative that you consume freely ignores this. It’s ignored because the American narrative is tailored to Americans. That doesn’t necessarily mean that it is bad, it just is what it is. Ontario and Quebec farmers much reach beyond that to understand and manage our foreign exchange risk which have a much bigger impact on our cash grain prices than anything the American farmer could ever imagine.

On Friday May the 10th, you will get the latest WASDE report from USDA.  It’s all good, even though I think it pales in comparison to what future spreads and basis says. So, consume it with a bit grain of salt.  For Ontario and Quebec farmers, we need good futures prices and a low Canadian dollar value especially as we ramp up into June, a time of traditional seasonality (higher prices) in the grain market.  We need to know our Canadian dollar value and we need to know our Ontario and Quebec cash basis market influences.

The foreign exchange part of that with the Canadian dollar is easy, although hard to forecast into the future. Understanding the true cash basis market influences is more like selling dollars on a dark street corner in Trinidad, Dubai or Bangladesh.  It’s all so close to the vest for the players involved.

Flat grain pricing scenarios in Ontario and Quebec with the use of standing marketing resting orders can help with this. So read the USDA commentary Friday, but there is so much more to consider.