20 years ago I went on a camping trip to British Columbia. It was the summer after my Master’s degree defense and a couple of my colleagues and I met up in British Columbia. It just so happened that one of my colleagues was a native British Columbian and he had all kinds of camping gear. And of course as many of you know British Columbia and parts of Alberta are home to Canada’s grizzly bears. So this Ontario farm boy was a bit nervous walking on mountain trails in Canada’s westernmost province.
My British Columbian friend had an annoying habit. Every time we were walking down a trail he would clap his hands. I finally asked him why he was doing that and he told me about the grizzly bears. He said that if there was a grizzly bear grousing on some grass a simple clapping sound would likely make him go away. In essence it was a way to keep us safe from grizzly bears.
It is too bad North American farmers couldn’t start clapping to keep market bears away like our friends in the Canadian Northwest keep those grizzly bears away. I know that many DTN subscribers in Alberta and British Columbia Peace River country have to put up with those grizzly bears in their canola. However most of us don’t have to worry about bears in our crops other than those nasty market bears that come around from time to time. Last week’s June 30 USDA planted acreage report certainly set those bears free to roam through our fields.
It is almost like the bears control our whole marketing world now. Last week’s report simply put a punctuation mark on it. USDA came out with a corn acre figure of 87.04 million acres and soybeans came in at 77.48 million acres. The soybean number was lower than expected but 1.5 million acres more than the March intentions report And 1.75 million more acres than last year. However it was corn that made me gasp because I’m supposed to know a little bit more about corn acres. So when I heard that USDA came in at about 4 million more acres than I expected I could feel the market bears at my farm gate. Corn was down the limit last Tuesday.
Well, I can clap my hands all I wanted and it wasn’t going to do any good. Soybeans seemed to be on a different planet, one where there is solid commercial demand and the inverted futures. However when it comes to feed grains like corn and wheat it looks like bearish mountain is getting that much bigger. It is almost like there is a bit of separation between corn and soybeans like never before. With corn’s agronomic superiority showing through, more and more farmers are leading soybeans behind.
In Ontario we are still trying to digest statistics Canada estimate of 1.823 million acres of corn. I had bought into the 1.6 million acres of corn and the Ontario provincial agriculture ministry was estimating about 1.65 million acres of corn. So it looks to me that there has been a bit of a sea change in the feed grain markets from the 2007/2008 bull run. How could I interpret it any differently. The production potential of this year is greater than almost anything we have seen before.
These increases in corn projections represent about 31.2 million bushels of corn in Ontario more than expected and about 450 to 460 million bushels more in the United States than expected just a few weeks ago. When you compute this with our flat feed demand and ethanol demand and current ending stocks normal weather going forward is very negative for corn prices and feed grains in general. Of course we all know it’s about the weather going forward but with July 4 upon us I think many are believing that “the crop is made “. It seems there are grizzly bears everywhere even in Ontario.
There are caveats in all this with the weather being the big one, world food demand being another and some extraneous variables from Mars in there too. You might remember me saying six months ago that $5 corn was the new $2.50 corn.  So with corn prices under four dollars where does that put Ontario corn producers now?
Keep in mind I want to keep clapping my hands hoping those bears will go away. Clearly though, it seems wheat and corn aren’t going to get rid of the bears for a long time. Soybeans on the other hand seem to be our greatest hope for finding those bears off. China’s insatiable demand for protein keeps those exports going. Put a few soybean aphids in the mix with a little bit of rust and you never know what might happen by August 30th.
It surely might seem a little bleak especially if you are on the Canadian prairie at the present time where drought stocks the land. There’s nothing good about poor prices and poor crops put together with a Canadian agricultural policy which is nonexistent. Needless to say let’s hope this is a bit of a bearish trough going forward. Biofuels, increased Asian food demand and low interest rates are still there to serve as demand variables in the future. I hate to say it, but these lower prices do the same thing. The challenge for Canadian producers is to weather the storm for another day. We all remember last year at this time when the bulls were eating hay. It’ll come again but in the meantime it seems like the bears are everywhere. I’m clapping as hard as I can.