Under the Agridome
Philip Shaw 5/24 4:38 PM
It is quite a battle planting corn this year. I got started last weekend a good three weeks later than normal, but only got 40 acres in the ground before another rainstorm came through. I have a bit of an advantage with two different distinct soil types. I farm mostly heavy clay soils, but about a third of my acreages is lighter sandy loam soils, which in wet spring years gives me the opportunity to get started. This year's been so wet and fickle, even those lighter soils have been a challenge.
In Ontario this year I would expect another 2.2 million acres of corn to be planted. That has been the default position the last few years as Ontario growers have got some handsome yields. However, last year's hangover with the DON outbreak is still in everybody's memory. Needless to say, those good yields versus soybeans are what you'd expect to get our standard acreage. As we head toward the end of May, the difficult weather may make that an increasing challenge. Our Ontario new crop corn basis may not have bought the corn acres once expected.
Knowing the cause of Canadian grain price basis variation is a constant challenge for me. I understand how basis is supposed to work and it works especially well in the United States when you look at their grain values. However, basis levels for futures grain prices in Ontario and Quebec have their own unique set of factors, which influence those levels. Foreign exchange is one of them and there are a few others, some known, some unknown which affect our basis levels. Sometimes it takes a lot of digging to get close to the truth and understanding.
I live close to Wallaceburg, Ontario. It is about 12 miles west of the town Dresden where my farms are located. I travel through Wallaceburg often, and in fact, that is where this column started 33 years ago. Interestingly enough, I cross the Sydenham River there, where I see a rusting relic of times past, which at one time was the focus of farmer ire. This relic was built on the Sydenham River, as a receiving point for cheap American corn to be shipped to Ontario. At the time (2005-06), many of our subsidized ethanol plants were receiving subsidized American corn. It made Canadian farmers angry.
It turned out to be a tempest in a teapot. That facility was ultimately used, but to the surprise of many local farmers it was used to export local corn to the U.S. Of course, we all know that the U.S. is the largest producer of corn in the world. At the time, many farmers were afraid that American corn would be imported into Canada reducing our basis levels. However, corn was so cheap here, that facility was used to export corn to a place that "didn't need it." It was like exporting snow to Canada in January.
What is left of that loading/unloading relic by the water in Wallaceburg is surely just an unknown memory to most people. I'm sure they don't even give it a second thought. Needless to say, at the time there were farm protests being planned to be there if any cheap American corn was unloaded. As it turned out, there weren't any farmers there protesting when our corn was going the other way. It was a great example at the time of how basis can be a determining factor when grain is moved.
Those days are surely over as Ontario grows more corn than we need and the new export market into Europe has developed partly because of the EU-Canada Comprehensive Economic and Trade Agreement (CETA). This may be challenged in 2019 or 2020 by cheaper corn from Brazil, Argentina and the Black Sea region. Of course, if Ontario farmers don't get good weather in the next 10 days, maybe the Ontario corn supply will not materialize. I know, none of us wants to go there.
As of May 20, U.S. corn planting was at 49%, which was the lowest since 1980 and soybeans were at 19%, which was the lowest since 1996. You can just imagine within those percentages the different problems that are going on. You have people like me simply having a hard time getting anything planted. You also have farmers who are planted and farmers who won't get planted this year. It has led to our spring weather market where corn has increased in price significantly. I can also imagine, depending on how it all turns out, how basis levels might be affected in the next few months. That surely is difficult to determine right now.
However, in my career, I've always got planted. I'm certainly hoping for the same thing this year. Needless to say, including the DON outbreak from last fall, with this spring fickle start, it's been a rough ride. It's got grain traders a little bit jumpy, too. The upcoming Memorial Day weekend can often serve as a firecracker to spur market action. With planters stalled, it should be telling. What we all need is a little bit of sunshine. Taking advantage of market opportunities works better when you finally get that crop planted.
Thank you for your all your correspondence.
Regular Mail: Philip Shaw, 29552 St George St, Dresden, Ontario N0P 1M0
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