Just where are we now? That was the thought that danced through my mind today as I left Canada’s Outdoor Farm Show. The show in Woodstock is always a late summer repository for sober second thought our production season. As I walked the different lanes of the show I heard from many of you regarding harvest yields and production problems this year. Generally speaking, I’m hearing about lower-than-expected yields on soybeans and the same for corn. It makes me wonder how we stack up going into 2011.
We got a bit of an inside track on that last week when the USDA released its September crop estimates and supply and demand reports. In the report the USDA actually cut US corn yields 2.5 bushels per acre with the crop set now to come in at 13.160 billion bushels. They also reduced the 2010/11 ending stocks down to 1.116 billion bushels, which shrank the stocks to use ratio down to 8.3%. This is the second lowest in 40 years since the 1970/71 production season. In the same report USDA increased its soybean production estimate by 50 million bushels from August to 3.483 billion bushels with a yield per acre of 44.7.
Of course now the focus will change to what actually is happening in the field. The corn market had already factored much of this negative information into market prices. Clearly though, if you had any doubts about corn being in bullish territory they were put to rest by the September report. The challenge for corn prices will be to maintain demand as futures levels increase. I am hearing everything that you are hearing regarding lower US yields. Despite what you hear I would move ahead cautiously because the test weight issue we had last year could work in reverse this year. That is lower volume might have higher test weights reflecting in yields that might be higher than first estimated. The October USDA report may fill in the blanks on that.
The soybean number can only be construed as bearish and market prices have been partly held up by corn and wheat. I am somewhat skeptical of the soybean number because soybeans in general have been such a dead dog when it comes to yield. For instance in my many conversations today with Ontario soybean farmers who had already harvested soybeans, yields are in the lower end of expectations. That’s a political correct way of saying they were very disappointing. I talked to one grower who was quite satisfied with his 44-bushel/acre yield and I talked to another grower who had harvested 1000 acres already with yields between 37 and 43 bushels per acre. I have said it many times with all the technology we put into the soybean we should be getting 85 bushels per acre with our eyes closed. In 2010 it looks like we have the soybean yield status quo again. That’s why I question the USDA soybean number.
So where are we? At first glance with corn above $4 cash and soybeans close to $10 cash it puts us in good stead despite our yield woes. Keep in mind that the disappointing yields I am talking about are from southwestern Ontario. The Ontario corn yield provincially may still come in as a record because of the outstanding crops in other parts of Ontario. Ditto for soybeans. So I’m thinking that in 2010 at least in Ontario and Quebec crop producers will be quite successful.
How this will pan out with regard to tangible capital asset acquisition is another thing. You would think that these price levels would spur machinery purchases. I am sure that they are but I had at least one vendor tell me today that it wasn’t as good as last year. Interestingly enough I also had one conversation with a vendor who talked about the American market being very tough for farm equipment. He simply told me the US economy is not so good and American farmers are having a very difficult time getting credit to buy large capital items. That made my head shake a little bit, because I didn’t quite realize that American farm credit hasn’t recovered fully from the credit freeze of two years ago.
As harvest continues one of the greatest concerns I heard today was about marketing position. For instance with grain futures at elevated levels do we store, sell now or wait to hit that marketing homerun? The answer of course is to sell where you are comfortable and profitable. Yes, you might remember your loyal scribe dreaming about $20 soybeans a few years ago. Let me tell you. I’m still dreaming. Where we are now is not such a bad spot. Looking ahead we’ll see if the October USDA does anything to change that.