Testing the Corn Economy: What Is The Future?

    I’m in Dhaka Bangladesh as I write this, but I’m inundated with news that I only have 75 days left before I plant corn.  That is our modern world for you, go a million miles away and still our mobile devices tweets away from production enthusiasts back home tweeting me I had better get my equipment together.  Oh, the urge to get those 100 million acres of corn planted.

Here in Bangladesh, farmers grow 900,000 acres of corn when they are not growing rice.  Of course that 100 million acres I’m referring to is the hype regarding American corn acres in 2013.  With our South American friends seemingly coming in with a big soybean crop this winter, many are looking to our American friends to fill the world ending stocks further.  Oh, if we had a crystal ball.

In Ontario, depending on weather, surely we’ll hit over 2 million acres of corn, like we did last year with 2.15 million.  I think we’re fairly “tapped out” when it comes to corn acres in Ontario because we don’t possess the combination of climate and soil to boost acres skyward.  Ditto for Quebec.  You can’t grow corn on the shores of Hudson Bay!  So when it comes to Canadian corn production, maybe western Canada holds part of that answer.

I was extremely interested in Progressive Farmer Contributing Editor Tom Dodge’s article this week, called “Westward Ho! High Prices, Tough New Hybrids Drive Corn Belt to the West.  In it Dodge documents South Dakota corn acres rising from 3.8 million in 2001 to 5.2 million by 2011.  In 2012 USDA estimated that 6.15 million acres of corn was planted in South Dakota, but 5.35 million would be harvested because of drought.

In many ways, it illustrates the great advantage our American neighbours have over Canada.  Our cold weather and “Arctic Tundra” don’t support corn production with the same type of potential there is the US.  Despite that Manitoba planted 300,000 corn acres in 2012 up 66% from 2011.  Soybeans were even greater at 875,000 acres vs. 575,000 in 2011. So we are “pushing it”.  As any Canadian farmer knows, “frost” is always on our mind, spring and fall.

Needless to say, when talking to western Canadian farmers about corn and soybeans it has them thinking.  When I chat with Manitoba farmers many of them say they like soybeans vs. canola.  Corn on the other hand is grown for grazing across much of western Canada, even north of Edmonton Alberta.

A few years ago I was invited out to speak in Edmonton in the cold month of January.  In September previous to that I received a call from the fellow arranging that engagement.  He told me about the corn north of Edmonton.  I asked him when they could expect frost.  He laughed and said, “Right about now!”  So there are limits to planting corn, I don’t think we’ll ever see it in Nunavut.

However, we should not be limited in our thinking our corn world is static.  Will new technology come along like it did for South Dakota to fill the Canadian prairie up with corn production?  Or despite all the good science, will corn demand not keep pace with an ever-expanding supply considering benign weather as we move forward.  In my small mind, I think that latter point might be more of the problem. The great demand market for corn is over until we move to a lower price to build demand again.

Of course that 100 million acres at trend line yields of 166 bushels per acre in the United States in 2013 might do it.  Needless to say, the world doesn’t work that way.  Our drive for 300-bushel/acre corn might help.  Ethanol will surely have to pitch in, but with 20% of US ethanol capacity idle, that’s like spinning our wheels in a snow bank.

Then there is “hydraulic fracturing” or fracking.  That’s the new drilling technology, which has helped our American friends discover so much more copious supplies of oil and gas in those same Dakotas.  The corn growing in those fields finds itself going to ethanol plants, which are there because of a US Energy Act, which built those plants.  However, now with “fracking” the new oil and gas reserves are putting the US on track to be “energy independent” by 2017 or 2020, depending on whom you believe.  So maybe the US won’t need all of that biofuel.  Maybe the impetus of the ethanol policy will become redundant.

So is corn the “Pandora’s Box” of 2013?  Are we going to grow corn on our rooftops and maybe this time gets the opposite of 2012 weather.  Like they say on Twitter, I’m just saying.  Don’t shoot the messenger.

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