Rays of Hope In a Bearish Marketing Environment

Grains Screaming
The last 5 years for agriculture in Canada have been pretty good.  It has not necessarily been the livestock sector, but the crop sector, which has benefited from higher prices over the last 5 years.  So as we head into the 2015-cropping season, the headlines across North American farm country are often searching for ways to make farming work this year.  Simply put, for some that have farmed over the last 5 years, the memory of cropping in unprofitable times is just too far back.  Welcome to 2015.

Of course for Canadian farmers the big caveat is the low value of the Canadian dollar currently hovering around the $.80 US level.  Futures values of $3.89 a bushel for corn and $9.74 for soybeans and $4.99 for wheat don’t excite anybody.  Needless to say, cash prices at those levels are below what American farmers are facing for their old crop and similar for their new crop.  It is a long way down from the record highs we saw 3 years ago.  So while American farmers struggle with planting decisions to try to make a profit at these price levels, Canadian farmers are somewhat insulated.  Of course the question is will the market eventually come along to bail us all out.

What would we be talking about if the Canadian dollar were still at par with the US dollar, like it was back in 2013?  Simply put we would be seeing extremely low cash prices for grain in Ontario and Québec, which would be difficult to produce.  The livestock sector would be doing fine, but not so much for the cash croppers.  That is how important this exchange rate is.

If you read any of the discourse in social media or the gibberish at your local coffee shop you will know that soybeans will seemingly be growing everywhere in 2015.  There is also a lot of conjecture on how we are going to do that profitably.  It is the same with corn, but maybe a little bit less bearish than soybeans.  If you were to listen to some of these bearish soothsayers you might not want to plant at all.  However, there will be a harvest in 2015.

From a personal perspective looking at unprofitable futures or cash prices is something that I’ve stared down many times.  Yes, I will admit farming at profitable price levels is so much easier versus the times when the market doesn’t give you that opportunity.  I used to call it planting hope.  At one time in my career prices were so unprofitable, that we simply went to the field and hoped things would get better.  I realize that hope is a 4-letter word and it shouldn’t replace a good marketing plan.  However, I have been there too many times and I’m here to write this column today.  In 2015 there will be many farmers planting on hope.  That hope may be misguided at times but in reality sometimes that’s all you have.

That’s okay because there is so much production risk on the table.  If you have read this column regularly you will know that I’m looking at US corn demand at approximately 14 billion bushels for this coming year.  That will continue to eat into ending stocks, which will eventually force price up to stem that flow.  Then of course there is an unexpected Tuesday, which may have arrived this week in the form of the war in Yemen.  Then there’s Mother Nature, which is unlikely to play nice in US production fields in 2015 after such a benign year in 2014.  This is agriculture and it’s the nature of every farmer that we’ll do better next year.  I am certainly no different than anybody else.

In the upcoming weeks I will be busier than a bee on my farms.  I know that is somewhat of a bad joke in Ontario, where bee issues have effectively lost us our neonicitinoid seed treatments in the years ahead.  That’s just another challenge.  It might be too cold right now, but give me another couple weeks with some good weather and I’m sure I’ll have a tractor roaring across a few of my fields.

Of course, maybe at the present time I’m talking through my hat.  We are all waiting with bated breath to see how many acres the USDA says US farmers will plant in 2015 on March 31st.  We also get some news about the quarterly grain stocks.  Yes, it’s another one of those mega-USDA reports.  It always serves to create an emotional groundswell of pixie dust to send the commodity markets on their ear, at least for the day.

The future will be all of this and none of this at the same time.  As farmers, we know that every year is different.  Whether we are planting hope this year or something else there is an undeniable truth either way.  That is that risk management with regard to our marketing never grows old.  As hard as it might get, we need to focus our management and get that crop in the ground.  My experience tells me, if you’re focused on the right management, sometimes things just take care of themselves.

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