Grains Swoon Early in a Year Eerily Familiar Of Big Crops Past

I made the trip to my local seed establishment earlier this week. On picking up some additional soybean seed, one farmer retorted to me, “Hey Phil, plant them right this time!” Of course, everybody there laughed. The point being that planting soybeans the first time in the Deep South west of Ontario can be a big leap of faith. It seems annually here I’m always replanting soybeans.

As you all know I’m not an agronomist, but I know a thing or two about soybeans. Over the years, I have replanted many times. According to my agronomist friends, the critical time for soybean emergence is the first 48 hours after planting. Every soybean that I planted on June 1st was having a very difficult time emerging from the soil. We had received a cold 6/10 worth of rain about 30 hours after I finish planting. For whatever reason, my soybeans were entombed, unlikely to produce a satisfactory stand. As we all know around here, you don’t hesitate; you go in and plant again.

On June 12th I finished planting soybeans for what I hope is the last time. I’m on the clock for the 48 hours, but it looks like I’ll make at this time. At 90°F temperatures coming this weekend, and who knows maybe that second planting will give me that record crop I’ve always hope for.

Of course, as we all know, as farmers, it’s one thing to grow a crop and another thing to market it. Our grain market has gone south lately and it has gotten many of us considering our options. About six weeks ago I wrote a column about the critical grain pricing time period in May and June leading up to the July 4th weekend. In 2017 December corn topped out in early July and in 2016 it was June 18th. Would December 2018 corn do the same thing in 2018? I thought that was a reasonable assumption. I thought we might see something similar in soybeans. Needless to say, grain prices are a lot lower over the last few weeks.

Let’s take a look at December 2018 corn for instance. On May 24th, the first day I planted soybeans, it topped out at $4.29 only to drop down to $3.87 a bushel on June 11th. As of last June 13th, it was sitting at $3.97 a bushel. The July contract is at its lowest point in about three months. On the soybean side of the ledger on May 29th November soybeans topped out at $10.42 cents per bushel, but have since dropped thru a trap door, currently at $9.55 bushel. Over a period of three weeks, we’ve lost 87 cents on a bushel of soybeans. In short, the soybean market has got whacked.

As you all know, I’m no marketing genius but I have made several statements in this column over the last several months about how standing marketing orders are incredibly important. $5 corn and $13 soybeans off the combine were there for the taking a month ago in Ontario and Québec, just by having the standing orders in. They can hit while you’re sleeping or while you’re driving a tractor and they are still relevant today even in a down market.

Last Tuesday the USDA chimed in with their latest WASDE report. They maintain corn production for 2018/19 at 14.040 billion bushels with an average yield pegged at 174 bushels/acre. USDA pegged the soybean crop at 4.280 billion bushels with an average yield of 48.5 bushels per acre. Obviously, that’s a big reason the grain markets have declined. Other highlights of the report saw new crop US corn ending stocks dropped 105 million bushels, with the Brazil corn crop declining by 2 MMT and Russia down by 3.5 MMT. USDA raised soybean crush demand by 30 million bushels over two years. World wheat stocks were raised but the Russian crop estimate was lowered by 3.5 MMT.

Ontario and Québec farmers have once again benefited from a lower Canadian dollar during this time of falling grain futures prices. The Canadian dollar has actually dropped into the $.76 level US, which has helped the soybean and wheat basis levels. For instance, the old crop basis for soybeans in Ontario is in a range from approximately $2.32 to $2.42 cents a bushel over the July soybean futures. From a flat pricing perspective that basis is still quite healthy even in a declining futures environment.

Obviously, nobody knows the road ahead with regard to the grain markets. We all know that crop weather especially over the next 3 to 4 weeks will be critical to corn production in the United States. Rain in August is always something that sets up the soybean crop. There is also the June 29th USDA report, which will update new crop acres, stocks and yield and a whole host of other statistics. That will lead us into the July 4th weekend, when sometimes the market decides, “the crop is made.”

So we shall see. We’ve still got all of that “tariff talk” between China, the US and unfortunately Canada and Mexico. That will weigh on the market too. The road ahead is littered with analysts who thought they knew what the grain market was going to do. I just keep driving. Keep those standing grain pricing orders updated.

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