Under the Agridome

Canadian Soybeans Are Losing Their Lustre

Thursday, July 12th, 2018

It has been smoking hot this past week as the calendar turned into July. I spent my Canada Day in Leamington Ontario mostly to get a chance to see our Prime Minister. One of my family is big fan of the man so I made the trek to Leamington where he was spending part of Canada Day. He actually gave a speech in front of a large food processor who had taken over from the Heinz corporation a couple of years ago. It was the start of the smoking hot weather and it was pretty brutal on everybody standing out in the sun.

Of course that hot weather continued all week with some of Ontario praying for rain and others like myself not so much. The corn and soybeans are growing tremendously in southwestern Ontario. The wheat harvest is already started in Essex County this year with yields less than normal. It would seem that the higher than normal temperatures this year did affect grain fill in this part of the province I’m hoping to get to my wheat in about 10 days or two weeks. I’m not expecting as good a yield as the past two years. Mother nature didn’t play nice with me on this year’s wheat crop.

Essentially this year isn’t much different than any other. I only hope that my corn and soybeans continue to benefit from the warm weather with the odd thunderstorm added in. I also hope that our trade tensions could do the same, benefit. As I write this is the night before July 6th, and on that day we are expecting to have tariffs applied to all kinds of products between the United States and China. Soybeans of course, as I documented in this column many times have taken the brunt of the price drop from this threatened trade policy.

My soybeans look better this year in the field than last year, but unfortunately soybeans as a whole are losing a little bit of luster. There are the trade problems on the one side but we’ve also seen a decrease in acres across Canada. For instance, this year Statistics Canada is reporting the total area planted into soybeans is down 13.2% from 2017 to 6.3 million acres. In Manitoba, soybean planting was down 17.5% and in Qu├ębec soybean planting was down 7%. The soybeans price certainly had a lot to do with that, but also I think our Western Canadian friends are finding that soybeans are not the panacea that maybe they were once projected as.

In Eastern Canada we used to think we’d plant the soybeans and wait. That’s how easy it was. Then came aphids, white mold, roundup ready weeds and a whole host of other things. It seems like you have to manage that crop right into harvest with middling results. In Western Canada they can have much bigger weather extremes, which raises the risk profile. However, this past week I saw a picture of some La Crete Alberta soybeans posted on twitter in northern Alberta, not that far from the Yukon border. So, I don’t want to say, “never say never” on more Canadian soybeans. However, I have my doubts.

The soybean price meltdown has been difficult for everybody. However, it is also created some extremely strange grain flows. For instance, we all know that the Chinese are reticent to buy American soybeans because of the threat of tariffs and tomorrow may respond with a 25% tariff of their own. This has created the phenomenon of huge premiums at Brazil ports for beans. These premiums have become so attractive that now we are seeing reports of Brazil importing US soybeans because they’re cheaper for their own domestic processors. Give your head a shake! That’s like Canada importing snow in January, but this trade war has created the economic playing field to make it happen. It is craziness.

Keep in mind; I say it’s crazy because geopolitics made it that way, a complete disruption of an efficient market. However, “cheap” always as a noun is the lubrication for our agricultural economy. If you make commodities cheap enough they flow in all kinds of strange directions. For instance, Ontario corn sometimes gets cheap enough in the fall that we export to the United States, which is the largest producer of corn in the world. Now, according to Bloomberg we have cheap American soybeans flowing to Brazilian ports to replace expensive Brazilian soybeans that are going to China. So this might be crazy, but it is our reality. It’s just such a shame that we’ve shaved more than $2 off cash bushel of soybeans in getting here.

My problem is I don’t understand why we needed to get here in the first place? The US might be growing more soybeans than corn for the first time since 1983, but the romance with soybeans is over. I expect fewer soybeans to be planted in 2019. Demand destroyed is a tough thing. Getting it back will be even harder.