The $5 price of wheat spawned discussions surrounding the negative basis levels for all grains in Ontario.  If you are one of my American readers, you would be very used to a negative basis but in Ontario, Quebec and other places across Canada producers until the last couple of years have been more used to high positive basis levels for grains.  So while many producers today at the elevator discussed their marketing plans, I asked the question what if the Canadian dollar goes back down to $.75 US?

The retort came to me this way.  Phil, it doesn’t seem the value of the Canadian dollar is having the effect it once did, what’s up with that?  Of course with the Canadian dollar hovering around the $.96 level I knew what he meant.  The Canadian dollar has been at this level for some time now and a movement within a four-cent range doesn’t seem to have much of an impact on basis levels.  I retorted back that the Canadian dollar in March 2009 closed at $.7749 US.  If it was to do that again, we’d gave huge positive basis levels for Ontario grains.  Of course at that point, price imaginations were going wild, and I said we just never know.

The simple truth is the value of the Canadian dollar lives in the psyche of most all Canadian farmers.  We are ingrained with the knowledge that the value of the loonie is significant in a major way on the price impact of almost every major agricultural commodity in Canada.  It is this way because most major agricultural commodities are priced in US dollars and about 80% of what Canada produces is exported to the United States.  Add in the fact that replacement value on Canadian grains especially in eastern Canada is always measured against importing it from the United States.  Any grain bought from the United States is paid in US dollars and so as the loonie goes, so goes our farm prices in Canada.

The loonie’s value gets mixed up into what basis really is when it comes to determining the value of Canadian grain.  For instance if you could imagine for a moment that we had a common currency between the United States and Canada, basis levels would be much easier for some to understand.  In that case basis levels would almost always be negative, taking into consideration the distance to the Chicago market or a warehouse deemed a delivery point by the CME.  At the end of the day, “basis values” reflect the true value represented in price which grain is moving at.  It just so happens that in Canada those values are in Canadian dollars.

Going further, “basis levels” are not only a value at which grain is moving, but also a true reflection of how acute grain is needed by ultimate end-users.  That’s what I was trying to emphasize to my farming colleagues today at the elevator roundtable.  For instance, as of today, Ontario corn end users can see an almost record crop in the fields.  They see no reason to raise basis levels; in fact, they probably see reasons to lower them.  Ditto for Ontario soybeans as well as Ontario wheat.   In the case of Ontario wheat, the question has to be asked are end-users willing to pay more than five dollars?  Why should they?  Wheat is everywhere at the moment!

It has almost led me to believe, that at least for some agricultural commodities, “basis” is a bit of a “state of mind.”  It’s almost like a game of chicken, end users constantly pulling down basis levels and only raising them when they absolutely have to.  It helps when you can fit end-users within a market in a minivan versus a motorcycle.

I was always maintained that it’s more important to “seize the day” and capture a cash price, which you are comfortable with.   Often, that puts the Canadian producer in a tough position as cash price movement always has a fickle basis.  The point is, “get over it”.  Negative basis levels are a true reflection of what our prices are.  Will they stay that way?  No, but it will take the Canadian dollar dropping precipitously to move it into positive territory.   In the meantime, our challenge is to plan accordingly and take advantage of those surprise-marketing opportunities like $5 Ontario wheat.  Surprises

Waiting for my wheat to get ready took an interesting turn this year because of the wheat price explosion.  Over a three-week period we have seen an increase of $1.36 in SRW wheat futures with cash prices in Ontario reaching about five dollars.  It was only a few short weeks ago when the new crop cash price for wheat was $3.77 a bushel.  For Ontario producers this has been a very welcome surprise.

I say for Ontario producers because wheat pricing doesn’t necessarily work on the free market in Canada.  For instance my Western readers will be gnashing their teeth because they are required to sell their wheat to the Canadian wheat Board.  Ditto for our DTN subscribers in Quebec who have a single desk agency for wheat.  It is in Ontario where producers have a choice, hard fought for, to either sell their wheat to the Grain Farmers of Ontario or make a contract with whoever they want to.  Wheat pricing in Canada is controversial and filled with a bit of mystery.

When I am in Western Canada, I often bring up the subject of the Canadian wheat Board.  I do that because I want to know the feelings behind the people that I’m dealing with.  I also ask because it is such a foreign notion to Ontario producers that Western wheat producers don’t have the same rights and privileges to market their week as we do.  It’s almost totally political and a little bit cultural, and from my Ontario perspective I don’t see Western farmers getting the right to sell wheat like I do at any point in the near future.  The only way it will happen is if Stephen Harper and his Conservative party get a majority government.  If that happens at some point in the future, the Canadian Wheat Board will be history, as we know it.

Despite the many different ways of selling wheat in Canada, I think we all are all interested in the wheat price explosion these past three weeks.  At a certain point these price gains will filter down into Western Canada and Québec, or at least we hope so.  Clues to the price explosion certainly lie in fund buying but also in the production problems in Western Canada, Europe and Asia.

This is significant because wheat unlike corn and to some extent like soybeans is grown almost everywhere.  For instance the former states of the Soviet Union like the Ukraine and Kazakhstan grow and export wheat, where once they did not.  There is all kinds of wheat grown under intense management in Europe.  I have walked through the wheat fields of Australia.  Wheat is simply almost everywhere and usually these wheat-growing regions don’t have problems at the same time.  This time around many of them did starting with Western Canada and that is a pretty good reason why we’ve had so much upward price volatility in wheat.

DTN’s John Sanow in his Market Sense column, “I Think I Can”, called wheat the “cockroach of grains” as it is nearly impossible to kill.  He said this in the context that the death of wheat is often exaggerated.  For instance, the TASS news agency recently reported that the ongoing drought in Russia has killed over 52% of the grain seedlings in the Ulyanovsk region of Russia.  So maybe that is true or not true.  On top of this, Informa economics recently cut Kazakhstan wheat production to just 11 MMT.   What’s the truth? I dunno, those places are so far away from the Chicago SRW exchange.  However, they are just examples of the bad wheat production news which is simply adding up day-to-day.

Of course it is never that simple. Wheat pricing fundamentals remain “pretty terrible”.   The United States has over 1 billion bushels ending stocks for this crop year the highest since 1986/87.   In Ontario you can bet that basis levels will only get worse at these higher futures prices.  We learned in 2007 that end-users would not pay historical basis off high futures prices.   Of course, in Western Canada and in Quebec, producers will just have to wait and see if any of these price spikes get into their pocket.

It’s all been a big surprise and you can bet that the wheat bulls will come back down to earth someday.  The lesson to be learned from the wheat rally is despite our best analytical and technical analysis, sometimes we never know.  Or maybe that’s most of the time.  Keeping that in the back of our mind as we make our marketing decisions should always be job one.

In Canada we have the tail of two stories.  On Wednesday of this past week we had Prime Minister Harper touring flooded farmland in Saskatchewan.   That was followed by agriculture Minister Ritz announcing that $450 million would be on its way to help producers affected by excessive rainfall.  It doesn’t matter how you cut it in Western Canada this year has been difficult.  The money flowing to Western farmers will boil down to about $30 an acre and will be delivered through the Agri-Recovery program.

Of course it is not all bad in Western Canada.  For those who do have a crop like those in the Peace River District of Alberta one man’s misfortune is another’s benefit.  Ditto for others across Western Canada.  Increased prices for canola will surely benefit those who dodged the rainfall bullet.

The other story for crop production is in Eastern Canada where the Ontario and Quebec crops look good going into tomorrow’s USDA report.  Yes, you could argue that much of southern Ontario crops are dry or even parched.  If that continues for several more weeks it will change the equation entirely.  If we get timely rainfall soon it will mean that crops in eastern Canada will be very good this fall.  Yes, that is a big if and you can bet if it remains dry, eastern Canadian farmers will be looking for some type of commitment from Ritz to satisfy them.  Needless to say his press conference last week in Saskatoon was bereft of any policy initiative such as Agriflex advanced by Ontario and Quebec.

At the same time as the USDA releases their stocks report there is some consternation in production areas around the world.  There are drought problems in Europe and Russia as well as Australia.  It seems there are drought problems almost everywhere except the US Corn Belt.  This had added nervousness to grain markets over the last week.  The futures spreads for row crops still do not reflect bullish sentiment.  However if the USDA comes out with stocks figures on the low side tomorrow all bets are off.  Of course, the problem is the numbers are the problem.   More specifically, the way the USDA handled the 2009 crop numbers has been the real puzzler.

The problem is if you have something bad going in you have something bad coming out.  I think somebody who invented computers made up that statement, but it also has to do with ending stocks.  One years ending stocks is another years beginning stocks so when that changes unexpectedly, the fundamentals of grain gets skewed.  In July 2010, that is exactly where we are.

Into this mix you need to add the China card.  Despite predictions of increased corn imports in the next several years to almost exponential levels, we really don’t know if that’s true or not.   If it is true, it will tighten our grain situation substantially.  That, along with any production shortfall in North America will certainly change the price equation.  The question is are there any end-users for corn and soybeans that might be worried about it?  My experience in the industry tells me they are not.

At times like these I often think of one analyst who asks the question, “What is the price of the last bushel?”  In other words if there was only one bushel left in the world, how much would it bring.  At the present time in Ontario that is about $3.60/bushel for corn and buyers seem to be getting lots of it.   So despite what some people may deem to be a bullish surprise last June 30th and maybe a bullish nudge tomorrow, it seems to me the market is not worried.   What you need to do is hope for rain and then let the chips fall as they may.

Letting those chips fall may surely be in a new marketing environment next week.  Combine that with production figures that usually drop during the summer and we’ve got the setup for something big.  The key will be to see if production can keep up with disappearing ending stocks and end user hubris.   10 days ago the conventional wisdom was caught leaning the wrong way in the market.  Maybe tomorrow we’ll see by how much.  I only hope the USDA doesn’t have another head fake in its arsenal.

The USDA shocked the corn market on June 30th by putting the planted corn acreage number at 87.872 million acres.  This was below the lowest trade estimate of 88.10 million acres.  That was quite a shock to the market but when the USDA came out and said there was 4.310 billion bushels in ending stocks well below the lowest estimate of 4.459 it was like a slap in the face to market bears.  The bulls blew through the barn door and corn rocketed up almost $.40 in two days.  It was almost surreal.

Looking back, maybe we should have known.  Maybe we should have known that the test weight issues in the 2009 corn crop were real.  However, it seemed like the USDA didn’t believe that and when they came out with their huge yield figure on January 12th, the market was caught the wrong way and corn prices have never recovered from that day.  In many ways the USDA gave a “head fake” to the market sending it one way when they did not necessarily know if the corn was there.  They don’t measure test weights.  Needless to say, if you have read this column since then you will know that I’ve always said that the USDA sets the goal posts and they do whatever they want with them.  In this case it looks like on January 12th they moved them, in the meantime told everybody that’s the way it is and now on June 30th for whatever reason they decided to move them back.  So what for all that old crop corn that was sold in between those dates.  In many ways it’s unbelievable.

I am quite a believer in the DTN six factors for marketing our crops.  I watch the market daily and hourly in the wintertime to simply get a tangible taste of what is going on.  With that I always check the futures spreads and follow USDA reports like a fox.  So on June 30th I was sitting in front of my computer waiting to see the results just because it was a major market mover.  I was looking for a big Corn number especially with our early spring weather and good pricing opportunities.  I had read all the pre-report estimates and bought into what the USDA had said.  What happened next was quite a slap in the face.

The USDA numbers came across my Twitter feed first.  When I read them I found it hard to believe US farmers had planted 1.1 million less corn acres in the March 30th USDA report.  Being on Twitter, I knew I could react immediately so I tweeted the statistics and said the corn number seemed low.  I was a bit nervous publicly tweeting that, because I’m a farmer and agricultural economist first and a market analyst down the list somewhere.  Then in fact I realized it was really low and I began checking my numbers on the paper in front of me.  I started to realize this was a bullish slap in the face to the corn market and everything I had been led to believe since January 12th must not be totally right.  Soon after, all our trusted analysts chimed in with the same thing.  USDA had changed the game and now we were in an extremely tight situation in the corn complex.

But still, with future spreads strong aren’t we in a bearish market situation?  That is the question I asked DTN senior analyst Darin Newsom immediately after the report in his online webinar.  To me, things just don’t change that fast where one day it is bearish and the next day it is extremely bullish.  Doesn’t that show up gradually in future spreads?  The answer of course is yes, but in this case is not so clear.  Futures spreads are changing as I write, but that question needs to be answered.  It almost looked as if the people who were buying the futures got duped too.

USDA’s Chief economist Joe Glauber exclaimed after the report, “I think we have been in a very tight corn supply frankly.”  Oh yeah?  Since January 12th we have all been led to believe that was not the case because USDA numbers said it wasn’t.  I told all my readers and listeners that the USDA sets the goalposts and they can do anything they want.  The unfortunate part is, in this case, I was right.   In the corn market on January 12th we were led to believe one thing by USDA and in the June 30th report they essentially canceled the January 12 report out.  In the meantime millions of bushels of old crop corn was sold at lower prices.  It all doesn’t quite add up, and that’s a big problem.

So going into next week I just want to remind everybody about who is right when it comes to forecasting acres.  It is the USDA; they set the goal posts with regard to acreage and yield forecasts.  Many of us learned a lesson last January 12th when the USDA surprised the corn market by raising 2009 corn production.  The market was leaning a little bit the wrong way and it quickly corrected.  There was farmer fury, I think on every concession throughout North American farm country.  However, at the end of the day the USDA decided to move the goalposts regarding crop size and despite the skepticism never looked back.

So what I’m saying is on June 30th, those will be the numbers.  For instance, at the present time the USDA is sitting at 88.8 million acres of corn.  So on June 30 if they come out that day with the number of 90 million acres, it’s 90 million acres.   Taking the USDA numbers seriously is about the best barometer we have.

I say that because I think we learn the hard way.  The January 12th USDA report was certainly classic for that.  The upcoming June 30th acreage report might be the same.  I tend to look at these reports a bit differently than my DTN colleague Darin Newsom who has often expressed the opinion that USDA reports are overrated.  I understand Darin’s reasons because he looks at the six factors DTN marketing strategies that are very solid.  For instance I find “futures spreads” a great indicator of market behavior.  However, USDA reports tend to stir emotion in my readers, listeners, neighbours and certain market players.  The USDA reports have resonance on the back concessions of Ontario farm country.  They also sometimes act as turning points in market psychology.  That’s a major reason why when I write “Market Trends” for the Grain Farmers of Ontario, I give my analysis post USDA reports.

The problem for Canadian producers this year is many of us will not have a crop to sell.  For instance as many of you know Western Canadian agriculture is going through one of the toughest, wettest springs in recent history.  I heard from one farmer this past week from the Interlake region of Manitoba who told me that his 2010 crop might be lost from wet weather.  He also documented for me the difficult times that Interlake Manitoba farmers have had over the last three years.  In fact he even told me that it was so wet last fall that he had a duck ride on his straight header for a couple hundred yards.   It was a tough story but one that is far too common in Western Canada this year.  So when I talk about the skepticism surrounding USDA reports, we should all remember that maybe Mother Nature could still be our greatest nemesis.

While the USDA report next week will surely influence market direction, it cannot be discounted how Western Canadian markets affected by the wet weather will influence farm pricing throughout the rest of North American farm country.  For instance with the canola, oat and HRW markets being heavily impacted by Western Canadian disaster reports the movement of grains is shifting.  If there is not as much canola, it cannot reach Ontario crushers as easily boosting new crop basis values for Ontario soybean producers.  With canola and soybeans being “loose substitutes” the loss of one boosts the price of the other.  It’s the same thing for HRW affecting the other wheat classes.  Unfortunately, even in 2010 one region’s misfortune is in other region’s gain.

Take the beautiful canola growing area of Peace River northwest of Edmonton Alberta.  This past week they enjoyed the longest day of the year was almost 20 hours of sunlight, which is exactly why they grow such nice canola there.  I commented to a colleague from northwest Alberta that these growers must be pleased with canola prices based on the problems in canola growing country elsewhere in Western Canada.  He retorted back to me that it was dry in Peace River and the canola needed rain.  So it goes, there is always something missing from the agricultural production equation.

So with our hedges set and our heads held high, we all look toward one of the most critical marketing periods, the next two weeks.   Remember, the USDA sets the goal posts and they don’t even think twice about picking them up and moving them at their own convenience.  At the same time, remember that duck riding on the straight header in the Interlake region of Manitoba.  Mother nature still controls everything.  It’s a long time till harvest time.  Nobody said this ever was going to be easy.

Saying it is wet in Saskatchewan has been a bit of an understatement.  I have been inundated all spring with reports of how much it is raining in Saskatchewan.  Editor after editor has chimed in about the rain in waterlogged fields.  Ditto for much of Manitoba.  Is sent the canola, oat and wheat market straight up over the last few weeks.

Of course nobody really likes this story.  It is never very good to benefit from somebody else’s misfortune even though that is very common for people producing commodities.  In fact when you are the producer who cannot get his fields planted or who loses a crop in the field relying on crop insurance is always a dog’s breakfast.  So when you see that there may be the lowest acreage planted in Western Canada in 39 years, it represents real hardship ahead for many Western Canadian producers.

Of course I always feel I’m on a bit shaky ground when commenting on Western Canadian issues as I am from, quote, one of the three other countries in Canada with a large agricultural sector.  You say what?  I’ve said it a million times there are three agricultural countries and Canada.  They are in no particular order Quebec, Ontario and Western Canada.  Each “agricultural country” is either separated by distance or culture or language and to a large extent we don’t understand each other.  Or at least that’s what many of the natives think.

So when disaster strikes like it has this spring in Western Canada, many farmers look toward the Canadian agricultural policy which was put together for those “three countries” that satisfies none of them.   Just today, Canadian agriculture Minister Gerry Ritz toured many flooded acres in Saskatchewan and said that our existing farm support programs are the best and quickest way to get money into the hands of farmers unable to plant or whose fields are underwater.  After I read that in the Calgary Herald, it made me shake my head.  In other words, translated through this Ontario farm boy, you western farmers are on your own.  I hope it dries up soon.

Yes, that is certainly a damning condemnation of present-day Canadian agricultural safety nets and disaster relief programs.  However, remember that your loyal scribe held the microphone in front of 10,000 angry farmers in April 2006 in front of the Parliament buildings pushing government to make a better policy.  What we got instead was three or four years of high commodity prices bailing the federal government out.   They ran with that and now with Western Canadian farmers wanting, any aid to help them will be close to nonexistent.  The federal government is to blame and agriculture Minister Gerry Ritz is mainly responsible for that.

The unfortunate thing is it will get much more complicated in 2010 if Minister Ritz shows favour to Western Canadian needs at a time when water fills their fields.  Quebec and Ontario have their own specific demands from the federal government with regard to the 60/40 traditional funding split of Business Risk Management support programs.   The conservative government has maintained mediocrity for all and if that changes for Western Canada there will be howls all over Ontario and Quebec.  It’s never easy in this country, I don’t say I agree, I just say that is the way it is.

This terrible rain/flooding/unseeded acreage problem might also represent an opportunity for Minister Ritz and Prime Minister Harper to make some things right.  The needs are completely obvious in Western Canada right now with flooded fields and lost hopes.  If Minister Ritz thinks Agristability will help Western farmers with flooded fields maybe he might try to put lipstick on that pig.  Or maybe he might just recognize that Canadian agricultural policy is woefully unprepared for the disaster, which has unfolded this year in Western Canada.  Maybe he and the Prime Minister will finally commit to make it right.  Is just so unfortunate the calamity in Western Canadian fields may be the stimulus to get something done.

I had to laugh when I read Pat Hill’s Market Matters Blog after a long day on the sprayer because she described it this way, “wow—so much for a sleepy lockup”.  It seems Pat is always at the USDA lockups just before all the major reports.  Of course I have no idea what it’s like in a lockup, I always envision everybody dancing on the tables while the USDA puts the numbers up by neon screen.  So it must’ve caught Pat leaning the wrong way too.  I guess we can thank ethanol for this and the lower prices for spurring that demand.

It always seems to be a double-edged sword when it comes to corn pricing.  There seems to be a corn pricing sweet spot where ethanol manufacturers ramp up production.  However, it surely has to fit in with oil prices and gasoline prices to make it work.  It would seem over the last month that once corn gets down to the $3.30 range that we have some type of boost in demand.  These lower prices encourage demand and that’s why we had the surprise, which we did today.  The secret will be to see if prices can stay where they are during the summer and continue building demand.  Maybe, with that I’m just hoping for a little bit too much.

It would seem that analysts had picked the soybean numbers right.  The USDA is now projecting the old crop carry out 185 million bushels.  New crop carryout is 360 million bushels, which were within the trade expectations.  There is lots of risk left in the production fields going forward, so who knows if there will be any supplied blips to upset this applecart.

Still, there are onerous supplies on the market and this seemed like just temporary bullish news.  At least you could say that for corn, with soybeans and wheat not necessarily getting the same boost.  For Canadian producers, the challenge will be to price this crop with the best combination of futures and basis to make things work.  I know a lot of you would argue that that time was about six months ago.

There is also trouble on the Canadian prairies.  All spring I have heard about the rainfall in Saskatchewan and Manitoba.  There is also been some strange weather going on in Alberta.  This is certainly put into flux the production numbers for Western wheat and canola.  One of my editors told me it will make for a very subdued Farm progress show next week in Regina.

Meanwhile our lovable loonie has gained a few cents over the past week to push over $.97 US as I write this.  This is having the effect of reducing Canadian cash prices.    However, at least for Ontario corn it would seem that the gyrations in the Canadian dollar aren’t having much effect on basis.  End-users seem to be quick to drop the basis when the dollar goes up but when it goes down the basis is not raised as quickly.  You might argue that is not right and I might agree with you but in reality it has to do much more with market structure.  The end-users are a small club in Ontario and with burdensome supplies of corn on their doorstep there is absolutely no incentive for a reactive basis.

There are other issues such as the importation of American corn to keep prices down.  Over top of all this is a continued lack of an agricultural safety net for Ontario grain producers.  It is all building toward a year of lower prices, higher costs and a bit of struggle.  The good thing is at least in Ontario crops look very good at this time of year.  In fact I would not be surprised based on how the corn crop looks now that we have a record yield in Ontario passing through the previous record of 165 bushels per acre of corn.

Should we all pull the trigger?  DTN analyst John Sanow asked that exact question in his last column.  Of course many of us have already pulled the trigger on both old crop and new crop and many of us have yet to do either.  Market action has certainly been bold over the last few weeks.   The next major market mover will be that actual planted acreage report from USDA on June 30th.   Will there be a bullish surprise then too?  I dunno, but I’m sure by then many traders will have decided the 2010 crop has been made.

Our world is fluid at the best of times.  This past week was evident of that as we had a naval dustup at sea between the Israelis and Gaza activists and oil continues to pour into the Gulf of Mexico.  We also had the North Koreans threatening war with the South Koreans.  Meanwhile in our field, we have one of the biggest corn crops ever planted knocking on record yields at this time of year.  Whether it gets to the finish line is another thing.  Needless to say, my colleague’s question about the oil spill in corn prices should serve as an example in 2010 that things might not work out in agricultural markets like some soothsayers are saying.

I heard one statistic that the oil being spilled into the Gulf of Mexico is about 19000 barrels per day or about 3 million litres per day.   Nobody really knows because BP has not let any independent observers in.  The United States uses slightly over 20 million barrels a day so you can see the oil spill is like a grasshopper on your windshield.  It is the worst environmental disaster in US history and the ramifications of it will surely thunder long into the future.  Part of those ramifications might be a brighter future for agricultural biofuels.

That was the longer answer to my colleague’s question.  At the present time Pres. Obama is putting the brakes to deep water drilling.  You can also hear the gnashing of teeth with regard to oil exploration in the Canadian high Arctic in Ottawa.  As every Canadian school kid knows the Arctic Archipelago is ours.  However, in 2010 our polar regions are increasingly coming under scrutiny from other nations because of the oil resources underneath them.  In light of the Gulf disaster, could you imagine if that happened in the Canadian high Arctic?  The optics of it at -40°C would be a nightmare.

That has put a chill within governments with regard to future oil exploration and at the same time it is been like a can of starting fluid to an old tractor tending the biofuel paddocks.   If you can turn more corn wheat and soybeans into biofuel, it means less chance of an oil disaster from deep water drilling.  That might be a simple statement but as more oil is released into the gulf and as the hype grows, it represents one of the best opportunities for the biofuel industry in many years.  The question is can they seize the brass ring and nudge government to make this safe clean choice?

The answer in the United States may come if and when the EPA gives the go-ahead to E15, gasoline blended with 15% ethanol.   That ruling may come at any time but I think it may even be pushed into next year.  With oil spewing into the Gulf, that might represent a stimulus to think differently.  Increasing gasoline blends to 15% ethanol would represent a major boost in the demand for corn possibly channeling another 900,000,000 bushels into the ethanol complex.  The effect on price would be substantial possibly being impacted like it was in 2007 and 2008.

In Canada, I cannot see any increase in ethanol blends. (5% in Ontario)  As an oil exporting country, there is no political will to reduce that.  In fact when I show up in Edmonton in January 2011 to speak to the provincial convention of the Association of Alberta Agricultural Fieldmen and mention biofuels, there surely will be some strange looks.  Like, why would want to do that, let’s just sell more oil.  So in many ways, the oil disaster in the Gulf of Mexico might spur our American friends to greater biofuel usage but not in Canada.

I hope I am wrong about that but under our current Canadian political arrangements I don’t think I am.   Keep in mind as we look ahead grain markets tend to top out toward the end of June with seasonality taking them down into harvest lows.  Sometimes it makes for a long summer.  Needless to say, we don’t know if that will happen in 2010.  The optics are for a huge crop ahead especially in the United States.  At the same time our geopolitics are boiling as oil continues to gush into the world’s media pages.  Volatility, yes we will see that.  Sure, at the end of the day it might represent opportunity for biofuels.  Sometimes the world changes on a dime.  This might be the month where it just so happens.

I had my best soybean-planting day of my career today.  At the end of the day I had planted 160 acres.  I’m not bragging because there are lots of you out there with bigger planters and bigger fields to get a lot more done.  There are also a lot of people out there a lot smarter than me.  However, my new drill is working well and it makes me a lot more efficient.  I can remember as a teenager, there would be three of us working in the field, one planting, one working ground and myself spraying.  We’d work all day and if we were lucky we get 50 acres in.

I thought of that today as I set my personal record.  Just how more efficient can we get as a farming populace?  One of the limiting factors in the old days was my sprayer capacity.  As a teenager, I was put in charge of this sprayer, mostly because it was a new thing and I don’t think anybody wanted to tangle with it.  The Calsa sprayer only held enough water to mix chemicals up for 7 acres.  So every 7 acres I would pump water out of a ditch into this sprayer and do it again.  I used chain links for markers, as this was so much better than guessing.

Yesterday I sprayed 225 acres and I started at noon.  I use a light bar for guidance and I have a 750-gallon capacity in my tank.  There is nothing huge about this sprayer capacity as there are lots bigger in my area.  Needless to say, when you think back to the time when I was doing 7 acres per tank load, the efficiency is mind-boggling.

The drive for greater efficiency is almost the default mechanism within the agricultural psyche.  For instance I could go on and on about how I try to do things cheaper and faster.  Ditto for almost every other part of the agricultural economy.  Each piece of farm machinery that I review for Country Guide magazine is made to increase farm production or decrease cost. This has led to an agricultural economy where the lowest cost producer is the winner.  It has meant that margins continually get less and less as the vicious cycle continues.

The efficiency paradigm is what it is on the farm but when our commodities leave the farm it continues.  For instance almost every farmer has an opinion about grain prices and certainly I’m paid in some forums to give mine.  However, how much thought is given to how the increased efficiency of the grain trade impacts our pricing decisions on the farm?  Even more important, in the future as grain is traded more and more efficiently how should we as farmers prepare for that?

I suppose you could make the argument that the efficiency in the grain trade has more to do with procuring cheaper grain than passing those efficiency gains onto farmers.  For instance if you think about the transportation of grain in the Great Lakes region of Canada, shipping by vessel to some end users makes very good sense.  It’s much more efficient than moving it by truck or wagon.   However, the problem is sometimes it makes it more efficient to import American agricultural commodities, which essentially spoils Canadian cash prices.

One of the true signs of a less efficient era in Ontario has been the disappearance of local grain elevators.  While some of you in Eastern Ontario and parts of Quebec might argue that there never were very many small grain elevators, in southwestern Ontario there seemed to be one every 5 miles.  Slowly over a period of time since I dragged that 7 acres sprayer through the field these elevators have been demolished.  Many of them were demolished because they were no longer efficient but some were demolished to avoid selling them to potential competition.

One of the greatest challenges in 2010 for Canadian farmers is to remain efficient in a high dollar world.  Our loonie gained almost 2 cents today closing just under $.96 US.   Of course there are some people who believe it’s going to be above par for a very long time.  I don’t know about that as I’ve said many times in this column but what I do know it’s just another efficiency challenge.   The question is are you poised and ready?

Surely the answer to that question is blowing in the wind.  Keep in mind though as you as you finish up planting soybeans how much your farm has changed over the years.  You’ve met efficiency challenge after efficiency challenge.  I don’t think that’s going to change now.

I did not have a birds eye view of this as this happened to be the day that I started planting soybeans.  I took delivery of a bigger seed drill this spring, more capacity, more speed, the whole 9 yards.  So it took me a couple hours to get everything adjusted the way I wanted and in between I was finding out about economic jitters in Europe.

I keep abreast of these things on the farm through a satellite radio.  I’ve always been a big fan of the radio while driving a tractor.  The problem is sometimes the maintenance to keep radios going in older tractors is prohibitive.  So a few years ago I came up with the idea of a portable satellite radio combined with noise canceling headphones.  Needless to say if you want to keep abreast of things and don’t like listening to commercials, satellite radio is the way to go when you are driving a tractor.

If I am lucky I can hear whenever DTN analysts on CNBC or some other financial news radio network.  That doesn’t happen very often but it does happen.  When you are facing long hours in a tractor cab keeping abreast of the economic events around you can best be served in my opinion by one of those small satellite radios.

Today that radio was crackling with opinion of American economists as well as investment advisors trying to put some type of continuity to the European debt problem.  It would seem that our European friends are coming a bit unglued regarding “keeping everybody together “.  There is even some rumor tonight that the European Central Bank will heavily invest in the Euro overnight to strengthen it against other currencies.

From a Canadian perspective, these latest economic jitters are surely affecting the bottom line of many investments.  One caveat that has really been hit from the problems in Europe has been the Canadian dollar.   The dollar closed at 93.27 cents Thursday, which obviously will be a boom for Canadian grain prices.  However, just because the Canadian dollar is down to $.93 US does not necessarily mean that basis will change for Canadian grain.  It at least has to be sustained for a few days or weeks to make a difference.

What should be taken back from this is the fickle nature of our Canadian dollar.  At the end of the day when there were fears in the investment community around the world, nobody was running to put their money in the loonie.  Sure it was a sexy currency when times were good but when Europe was having its problems the US dollar filled the void.  I have said before publicly I do not know what will happen to the value of the Canadian dollar and I understand the argument about it going up.  However, we’ve lost about seven cents in three weeks and farmers should expect more volatility in the weeks to come.

One thing that I find quite intriguing in this current debate regarding some of the debt problems in Europe is the movement toward more regulation in financial markets.  For instance this past week Germany made a move to stop “naked short selling “.  The optics of that is simply fascinating but it’s not what you think.  Essentially, what some countries are worried about are financial products being bought and sold almost simultaneously by computers within our financial markets.  Some governments have moved on this because it’s like the fox and the chicken in the henhouse all cooperating financially together like it’s scripted.  There is even a movement among some European finance ministers for a bank tax to make sure bankers can be reeled in.

All of this crackles over my satellite radio every day and I’m trying to get my head around on it.  You might say agricultural markets are full of chicanery to.  So far we have been bystanders to the financial markets gyrations everyday.  At least that’s the way I feel.  At the end of the day somebody out there realizes we all have to eat.  The bad part though is much of this economic uncertainty is simply eating up agricultural demand which is so difficult to generate in the first place.

It would seem “on this side of the pond” we will be able to weather the storm regarding European markets.  As one large farmer told me last week we never used to have to think about all this stuff.  The fundamentals of grain were the fundamentals of grain and that’s what took up our time.  Now he said we have to think about all this including sovereign debt problems.  Of course I concurred.  Our marketing horizon is global in scope.  It’s like those grain fundamentals don’t matter anymore.  But, we all know they do.  It’s just much bigger than it used to be, figuring out exactly what’s going on.