Under the Agridome

Is This Critical Grain Pricing Window Closing Fast?

Thursday, June 14th, 2018

Nitrogen is one of the most important nutrients in corn production. I spent the day side-dressing nitrogen on a 100-acre field of corn north of Dresden Ontario. Generally speaking, you get a yield bump from side dressing nitrogen. Remember, what do I know? I’m an agricultural economist; I just try to get the right trade-off between nitrogen price and the productivity boost it gives me.

In many ways, nitrogen is a very mysterious nutrient to manage. From what I’ve learned, it reacts differently to environmental conditions, soil conditions and geographic conditions in many instances. On one of my fields I actually take Google Earth images and adjust my nitrogen through a variable rate prescription using urea and ESN. (A slow release form of Nitrogen) It’s worked well for me the last few years, but of course at the end of the day the increase costs has to justify the means. Still, by putting nitrogen on this way it frees up my valuable time to do other tasks in the early spring.

Needless to say, nitrogen can be a bit of an enigma, timing of the application can be very crucial to boosting that corn yield at the right time. There is even a side dress nitrogen test, but of course it has to be taken during the spring run and most of us don’t have time for it. It’s a timing thing and it never seems to work out.

There are a myriad of tasks that farmers have to do during the spring run, with nitrogen being only one of them. My days are so packed full of work I hardly have time to breathe. I’m exaggerating, but it does feel that way sometimes. That’s why I always have standing grain-marketing orders ready to hit. When $5 corn and $13 soybeans hit through a combination of futures prices and Canadian basis I want a piece of that. I’d never have my timing right if I had to follow both and make that call myself. Pricing grain isn’t like side dressing corn.

Pricing grain takes daily market intelligence and I’m no better at it than anybody else. My mantra is nobody knows what grain prices will do. Over the years I have the critical new crop pricing period tends to be right now. In other words the 12-week period before July the 4th often give the best new crop marketing opportunities. Last year, new crop corn topped out in early July and the year before it was June 18th. I have cautioned my readers to keep vigilant with grain prices during this period of time. Standing orders sure help in that regard.

That being said, here we are in 2018 on the 7th of June and I’m ready to sell new crop grain. The only problem is corn and soybeans have not been cooperating with this critical grain pricing time period. For instance, July corn hit a new four-month low today of $3.76 a bushel. The July soybeans also hit a new four-month low, their 7th down day in the last 8 trading sessions. November soybeans hit a new four-month low and December soybean meal hit a new two-month low. So maybe my idea of waiting until about June 15 to price grain wasn’t such a good idea? Of course, nobody knows. Clearly, it looks to me that the late spring/early summer highs for new crop corn and soybean might be in. It came early.

However, it seems odd to me, but I’m no Darin Newsom, Elaine Kub or Todd Hultman. Mastering the grain markets in Canada means daily marketing intelligence on the Canadian dollar value and its effect on cash basis. Then there are grain futures, but not necessarily in that order. Add this time of year to the mix and all the risk going forward in our fields and I must believe the pricing window is not over for 2018. Mother Nature usually doesn’t play nice forever.

The challenge will be if Mother Nature continues being benign on North American crops. If that is the case, it is easy to see again the long slog of crop prices drifting down to harvest time lows in October. If that does happen, it will be like an old movie we’ve seen before.

Of course, just like nitrogen, we’ve seen lots of old movies before. If this grain-pricing thing is going to turn around, the next three weeks will be pretty critical. Sometimes you get into the July 4th weekend and the traders think that the crop is made. It’s almost like they have mistaken June 4th for July 4th in 2018.