Steve Kell’s
Market Minute
One of the things which Ontario grain farmers are going to remember about the 2022 harvest for many years is just how fast this year’s harvest went. From mid-September to mid-November near perfect weather conditions enabled combines to roll across fields at record speeds, and the 2022 crop moved from field to storage in remarkably good condition.
I think that it is worth noting that the speed of harvest created something of an illusion which made the crop appear larger than it will ultimately turn out to be. In most parts of Ontario this fall we saw situations where country elevators were filled.
Terminal shipping stopped while operators waited on vessels to arrive. There was a shortage of trucks available to move the crop from country storage to the export terminals and other markets. Those factors combined to create an illusion that the 2022 crop volume was extraordinarily big, but when the final numbers become available, it will seem likely that 2022’s total crop size is smaller than last year.
The issue with a fast harvest is that it overwhelms the logistics pipeline. Think about what would happen to Hwy 401 if you tried to push a day’s worth of traffic through in six hours. It would end up in a traffic jam. The same thing happens when you try to push six weeks worth of corn and soybean harvest through the logistics infrastructure in three weeks. The system backs up, and in some situations grinds to a stop. The storage issues which Ontario grain producers saw in October was not the result of a massive crop size, but rather a tremendous harvest speed.
All of us who have grown crops know that the key to really high average yields is to not have any bad spots in the crop which draw the average down. All that it takes is one gravel knoll or one flooded low spot to wreck the average yield on an otherwise pretty decent field. The same thing is true on a provincial scale. There was some parts of Ontario that harvested some really good crops in 2022, but many of the areas that could dry out, did dry out.
Although I am reluctant to say things that sound like conspiracy theories, there’s one key piece of the USDA’s current projections on 2022 corn and soybean yields that intuitively just doesn’t seem to add up. One of the big weather stories of the fall of 2022 has been the low water levels in the Mississippi River. In itself, the issues with shallow water on this major grain shipping corridor is an important story, and one that impacts both US grain export volumes and the cost involved in positioning grain stocks in the gulf export terminals. If the central US heartland is as dry as river levels suggest, then it seems unlikely that mid-west crop yields are as high as the USDA is currently reporting. While they are estimating that the 2022 corn yields are lower than last year, it seems likely that the crop is even smaller.
Currently, the United States Department of Agriculture is forecasting an average 2022 corn yield of 172.3 bushels per acre. It’s a small reduction from 2021’s 177.6 bushel average yield, but still above 2020’s 171.4 bushel per acre average yield.
If you look at forecasted average corn yields in the heartland states, which make up the Mississippi watershed, corn yields are down in essentially all of them, but those yield reductions are in the 1- to 3-bushel per acre range, so they are actually expected to have a smaller reduction in corn fields than the national average. (South Dakota’s 6.1 bushels per acre corn yield drop is the only central corn-belt state with a greater yield reduction than the national average).
One interesting thing about the USDA is that they will continue to adjust 2022’s crop yields and crop production estimates until their September 2023 report. I’ve often found it interesting that 9 or 10 months after a crop’s harvest has been wrapped up that the government analysts are making tweaks to the previous year’s estimates. Based on that timeline, what we can say is that the USDA analysts aren’t wrong. They just haven’t nailed down what’s right yet.
Once the harvest is complete and the bin lids are closed, they’ll likely stay closed pretty tight for at least a couple of months. In both the winter and early spring of 2021 and 2022, grain prices moved up sharply between January and April. At least at a subconscious level, there’s more than a few grain producers who know that they sold a little too much and a little too early in both of the previous two crop years, and they’re pretty steadfastly resolved not to make the same mistake again. While it is true that the combines got across the fields faster than the export vessels slipped up to the docks, everything that was supposed to move ultimately made it out, and the stocks that are left might be smaller than we think.
Steve Kell is a Simcoe County crop farmer and handles grain merchandizing for Kell Grain, with elevators in Belleville and Gilford.
