One of the most encouraging things to develop out of the summer of 2021 is our potentially record-breaking crop size. Ontario has already harvested its biggest wheat crop ever, and this fall’s soybean and corn yields might also be record breaking.
Despite a significant drought in the western half of North America, the USDA has such high hopes for the eastern production, that the 2021 US corn crop is expected to be 5% bigger than last year, and the soybean crop 7% bigger than last year. So what’s holding prices up in the face of such impressive production?
There is a 70% to 80% chance of La Nina developing in the fall of 2021 and winter of 2022. “La Nina” is the name given to colder than normal surface water temperature conditions in the equatorial Pacific Ocean which gave rise to the dryer than normal growing season experienced in Brazil and Argentina last year. It is still too early to say for certain that a drought will occur, but conditions are similar as we move into late October and early November planting season of 2021 in South American again this year.
Chinese demand for grains and oilseeds also remains strong as we wrap up 2021. World commodity markets were fueled by record imports from China this past year, and with no sign of their demand softening, and some renewed concerns over South American supplies, export interest in North American agricultural products remains good.
As we move deeper into Ontario’s 2021 harvest, grain prices have certainly backed down from their mid-summer record highs, but they certainly haven’t retreated back to their traditional harvest levels. One year ago at this time, corn into a country elevator was $180/mt, and soybeans were $12.50/bu. The fact that corn started in October at $250/mt and soybeans were at $15.50/bu is entirely attributable to South American weather potential, Chinese export demand the impact which those two factors had on ending stocks from last year.
Our potential problem in terms of holding up grain prices in the Ontario marketplace from now until December is that there is going to be a shortage of storage space. We’ve just harvested the biggest volume weather crop in our province’s history, and a large soybean and corn harvest is coming right on its’ heals. Moving Ontario’s 15 million metric tonne grain harvest through the pipeline is a bit like traffic on a highway. If the first cars get delayed, the ones behind end up stopped.
Due to some quality issues around falling number, Ontario did not export as many boat loads of wheat this harvest as we normally would. This means that all of that wheat is still in farm or commercial elevator storage which now isn’t available for another crop. As we’ve shifted over into IP soybean harvest, there have been some concerns about lower protein and oil levels in the 2021 crop. This confounded with a shipping container shortage and record high container freight rates. Like the wheat situation, it doesn’t mean that food grade soybeans won’t move, it just means that they won’t move easily or quickly and that portion of the grain pipeline is also going to back up.
The scarcity of freight is actually going to be one of the key challenges in getting through this year’s harvest. Grain trucks are hard to find, and fuel costs are up. If you can get the grain to a ship, the Baltic Freight Index has risen 78% between June 21 and September 21. Ontario farmers do not have a problem with people wanting to buy our grain. We just have a problem with getting our crop to the places where those buyers are. All of those additional freight costs come out of the farm gate price for crops. The freight problems are the worst in times of peak demand, so if you can build a marketing strategy around limiting movement during the harvest freight frenzy, it will at the very least lower your frustration level.
This is a season where having a marketing plan is going to be critical. I am really quite optimistic about grain prices out into the spring of 2022, because world wide, the 2021 harvest doesn’t look big enough to replenish last year’s depleted stocks. However, we’ve got to get to next spring, and with eastern North America currently in the midst of a really successful harvest we are likely to run out of space to hoard, and supplies with no where to go are extremely hard on price. The “harvest low” is an entirely predictable, and a relatively short lived problem. Our challenge as grain producers in 2021 is to make certain that we avoid it.
Steve Kell is a Simcoe County and handles grain merchandizing for Kell Grain, with elevators in Belleville and Gilford.