Earlier this month, Statistics Canada released their estimates of grain stocks stored on Canadian farms as of March 31. What’s of particular interest to us in this province is that their analysis placed the volume of soybeans stored on Ontario farms at 8750,000 metric tonnes. That’s up 34 % from the same report one year earlier.
One of the things that our neighbours to the south have been dealing with this past year has been another large soybean crop, and a trade dispute which has restricted their access to the world’s largest soybean market. With the Americans looking for more places to go with soybeans, although Canada is not a very big market, we are close and there are no trade restrictions on oilseeds between Canada and the US, so more of their crop has come north over the past 11 months. In a Feb. 22, 2019 release, Statistics Canada put U.S. soybean imports into Canada for the year at 2.9 million tonnes, up from 2.5 million one year earlier. Certainly all of that 400,000 tonne increase didn’t come into the Ontario market, but with two soybean crush plants in Ontario both conveniently located near border points, it’s entirely logical that Ontario’s soybean supply is being enhanced by additional American soybeans flowing in.
Ontario soybean growers have actually done a really good job of merchandising their 2018 soybean crop over the past year and a half. Collectively, we’ve actually moved more soybeans to market from the 2018 production than would be typical for this time of year. The growth in inventory is really less than the increase in yields, and the increase in U.S. imports, so the pace of sales actually exceeds previous years. We’re simply wrestling through a bigger than normal supply.
As Canadians, we have a bit of an ability to enhance our cash prices by taking advantage of variations in the exchange rate, timing farm sales in order to capitalize on periods of relative weakness in the Canadian dollar. But ultimately, we’re marketing soybeans in a “made in the USA” marketplace. It is estimated that by Sept. 1, 2019, 995 million bushels of the Americans’ 2018 soybean crop will still be sitting in storage, a whopping 22 % of the 4.546-billion bushel crop grown there last year. By comparison, Ontario produced about 160-million bushels of soybeans last year, so there will be about 6.25 times as many soybeans as we produce sitting as ending stocks across a free-trade border to the south.
For Ontario farmers, this means paying extremely close attention to the price of soybeans in nearby U.S. markets. For the balance of the 2018 crop marketing and all of the 2019 crop marketing, we’re going to trade at the price of U.S. replacement soybeans flowing into both the domestic processors and the international export markets. The price where American farmers will release soybeans is like the highest board on a dam. Once we reach that price level, there’s no practical limit to how much supply could flow over it. That’s not a particularly new phenomenon in the soybean market, but if the U.S. government decides to provide financial assistance to American farmers as a result of the Chinese trade situation, we could find ourselves competing with a less disciplined competitor.
Having to compete with American soybean growers is not new for Ontario farmers, but at press time, the U.S. president was talking about as much a $30 billion dollars being allocated to American farmers in order to help them to offset the impact of the soybean tariffs imposed by China as part of those two countries’ trade war. It’s not going to be any fun for Canadian farmers to have to compete in a marketplace where American soybean producers have a lot of inventory to move, and potential subsidization which makes them less dependent on price. Rather than waste time contemplating exactly how or when potential U.S. farm support might be implemented, Canadian producers should simply get busy marketing soybeans prior to such a program coming into place. If you see a storm coming, there’s no point standing outside until it starts to rain.