By Steve Kell
Ontarios cash crop sector is pleased that the 2014 growing season is now behind us. As one farmer pointed out to me: “I hope that we talk about 2014 for a long time, because if we stop talking about it, it can only mean that weve had a year that was worse.”
This past growing season came with no shortage of perils. There was late spring seeding, a cooler growing season, which limited the pace of crop development, early frosts in some areas, and a wet harvest season. Weve now turned the calendar on 2014 and are looking forward to 2015 with a certain degree of optimism. But there are some lingering after effects of 2014 that set the stage for Ontarios cash grain market in 2015.
The most beneficial outcome for the marketplace in terms of pricing, is that the wet field conditions and delayed bean harvest last fall resulted in significantly fewer acres of sown winter wheat. Winter wheat supplies for the coming year are going to be fundamentally diminished, simply because the crop never got planted. Fall estimates placed Ontarios 2014 winter wheat plantings at 610,000 to 615,000 acres but that number can only shrink over the winter and spring depending on how the weather unfolds and how much of last falls planting went into less than ideal field conditions.
The flipside of reduced winter wheat plantings is that there will certainly be an offsetting increase on the acreage of alternative crops this coming spring because every acre is ultimately going to be planted into something. With 350,000 to 400,000 fewer acres of winter wheat, producers need to be aware of which crops are apt to experience an acreage increase, and have a marketing plan that takes into account having those crops contracted before the rest of the marketplace tunes into the potential increase in supply.
In the case of growers who prefer to stick to a grass/legume crop rotation, the most logical substitutions for the missing winter wheat are spring cereals like oats, barley, and spring wheat. Since all three of those potential choices have relatively small domestic demand volumes, it is key to have them marketed before the increase in acres overwhelms the local demand.
Realistically, we should expect to see an increase in soybean planting this coming spring. This will occur partially as a result of the decrease in winter wheat area, but also because the poor finish to the 2014 corn crop (especially in shorter season areas) is going to drive producers back to the relative production safety of soybeans. Ontario set a record in 2014 with its largest ever area for soybeans planted. In 2015 we will break that record. The United States also set a record for soybean area planted in 2014, so it is key for Ontarios growers to see if the American farmers are also leaning towards planting more soybeans this coming spring.
Producers looking to optimize their return on soybeans in 2015 need to stay focused on two significant statistics. The first is U.S. planting intentions (to have a clear grasp of how big is the supply we are producing into) and the second is protein meal prices. One of the biggest key contributors to soybean values in the face of this past years record oilseed production was the record high cash values of soymeal. Any perceived weakness in meal values will translate into lower bean values almost instantly. Sellers of soybeans need to become observers of the meal market.
Expect a more conservative tone in the grain markets moving into the early stages of 2015. Until either planting intentions or growing conditions give the prices a fundamental reason to move, we shouldnt expect much buoyancy in values. But in the case of crops with significantly larger supplies forecast for 2015, some disciplined sales are in order early in the new year.
Steve Kell operates a crop farm in Simcoe County and is a grain merchant for Parrish and Heimbecker Ltd. in Toronto.