The News & What it Means – Difficult Choices Ahead for Ontario Growers

By John DePutter & Dave Milne – January 16, 2019

 

The news:

“Lambton County farmers have a big decision to make following a volatile 2018 that saw corn emerge as a to-be bumper crop, soybean markets take a hit due to the still-running trade war between the US and China, and a “catastrophic” outbreak of mould in corn due to a wet harvesting season.”

– Sarnia Observer, Jan. 9, 2019

 

What it means:

This isn’t just a dilemma for farmers in Lambton County. It’s one shared by producers across the rest of Ontario as well.

 

The story this clip came from was addressing the cropping choice Ontario farmers face for 2019.

 

For all that is written and discussed about them, new-crop decisions typically are not all that difficult for producers in Ontario. It’s usually a case of a mix of corn and soybeans based on rotational considerations.

 

Sometimes though, the markets will send a reasonably clear signal to lean more heavily toward corn and against soybeans, or toward more soybeans and less corn.

 

The amount of winter wheat put in the ground the previous fall, and its health in the spring, also plays into the corn/soybean acreage mix. But when it comes down to it, there’s usually not a whole lot of thought or number crunching on most farmers about the corn and soybean mix.

 

But 2019 isn’t shaping up to be like any other year

As has already been widely reported, Ontario experienced one of the worst outbreaks ever of vomitoxin in the 2018 corn crop. As it happens, the outbreak also occurred when many producers were blessed with record or near record high yields, leading to an absolutely devastating situation for some in which perhaps the best crop of their farming career was severely reduced in value and in some cases rendered basically worthless.

 

But there have been plenty of reports too of 200 bu/acre corn simply dumped in the bush or chopped up and worked in into the soil.

 

Yes, provincial crop insurer Agricorp offered a salvage benefit for any crop that was deemed unmarketable. And some avenues opened up to sell high vomitoxin corn.

 

Farmers don’t forget things like that easily though, meaning there are likely some out there now who are very nervous about growing corn on the land that yielded high vomi corn in 2018, regardless of the how enticing forward contract prices might be.

 

On the other hand, soybeans are certainly not a great option either

In the wake of the vomitoxin problems in the corn crop, an increase in soybean planted area might have been a slam dunk, promising solid profits.

 

However, the ongoing trade spat between the US and China has ensnared soybeans, leading to a sharp reduction in Chicago futures, upon which Ontario values are based. Admittedly, the trade battle has allowed Ontario to sell more soybeans to China, but that extra business hasn’t been enough to offset the larger impact of the price fall.

 

There was some initial market optimism following trade discussions between US and Chinese officials earlier this month but so far, no breakthroughs have been announced. The outlook is decidedly uncertain. Meanwhile, heavy soybean supplies, both in the US and around the world, make putting additional acres in the ground this spring even more tenuous.

 

Farmers are often subject to forces beyond their control, and in this case, the weather and geopolitical developments, are making things even worse.

 

Need help trying sorting through confusing market developments?

 

Ag-Alert lays out trading range parameters that can help you with your plans, as well as forward contracting advisories.

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