Commentary

Rural Voice October 17, 2018

Harvest conditions have been difficult throughout much of the US due to frequent rain showers throughout October.  It has been no different locally here in Ontario.  By mid-October a majority of our soybeans were still in the field and very little corn had been harvested either.  The poor harvest conditions have also prevented wheat from being planted in the timely manner that most had hoped for.  The once expected large wheat acreage that was anticipated in Ontario is now looking less likely as we approach November. 

The frequently occurring rain showers are consistent with what we experienced through the last half of the summer.  The recurrent rains and abundance of heat produced ideal crop growing conditions and the yields this year are high in most areas of the province.  Unfortunately, the same conditions that allowed the crops to thrive were also ideal conditions for fungal infections in the corn crop as well. 

With the abundance of fungal growth much of the corn crop has a high presence of vomitoxin (vom) this year, as well as the likelihood of other fungal toxins as well.  As of this writing very little corn has been harvested, so it is difficult to know with precision how much of the crop is affected and which areas have high incidence, and which areas if any have low incidence.  What we do know with absolute certainty is that there are some areas with an extraordinarily high rate of infection, with extreme levels of vom being discovered.  There are reports that some areas of the province have seen corn samples running 8 parts per million (ppm) or greater – with some testing even up to 30 ppm.  The marketability of this corn is very difficult currently as we begin harvest.  There is just too much uncertainty as to the extent of the problem at this time to gauge what end uses could be used for this corn. 

End users and grain handlers are going to be very cautious in handling this crop.  In order to market grain into end use channels, the elevator system needs to know the quality of their inventory, so they will need to be diligent in testing harvest loads.  End users need to ensure final product integrity and will have to work within vom specifications as required by their needs.  Hogs are especially sensitive to vomitoxin and therefore they may look to source other grain such as wheat to be sure that their animals do not run into production difficulty.  Ontario has a good inventory of wheat at this time and luckily the quality of the grain is very good, as this was a low vom wheat year. 

The crop harvest delays throughout the US have helped futures prices recover from contract lows.  Corn demand remains robust while corn harvest is at a standstill across a wide geography.  There are some analysts who estimate final yields in the western corn belt could fall because of the excessively wet September and first half October experienced in that region.  The state of Iowa has recorded its third wettest September on record this year, with 235% of normal precipitation being received, with records dating back to 1895.  There are likewise concerns that final soybean yields could also fall below current expectations.  Concerns over pod shattering, splitting and even sprouting and other quality issues have created yield loss potential. 

Even with some yield losses the US bean crop will be extremely large and burdensome.  Current estimates for the US carryout are record high and the US and China have still not come to resolution on trade and may not for the foreseeable future.  Unless South America has production problems it is likely that world stocks on beans will grow larger and the market reaction will be to discourage production.  While the US soy stocks bulge to massive levels, Ontario’s soybeans still see great marketability to China as a result of non US demand.   Currently this demand is large but will subside into the winter as the seaway closes and alternative supplies from other nations come to market. 

Corn supplies throughout the world continue to tighten, while in the US corn supplies are estimated to grow slightly from the September USDA estimate.  Because Chinese corn stocks are not available to the world market many analysts like to look at world stocks that do not include China.  If we were to do this we would find worlds stocks fall to the lowest stocks to use ratio since 1973/1974, where the stocks to use ratio fell to 13.6%.    Ontario’s corn exports have been large and uptake of our old crop corn overseas has been excellent.  As discussed earlier our crop quality has been jeopardized due to vom and also visual damage in some samples.  Although there is great demand for Canadian corn into European markets our quality may be as such that we cannot meet their minimum quality specifications.  Long story short:  hopefully the crop comes in better than is feared today. 

World wheat inventories are also expected to fall going forward.  There are production problems all over the world.  Western Canada still has lots of wheat out with heavy snowfall accumulation.  Australia had a devastating drought and Russian production has fallen.  The trouble for US futures prices is that even with these issues the US is not selling enough wheat to the world market.  Currently in this marketing year, the US is 100 million bushels behind the pace needed to meet the current export projections.