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More corn predicted for Canada, based on USDA numbers

April 2, 2008

Chatham, ON – The release of the USDA Planting Intentions Report on March 31st contained a couple of surprises that will create opportunities for this planting season. Corn was pegged at 86 million acres, down eight percent from last year and one million acres below analyst expectations. The combined acreage decline in Iowa and Minnesota alone will more than equal Ontario’s production this year. Soybeans by comparison came in well above analyst expectations at over 74.8 million acres which is 18% and over 10 million acres above year ago levels. The market is responding with soybean futures selling well off historic highs and corn holding steady to protect and grow acres.

In Canada, it is expected that corn acres will decline at least 10 – 15% given increased winter wheat acres in Ontario, higher soybean prices and the fear of high fertilizer prices –the decline coming at a time when new ethanol plants will demand more corn from Eastern Canadian producers than ever before as we head into 2009. Isn’t it ironic that at a time when Chicago is starting to call for more corn acres, most Canadian producers are looking today at depressed basis levels for new crop corn that reflect a number of factors including current local inventories, contraction in feed demand, a dollar at near parity and a risk premium given volatile commodity markets.

The reality is however that Eastern Canada will need corn going into next year. This is likely to be reflected in much improved basis levels as the summer passes and harvest approaches – particularly if there are any weather related issues affecting supply. Also, even with much higher fertilizer prices, the ratio of fertilizer price to commodity price is actually more favourable now towards use than over the last few years when commodity prices were low.

If you can store corn, the signals are here that this is a good year to grow corn, particularly in high yield areas. Even at a conservative price ratio of 2.1 bushels of corn to soybeans (the old standard being 2.5 bushels of corn to soybeans) and using basis adjusted prices of $4.80 for corn and $9.25 for soybeans in Ontario -today’s ratio favours corn production for acres that have not been forward contracted yet. Of course financing requirements, field rotation and your on farm yields could dictate a different perspective, but overall current market conditions in Eastern Canada now tilt in favour of corn.

Given recent changes in market prices over the last few weeks, it is a good time to once again review your crop budgets for fields that are not already committed – look both at crop values and your input costs. You might be surprised at what you find.

The following are details of the USDA's Planting Intentions Report (millions of acres):

Crop             USDA           Avg.Analyst               Range           2007 Acres

                   Report              Estimate            of Estimates

Corn               86.0                   87.4                85.5 – 90.0            93.6

Soybeans       74.8                    71.5               70.0 – 74.2            63.6

All Wheat        63.8                   63.6               62.3 – 65.4             60.4