The resounding crack you just heard was the corn market hitting the price ball out of the park.
And farmers, who now see home-run prices to make up for a humdrum recent performance, are cheering.
The groaning in the background is from hog and cattle producers who see their hopes of profitable prices evaporating as the feed grain price rises higher.
“This is a big win,” said Manitoba Corn Growers Association president Gary Unrau, a Roland farmer.
“Corn is rising and dragging the other crops with it too.”
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The recent surge in corn prices was sparked by a Jan. 12 United States Department of Agriculture report that found much lower corn supplies than the market expected. Ethanol production is now eating up a lot of the U.S. corn crop and with dozens of new ethanol plants set to enter production this year, there are supply fears for not just 2006-07 but also 2007-08.
Anyone who needs corn this spring and summer is now racing to secure supply.
Fears that high corn prices will take spring acreage away from wheat and soybeans have caused wheat, barley, corn and soybean prices to leap as well.
For Unrau, the rise in corn prices means a lot. He still has 8,000 bushels unpriced, and that’s the grain on which he will make his margin. The rest has been paying for inputs and interest costs.
“This is what’s on top. Everybody else has gotten paid now. Anything that I gain in the market now is mine,” said Unrau, who farms in a part of Manitoba where many farmers have begun growing corn as a cash crop.
“The farmer gets whatever’s left at the end, and this year there will actually be something left over.”
The USDA report caused corn prices at the Chicago Board of Trade to close limit-up on Jan. 12, but caused feeder cattle prices at the Chicago Mercantile Exchange to close limit-down.
Oat market analyst Randy Strychar of Ag Commodity Research said farmers don’t have to worry that this recent price surge is a short-term thing. The market is going to be scared until it sees the next crop close to the bin.
“They’re going to have to ramp this corn (price) up and buy 12 million acres,” said Strychar.
“They’re going to have to get the price up to both buy acres and make ethanol production unprofitable.”
It won’t be until July that the market is able to assess whether the next crop will produce enough to improve the present supply and demand situation in which feed grains stocks are at 27 year lows.
“You can’t just buy the acres. You need to get something from those acres,” said Strychar.
Rapidly increasing grain prices are causing a lot of anxiety among livestock feeders, however. That anxiety is going to reach back to every cow-calf producer in Western Canada.
“It’s going to drop the feeder cattle price, so the cow-calf guy will bear the brunt of this,” said Larry Schweitzer, a feedlot operator in Hamiota, Man.
“The calf prices are going to have to go down.”
Hog producers are also reeling because their feed prices are based on U.S. corn prices. They and the cattle producers are already suffering from the rise in the value of the Canadian dollar in recent years.
Schweitzer said the livestock industry benefited from low feed grain price in recent years and could handle an increase, but the sharpness of the increase is the problem.
“We knew the grain price had to go up so the grain guys could make it viable for themselves, but this is getting over the top,” said Schweitzer.
Farmers selling in the cash markets or through elevators haven’t necessarily noticed a big change yet. The recent rise has been in futures markets, and there are often disconnects between local and North America wide prices. It’ll take some time for the price changes to trickle down.
“You could lock in a dime or 15 cents a bushel better price on Friday afternoon than you could Thursday afternoon (before the USDA report) for June delivery, but could you get a dime or 15 cents more out of hauling it next week? No,” said southern Alberta feed broker Doug Chambers of Quality Grain.
“It hasn’t really moved the January market. As I’ve said to farmers before, it’s called a futures market because it’s about the future, not about now.”
Unrau said all grain growers are going to be winners because of corn’s sudden price surge. But corn growers will see the biggest gains, and that’s something that he hopes will produce more corn acreage this spring.
Two bad years in a row have cut Manitoba production to far below the 200,000 acre level it reached a few years ago.
“There’s a lot of interest in corn now.”
