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Input access, rising expense concerns offset historically high 2022 commodity prices

Updated: May 10, 2023

Farming is a bit of a gamble every day says Devin Homick, Grain Origination Coach, FS Partners.

Devin Homick, Grain Origination Coach, FS Partners says that while 2022 featured high commodity prices, ongoing conflict in the Ukraine and input costs may present challenges for the 2023 season.

But with a shooting war ongoing between two of the world’s leading wheat exporters, input costs from ‘ag-chem’ to fuel to fertilizer on the rise, and interest rates having more than tripled, ‘volatility’ is an accurate word to use for the challenges facing South-Western Ontario’s commodity producers.

“A lot of balls in the air,” he summed up. “You are juggling a lot of things.”

Offsetting this uncertainty is the fact Ontario’s big three cash crops - corn, soybeans and wheat - reached historically high prices in 2022 and to date, are setting up well for 2023.

“The highest prices we’ve ever seen, and that’s for all commodities,” said Homick.

In terms of acreage, Ontario was close to its historical norms of roughly 3,000,000 acres of soybeans, 2,000,000 of corn and 1,000,000 of wheat. An extremely wet fall in 2021 skewed winter wheat planting, bringing the latter total down to around an estimated 700,000 to 800,000 acres. Some of this total was offset by spring wheat planting by those seeking to maintain their regular crop rotation or requiring straw. Other acres planned for winter wheat went into alternate crops including soybeans and barley.

There were some concerns about a lack of consistent rainfall. One region, north Brant up towards Ayr did suffer from drought says Homick, however the bulk of areas fared comparatively well.

“It was surprising how well our crops came out of it. It was probably the best or second-best quality crops Ontario has ever produced.”

Soybeans came off quickly and with comparatively low moisture says Homick.

“And corn harvest stayed easy and went quickly too.”

Prices received for commodities were also favourable for producers, beginning with wheat.

Resultant concerns perhaps influenced by the shortfall in acres of winter wheat planted amongst more localized millers and wheat producers helped bump returns, Homick surmised.

“The market was going to be hungry for it.”

Prices rose accordingly, hitting $15.18 per bushel on May 17th, 2022.

“That is historically high,” said Homick. “I cannot remember wheat getting to those kind of numbers.”

As of January 30th, 2023, the price was at $8.85, a significant drop from those heady values.

“We’re talking almost double.”

Corn also hit an all-time high says Homick, reaching 9:16 per bushel on May 16th, 2022. The price for a bushel of corn on January 30th of this year sat at $7.20, down but still solid.

“It wasn’t that long ago that guys were tickled to get $5 corn and $12 soybeans.”

Soybeans were running $19.62 a bushel on June 17th says Homick, but sustained and actually increased in value through harvest and beyond. Sold ‘in the bin’ for over $20, they sat at around $17.50 a bushel as of January 30th, but were as high as $20.20 in the first week of this new year.

Of course, if farming was simply about rising commodity prices, everyone would be doing it. Beyond inflationary and supply chain impacts related to COVID-19, the ongoing war in Ukraine - ranked number five globally in wheat production - is a major factor.

Russia is the world’s top wheat nation and also a major producer of nitrogen.

“It’s still up in the air what price farmers will be paying for fertilizer,” says Homick, noting some producers may be trying to get a better handle on that number before ultimately deciding what crops to plant.

“Those two countries together have a huge impact on markets,” Homick added, noting an unrelated and yet indicative outcome from the shortfall in the flow of natural gas to Europe.

“They’re talking about firing up coal plants in Germany.”

Fertilizer may be the most dramatic concern, but agricultural chemicals including pesticides and herbicides as well as fuel costs have risen significantly, along with interest rates at the bank.

“The cost of borrowing money to pay for that new tractor, you name it, that’s gone up too. There’s a lot of cogs in this wheel.”

Homick’s concern is that we have not seen the full impact on the markets. Often, the impact of prices which must be paid in the moment aren’t fully felt until six months down the line.

“Have we even seen the full impact on the marketplace?”

Homick is in a way, surprised to not have been ‘a seven or eight dollar loaf of bread at the grocery store.

“It’s tough to understand where this will finally go and how this will impact the average consumer. And in my opinion, it’s going to continue to happen.”

On the bright side, compared to some countries fully tied to international inputs and vulnerable through the requirement to import virtually everything, Canada has domestic access to potash at least. This country has been one of the world’s top wheat producers, a trend Homick anticipates continuing with what could be one of the largest historical acreage totals planted in anticipation of the 2023 harvest.

“We think a lot of acres got put in the ground this past year. From a food standpoint in Canada, I think we’re in pretty good shape.”

Despite myriad challenges, Homick believes Canadian agriculture is also ‘booming’, continuing to grow and present viable career opportunities for youth.

“It’s also a vital piece for everyone,” he concluded, alluding to the correlation between food security and farmers, which he strives to emphasize with his own children.

“The food we eat has been farmed somewhere by somebody, it just doesn’t show up magically in the grocery store. Someone had to work hard to make that happen.” 

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