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12

CORN IS AN

incredibly important crop to

the Ontario economy. From Windsor in the

southwest to the Québec border and north

to Earlton, cornfields are a predominant

default of the rural landscape. Whether it

is fed to livestock, processed for ethanol,

exported out of the province. or used in

distilling spirits, Ontario's corn crop will

likely remain a very important part of our

greater agricultural economy.

In 2017, the Ontario corn crop had an

uneven growing season. Across much of

Ontario, a wet spring delayed planting. This

was followed by uneven moisture conditions

in many parts of the province. However,

according to Statistics Canada, Ontario

farmers will harvest 2.1 million acres of

corn with an expected yield of 167 bushels

per acre. This would represent one of the

largest corn crops in Ontario history.

STRONG YIELDS

The two million acre mark and the yield

are significant with regard to the cash price

for corn within Ontario. Historically, Ontario

did not produceasmuchcorn as it consumed.

This often resulted in corn being exported

out of the province at harvest time only to

be imported back the following spring or

summer as supplies dwindled. Typically, this

meant low basis at harvest, but when corn

was imported back in the following spring

or summer, Ontario would go to an import

basis, which was much higher. Generally

speaking, if harvested acres fell significantly

below the two million mark with yield down,

the realization of an import basis in spring

was much more real.

As time has gone on and technology has

improved, some of this has changed. For

instance, with new corn hybrid genetics

and better crop management, Ontario corn

yields have been improving significantly

over the last several years. This has led to the

creation of a cash corn market environment,

where supply can often be extended to cover

end-user needs throughout the year.

With an open border to grain movement,

corn can come across the border freely if

Ontario farmers aren't selling. Increasingly,

an import basis is becoming more rare. Big

Ontario yields are part of that equation.

Generally speaking, as you go east in Ontario

the corn basis gets more positive. Historically,

the far east of Ontario has a much stronger

basis for corn versus southwestern Ontario.

This is because of the lower supplies in the

east and the dynamic demand represented

from livestock production and a Quebec

market often looking to import corn. Access

to salt water is also closer. TheComprehensive

Economic and Trade Agreement (CETA)

agreement, the new trade arrangement

between the EuropeanUnion andCanada, has

made Canadian corn tariff free into Europe.

WORLD PRICES

Of course, the Ontario corn economy does

not operate in a vacuum and our cash prices

are derived here based on local conditions

but also reflect the world prices derived

at the futures market in Chicago. These

prices in 2017 have been affected greatly

by the huge corn crop produced in the

United States in 2017. According to the

United States Department of Agriculture

(USDA) November report, they have

produced a corn crop in 2017 of 14.578

billion bushels, based on an average yield

of 175.4 bu/acre on 83.1 million acres

harvested. Ending stocks are projected to

be close to 2.5 billion bushels. This has

pushed down nearby futures prices to

contract lows of $3.36 a bushel. Ontario

cash prices range from $4.09 bushel to

$4.63 across the province.

These prices are low compared to the last

10 years and are buffered to some extent

by a lower Canadian dollar below 80 cents

U.S. Demand for corn is still very strong

with projected usage this year in the U.S. of

14.435 billion bushels in 2017. Successive good

crops over the last five years have been

able to cover this demand. It will need to

Higher production and market demands

THE ONTARIO CORN ECONOMY

Marketing

Philip Shaw

be the same in 2018, although there is

already 2.5 billion bushels of corn ending

stocks weighing on this market helping to

keep corn futures prices mitigated.