Under the Agridome

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In many ways it is the nicest time of the year when we experience some of the longest days imaginable. Often, this time of year, I am busy spraying my soybeans long into the night as the sun seemingly never sets. Of course, it's been a bit different this year, because as you all know I've had a terrible time getting soybeans to come up and some planting still continues into late June.

Markets continued to take a tumble down this week as everybody is piling on. We will also find out on June 30 if the USDA's Acreage and quarterly Grain Stocks reports have any surprises for us with regard to acres and stocks. So, that should be fun. There are always a few fireworks on June 30 that stay with us for a very long time.

One aspect of the agricultural price equation that I often mention is the effect of geopolitics. We can all remember back to when Russia invaded Ukraine in 2022. The wheat market took off -- of course, it took off because of emotional buying with two of the largest wheat producers in the world going to war. However, over several years we also see how the trading algorithms have that all dialed in. I cannot even imagine a geopolitical event now which would make the wheat prices go up like they did at that time.

Geopolitics are still important, but predicting their effect on the markets is rather fickle. During the last few weeks, we have seen open warfare between Iran and Israel. We also have seen the United States hit Iran's nuclear sites with bunker busting bombs. When this happened, it is entirely reasonable to think that markets might open with some type of emotional buying or selling depending on what the commodity is. However, last week when this happened the markets were muted.

We did have a rise in the price of oil earlier on rumors of war, but of course it is falling back now to $65.23 a barrel. You can understand how oil might be sensitive to military actions in the Arab gulf. However, things seem to have settled down with U.S. President Donald Trump talking about the past 12-day war and the ceasefire that he helped orchestrate. For farmers looking for some type of bump from a geopolitical event, it's been a bit of a disappointment. A true black swan is rare. With our grain markets flush with supply, it would take a true black swan to turn this market around in a hurry.

There was more news last week as the world's political leaders were at the G7 Leaders' Summit in Canada, followed by the NATO meeting in Europe. That's where we found out that NATO allies are looking toward contributing 5% of their GDP to their defense budgets by the year 2035. For Canada, this is a real departure since under the Trudeau administration we had never even reached 2% before. However, there's obviously a new sheriff in town and along with other western governments there is going to be an awful lot of new defense spending in this world. Who knows what that will mean in 2035.

One thing that it will likely mean is less robust Canadian agricultural policy as money goes into ships, airplanes and who knows what else. Canada's Department of National Defence always takes up the most of any Canadian budget and with this current vision so apparent, it's pretty obvious to me somewhere along the line that taxes might have to be raised. We're talking billions of dollars.

Of course, this is looking out 10 years in the future and who knows what the world will be like then. I remember very clearly several years ago I was speaking to a local commodity group about the huge corn crop in the United States that was about to reach 9 billion bushels (bb). I asked the group, "Will I be standing in front of you in a few years and we'll have a corn crop of 14 billion?" Clearly, from my perspective that was going to come true; this year, we have the USDA predicting the U.S. corn crop of over 15 bb.

Keep in mind it will be more and more and more and more. However, that might not necessarily be this coming Monday when the USDA gives us its new crop acres estimates. Currently, USDA is saying 95.3 million acres of corn and 83.5 million acres of soybeans. I have read commentary from several analysts who say it will not veer much from that. The race for cheap grain certainly isn't for the faint-hearted.

As we head into next week, the long days will get a little shorter, but the clarity we're all searching for -- whether from the USDA, the markets, or the weather -- might not arrive so easily.

The crops will grow, the heat dome of death may come, and the market will care ... or it won't. What we do know is that geopolitical risk still hangs in the air, even if it's not moving grain markets the way it used to.

At the same time, massive government spending shifts and record-breaking U.S. crop projections are reshaping the chessboard underneath us. That doesn't mean the game is over -- just that it's getting harder to play. So, we keep moving, keep planting, keep watching, knowing that somewhere in this uncertain jumble is the next opportunity.

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Philip Shaw can be reached at philip@philipshaw.ca

Follow him on social platform X @Agridome

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