Under the Agridome

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It is the best of times and, of course, it is the worst of times. I'm referring to springtime in farm country. As we all know, we are going into spring this year with the war affecting our world markets. Of course, as we all look forward to warmer weather it is being tempered by the fact that fuel and fertilizer have risen in price because of the problems that we're having in the Middle East. Nobody knows the future, but as the calendar turned into April, bombs were still dropping all over Israel, Iran and the Gulf States and the Strait of Hormuz was effectively closed to the enemies of Iran.

So, it is not the best of times. Over a span of about 40 years of writing this column I've seen a lot. We do not know the immediate future, but with Canadians paying close to $2 a liter for gasoline and above $2 a liter for diesel fuel, there's got to be a little hope out there somewhere. The rules of agricultural economics still apply. Somehow, maybe with a more efficient use of fuel and fertilizer, we can get to those great production heights we hope for every spring.

That takes me back to a trip to Bangladesh 26 years ago. I've told you about it in past columns, but on one January day I walked out into the dusty fields north of Sylhet, Bangladesh, admiring some of the rice that was being grown.

I soon was surrounded by Bangladeshi farmers who I got to ask many questions. Some of my questions surrounded agricultural economics and some of them were about their fertilizer use. On one particular rice paddy I admired the color and ask the farmer what type of fertilizer he used. He responded by telling me he was using some type of manure. Even on the other side of the world farmers were making rational decisions based on good agriculture economics.

I was reminded of that in a recent article from Al Jazeera. It documented a farmer in India who was reeling from the increase in the price of fertilizer and fuel because of the war in Iran. His name was Kumar and the article explained how he was adding up the numbers in his head regarding fertilizer costs, expected yield and market prices. He said that he didn't know if he could afford it this year, but everything will depend on the crop he gets out of his fields. So true. (https://www.aljazeera.com/…)

I couldn't help but think of the symbolism of what Kumar was saying. As you all know, I look at everything through an agricultural economic lens. Everything needs a payback in agricultural economic terms, otherwise we don't go there. For every incremental increase in production, there is an incremental cost to it and the incremental revenue from the increased production must be greater than the marginal (incremental) cost. One of the best ways to achieve that is through increased production at the end of the day. It is true for us in 2026, just like it is for Kumar in India and other farmers elsewhere in the world. Boosting production in this scenario might seem hard to think about, but at the end of the day it is standard procedure to boost farm profits.

Still, it is difficult. As I've explained earlier, deciphering markets in a war economy is a mug's game. We know that our grain market has been elevated during the last two months and especially during the last month of the war. Our grain trading algorithms respond to the social media posts from U.S. President Donald Trump. It is what it is, you can almost forget about the bearish supplies of crops which are almost everywhere at this time.

Case in point was last week when the USDA came out with its Prospective Plantings report for 2026. USDA stated U.S. corn would come in at 95.338 million acres, which is down 3.45 million from last year. Soybeans were pegged up 3.485 million acres from last year at 84.7 million acres. In other words, acres are almost the same as what USDA was predicting a year ago and you know what happened then. At the end of the day, U.S. domestic corn supply ballooned to 17.02 billion bushels. I think it's even money, but at the end of this year, it's going to look a little bit like the end of last year. Likely, there will be grain everywhere.

What makes it difficult is where we are now, in effect, is exactly where Kumar is. We are at the starting gate to get planters in the field and suddenly our whole planning horizon has changed. It is true grain prices are higher. For instance, in Ontario, you can contract cash soybeans for approximately $15 a bushel and you can contract corn for above $6 a bushel. Yes, I can hear you -- that's not enough, but it's better than where we've been the last two years.

Let's hope peace breaks out but, in lieu of that, risk management has never been more important. I'm asking you to be a bit wistful. There are a lot of Kumars in this world; we are no different than them. Sure, we might have a few more resources, but our planting horizon is the same. Let's all prepare for the biggest crop we've ever grown. Somehow, we're going to get there. Risk management and daily market intelligence will remain key.

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Philip Shaw can be reached at philip@philipshaw.ca

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