An update on grains and oilseeds markets and its impact on Ontario farmers. Steve Duff, OMAFRA

1. 2019 Commodity Outlook
Steve Duff
Chief Economist
OMAFRA

2. Overview
▪ US market situation and outlook
▪ Canadian and Ontario Market Situation
▪ Ontario Outlook
2

3. US Market Situation and
Outlook
3

4. Parity Era
Target Price Era
Decoupled Era
Source: USDA-NASS
1933
AAA
1996
FAIR Act
US Farm Policy – Distinct Eras

5. US Drought Monitor
5
▪ Feed and pasture availability back to normal in major US
cattle producing areas

6. Source: WASDE
US Ethanol Production

7. US and Brazil Soybean Exports
Source: USDA-FAS

8. 2017- 2018 Changes in US Corn Exports
Source: USDA-FAS

9. Source: USDA-FAS
2017- 2018 Changes US Soybean Exports

10. Source: University of Illinois 2018
• With corn and soybean acreage relatively unchanged in 2018, price movements were going to be driven by weather/yields
and trade over the summer and fall
• Weather in the US looked very favourable to above trend yields as June and July progressed and this would have trended
prices downwards regardless of China situation. The China situation generally added day to day volatility and profit-taking
by non-commercials
• Corn: payment of $0.01 per bu is about 0.29% of the current cash price of $3.41 per bu in the US - does little to retrace the
roughly $0.60 per bu lost since June
• Soybeans: payment of $1.65 per bu is about 19% of the current cash price of $8.58 in the US – will retrace a larger portion
of the roughly $2 per bu lost since June
US Corn and Soybean Prices during China Dispute

11. 2018 Market Facilitation Payment
• USDA announced first MFP payment on July 24, 2018 and second payment on Dec 17, 2018
• Each payment was on 50% of the farm’s total production for the commodity.
• Outside of soybeans and hogs the payments per unit are quite minor: Corn: payment of $0.01 per bu is about 0.29%
of the current cash price of $3.41 per bu in the US; Wheat: payment of $0.14 per bu is about 2.7% of the current cash
price of $5.22 in the US; Milk: payment of $0.12 per cwt is about 0.68% of the current cash price of $17.40 per cwt in
the US; Soybeans: payment of $1.65 per bu is abput 19% of the current cash price of $8.58 in the US; Hogs:
payment of $8 per head is about 7.5% of the current cash price of about $106 per head in the US
• While the soybean and hog payments are quite large, the MFP is subject to the similar per farm payment limits as the
ARC and PLC programs. The payment limit being $125,000 per farm. Note with MFP, a large hog, dairy and cash
crop farm could trigger up to $250,000. In the context of the scale of US farms, effectively this means the largest
farms have very little real coverage and may limit both participation and the financial impact of the program. For
example, a farm growing 1,300 acres of soybeans would hit the cap.
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Commodity
Payment
Rate Units Production Base
Estimated Total
Payments ($ Millions)
Soybeans 1.65 bushel Harvested crop 7,259.40
Hogs 8.00 head Inventory during July 15 to August 15 580.60
Cotton 0.06 pounds Harvested crop 553.80
Sorghum 0.86 bushel Harvested crop in 2018 313.60
Dairy - milk 0.12 cwt. Historical MPP-Dairy production 254.60
Wheat 0.14 bushel Harvested crop in 2018 238.40
Corn 0.01 bushel Harvested crop in 2018 192.00
Fressh sweet cherries 0.16 pound Harvested crop in 2018 111.50
Shelled Almonds 0.03 pound Harvested crop in 2018 63.30
Total 9,567.20
Source: Congressional Research Service - Dec 20, 2018
2018 US Market Facilitation Payment - total of July 24 and Dec 17 payments

12. US Corn Supply-Disposition
Source: USDA - WASDE
CORN
2016/17 2017/18
2018/19
December 2019/20 2020/21
Area Planted 94 90.2 89.1 92.0 93.0
Area Harvested 86.7 82.7 81.8 84.6 85.6
Yield per Harvested Acre 174.6 176.6 178.9 176.5 178.5
Beginning Stocks 1,737 2,293 2,139 1,780 1,570
Production 15,148 14,604 14,626 14,930 15,280
Imports 57 36 45 50 50
Supply, Total 16,942 16,933 16,810 16,760 16,900
Feed and Residual 5,470 5,298 5,500 5,575 5,650
Food, Seed & Industrial 2/
6,885 7,058 7,080 7,190 7,215
Ethanol & by-products
3/ 5,432 5,605 5,600 5,700 5,725
Domestic, Total 12,355 12,356 12,580 12,765 12,865
Exports 2,294 2,438 2,450 2,425 2,450
Use, Total 14,649 14,794 15,030 15,190 15,315
Ending Stocks 2,293 2,139 1,780 1,570 1,585
Stocks-Use Ratio 15.7% 14.5% 11.8% 10.3% 10.3%
Avg. Farm Price ($/bu) 3.36 3.36 3.25 - 3.95 3.90 3.95
Million Acres
Bushels
Million Bushels
USDA Corn long-term projections as of October 2018

13. US Soybeans Supply-Disposition
Source: USDA - WASDE
SOYBEANS
2016/17 2017/18
2018/19
December 2019/20 2020/21
Area Planted 83.4 90.1 89.1 82.5 82.5
Area Harvested 82.7 89.5 88.3 81.8 81.8
Yield per Harvested
Acre 52 49.3 52.1 50.0 50.6
Beginning Stocks 197 302 439 956 794
Production 4,296 4,411 4,600 4,090 4,135
Imports 22 22 25 25 25
Supply, Total 4,515 4,735 5,064 5,071 4,954
Crush 1,901 2,055 2,080 2,075 2,100
Seed 105 104 96 95 96
Residual 41 8 32 32 32
Domestic, Total 2,047 2,167 2,208 2,202 2,228
Exports 2,166 2,129 1,900 2,075 2,090
Use, Total 4,213 4,296 4,108 4,277 4,318
Ending Stocks 302 439 956 794 636
Stocks-Use Ratio 7.2% 10.2% 23.3% 18.6% 14.7%
Avg. Farm Price ($/bu) 9.47 9.33 7.85 - 9.35 8.75 9.15
Million Acres
Bushels
Million Bushels
USDA Corn long-term projections as of October 2018

14. U.S. Meat Production
Source: USDA - WASDE

15. US Cow Herd Size
15
▪ US cow herd bottomed in 2014 and is now into a fourth
year of expansion

16. US Beef Supply-Disposition
16
Source: USDA - WASDE
Beef Units 2017 2018 2019 2020 2021
Beginning stocks Mil. lbs. 757 649 685 690 625
Commercial production Mil. lbs. 26,187 26,944 27,910 28,524 28,548
Change from previous year Percent 3.8 2.9 3.6 2.2 0.1
Farm production Mil. lbs. 63 63 63 63 63
Total production Mil. lbs. 26,250 27,007 27,973 28,587 28,611
Imports Mil. lbs. 2,993 3,027 3,100 3,113 3,169
Total supply Mil. lbs. 30,000 30,683 31,758 32,390 32,405
Change from previous year Percent 3.5 2.3 3.5 2.0 0.0
Exports Mil. lbs. 2,860 3,164 3,245 3,283 3,342
Ending stocks Mil. lbs. 649 685 690 625 625
Total disappearance Mil. lbs. 26,491 26,834 27,823 28,482 28,438
Per capita, retail weight Pounds 57 57.2 58.8 59.7 59.2
Change from previous year Percent 2.6 0.4 2.8 1.5 -0.8
Prices
Steers, 5-area $/cwt 121.52 116.29 117.75 114.11 110.98
Feeder steers, Oklahoma City $/cwt 145.08 148.20 146.50 142.54 134.11
Cattle inventory 1,000 head 93,705 94,399 95,000 95,200 94,801
Beef cow inventory 1,000 head 31,210 31,723 31,890 31,980 32,001
Total cow inventory 1,000 head 40,559 41,123 41,300 41,396 41,424
USDA Beef long-term projections as of October 2018

17. US Sow Herd Size
17
▪ US sow herd bottomed in late 2013 and is now into a
fifth year of expansion

18. US Sow Herd Productivity
18
▪ US productivity per litter has grown rapidly since 2006

19. US Pork Supply-Disposition
19
Source: USDA - WASDE
Pork Units 2017 2018 2019 2020 2021
Beginning stocks Mil. lbs. 507 554 550 585 590
Commercial production Mil. lbs. 25,584 26,425 27,810 28,243 28,474
Change from previous year Percent 2.6 3.3 5.2 1.6 0.8
Farm production Mil. lbs. 14 14 14 14 14
Total production Mil. lbs. 25,598 26,439 27,824 28,257 28,488
Imports Mil. lbs. 1,116 1,064 1,060 1,070 1,080
Total supply Mil. lbs. 27,221 28,057 29,434 29,912 30,158
Change from previous year Percent 2.2 3.1 4.9 1.6 0.1
Exports Mil. lbs. 5,632 5,989 6,200 6,350 6,380
Ending stocks Mil. lbs. 554 550 585 590 595
Total disappearance Mil. lbs. 21,035 21,518 22,649 22,972 23,183
Per capita, retail weight Pounds 50.1 50.8 53.1 53.4 53.5
Change from previous year Percent -0.1 1.4 4.5 0.6 0.2
Prices
National base, live equivalent $/cwt 50.48 45.23 41.25 43.06 44.83
Hog inventory,
Total Hog Inventory 1,000 head 71,545 73,445 75,750 75,650 76,003
USDA Pork long-term projections as of October 2018

20. Canadian & Ontario
Market Situation
20

21. Ontario Crop Production
21
Field crop production stats in Ontario (2007-2018)
5-yrCAGR 10-yrCAGR
Type of crop 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2013-2018
CAGR a
2008-2018
CAGR a
WinterWheat 595,000 1,255,000 970,000 855,000 1,100,000 840,000 1,070,000 775,000 649,000 1,080,000 920,000 914,000 -3.1% -3.1%
Spring Wheat 180,000 195,000 128,000 132,000 115,000 89,000 80,000 80,000 125,000 119,000 90,000 81,500 0.4% -8.4%
Corn forgrain 2,055,000 1,740,000 1,820,000 1,940,000 2,000,000 2,210,000 2,210,000 1,865,000 2,080,000 2,110,000 2,060,000 2,080,000 -1.2% 1.8%
Canola 48,000 55,000 50,000 80,000 88,000 74,000 60,000 32,000 35,000 39,000 43,000 62,400 0.8% 1.3%
Soybeans 2,225,000 2,095,000 2,465,000 2,495,000 2,463,000 2,587,000 2,595,000 3,060,000 2,930,000 2,770,000 3,060,000 3,005,000 3.0% 3.7%
Dry White Beans 85,000 79,000 49,000 85,000 35,000 65,000 45,000 59,000 65,000 51,000 69,000 52,300 3.1% -4.0%
Dry Coloured Beans 74,000 54,000 47,000 60,000 52,000 55,000 45,000 64,000 65,000 70,000 61,000 65,200 7.7% 1.9%
aCompound Ave Growth Rate (CAGR)
5-yrCAGR 10-yrCAGR
Type of crop 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2013-2018
CAGR a
2008-2018
CAGR a
WinterWheat 73.6 80.2 73.2 79.5 75 78.3 79.3 77.2 78.6 87.5 87.3 83.6 1.1% 0.4%
Spring Wheat 51.1 49.5 50.6 52.3 52 55.1 52.2 56.3 64 52.9 46.7 54.3 0.8% 0.9%
Corn forgrain 133.8 156.3 142.9 163.9 152 153.2 160.5 160.4 169 156.4 167 166 0.7% 0.6%
Canola 34.7 40 39.4 41.6 36.9 36.5 36.7 43.1 42.9 41.9 46.5 47.1 5.1% 1.6%
Soybeans 33 43.4 40.2 46.1 47.6 48.3 45.9 45.5 46.8 45.5 45.6 51.4 2.3% 1.7%
Dry White Beans 16.1 20.3 17.8 21.4 20 23.1 22.2 22.3 19.6 21.1 20.6 26.4 3.5% 2.7%
Dry Coloured Beans 13.6 22.5 19.1 20.6 19.2 20 18.4 22.3 19.3 17 20.4 23.9 5.4% 0.6%
Source: http://www.omafra.gov.on.ca/english/stats/crops/index.html
Harvested area(acres)
Average yield (bushels peracre)
Average yield (cwt/Acre)

22. Ontario Corn Yields
22

23. Ontario Soybean Yields
23

24. Ontario Land Rental Rates
24
Estimated Rental Rate per acre, Province, CAR, CD, 1991- 2016
Source: 1991-2016, Census of Agriculture, Statistics Canada
Geography 1991 1996 2001 2006 2011 2016
Ontario 47 54 58 72 89 149
Southern Ontario Region 78 92 103 123 143 227
Niagara Regional Municipality 72 70 63 128 108 168
Haldimand-Norfolk Regional Municipality 73 81 84 114 135 231
Oxford County 83 100 135 152 183 252
Chatham-Kent Division .. .. 154 157 186 292
Essex County 89 101 112 125 144 226
Lambton County 67 78 98 120 143 217
Middlesex County 70 82 106 112 144 247
Western Ontario Region 42 49 59 74 94 156
Wellington County 38 42 54 62 90 151
Perth County 71 93 115 159 191 312
Huron County 63 82 108 121 155 251
Bruce County 31 37 38 55 68 122
Grey County 16 16 16 20 30 51
Central Ontario Region 28 29 27 32 41 66
Hastings County 20 12 14 14 19 29
Prince Edward County/ Division 23 22 18 25 31 50
Northumberland County 22 28 25 28 31 56
Peterborough County 18 17 14 16 18 30
Victoria County/Kawartha Lakes Division 19 17 19 22 28 42
Durham County/ Regional Municipality 45 42 46 59 90
Eastern Ontario Region 22 21 26 30 42 79
Stormont, Dundas And Glengarry United Counties 33 35 38 56 78 145
Prescott And Russell United Counties 26 27 33 40 59 96
Leeds And Grenville United Counties 13 15 15 21 24 45
Lanark County 14 14 11 12 21 47
Frontenac County 12 11 13 12 16 32
Lennox & Addington County 15 12 23 12 17 32
Renfrew County 15 16 12 18 18 34
Ottawa-Carleton Regional Municipality 38 33 .. .. .. ..

25. Ontario Corn Basis
25

26. Ontario Soybean Basis
26

27. Meat Demand
27
▪ Total meat demand is growing
▪ Beef demand increased and has flattened despite rising prices

28. Canadian Cow Herd Size
28
▪ Canadian cow herd at lowest level in 20 years – short-
lived expansion in 2016 and 2017

29. Ontario Cattle Slaughter
29
• Ontario cattle slaughter has risen in large part due to higher cow slaughter
• Western Feeder cattle have fallen from 44% of total slaughter in 2015 to
about 30% in 2017
• Slaughter prices have fallen sharply from record highs but are still
historically strong

30. Canadian Cattle Slaughter
30
• Tight supply has lead to increasing carcass weights over
time
• 2017 saw first decline in close to ten years

31. Ontario Cattle Slaughter
31
• Tight slaughter supply has meant a strong basis
• Simply not enough fed cattle in Ontario to meet demand
• Basis has weakened considerably as cow slaughter has increased

32. Beef Imports
32
▪ Beef imports are a major part of the Canadian supply
chain and are below pre-BSE levels
▪ Ontario imports close to 50% of beef consumption

33. Ontario Feeder Calf Basis
33
• High crop prices and low returns since BSE has tightened an already tight
feeder calf supply
• Weak dollar, and low supply of calves are main drivers
• Fall 2018 has seen price ranges widen as weaker cattle are heavily
discounted

34. Ontario Sow Herd Productivity
34
▪ Ontario productivity per litter has grown rapidly since 2006
▪ Ontario pigs born per litter exceed US by almost 2 pigs

35. Ontario Hog Slaughter
35
• Total Ontario hog slaughter fell as sow numbers declined and has
began to rise again
• Roughly 1.5 million market hogs go to Quebec for slaughter now

36. Ontario Hog Slaughter
36
• Tight slaughter supply means a stronger basis
• Movement of hogs to Quebec has pushed this also

37. Pork Imports
37
▪ Pork imports are a major part of the Canadian supply
chain
▪ Ontario imports roughly 40% of pork consumption

38. Ontario Market Outlook
38

39. 39
Ontario G&O Price Trends and Outlook

40. Ontario Corn Returns to Land and Owner Labour
40

41. 41
Ontario Soybean Returns to Land and Owner Labour

42. 42
Adapted from OMAFRA RMP feedlot farm sample
Ontario Cattle Price Trends, Outlook and Returns

43. Forecasted Feeder Steer Price

44. Forecasted Fed Steer Price

45. Ontario Hog Price Trends, Outlook, and Returns
45
Adapted from OMAFRA RMP hog finishing farm sample

46. Forecasted Market Hog Price

47. Highlights
▪ Long-term prospects for the ag sector continue to be bright.
▪ 2019 should see modestly higher US acreage for grains & oilseeds crops.
▪ US beef and pork production continues to grow while demand is growing –
adding strength to prices in the medium to longer term
▪ Unpredictability and volatility are likely to increase due to expansion of
livestock markets in the US and high level of stocks
▪ Weak Canadian dollar continues to largely shield Canadian farmers from
price weakness experienced in US.
▪ Ontario prices
▪ Farmers must continue to implement a number of strategies:
• pushing for production and cost efficiencies;
• participating in business risk management programs;
• hedging on commodity markets;
• using available marketing tools;
• ensuring credit is in place before it is needed; and,
• reducing debt and increasing liquid assets.
47