I was in one of my soybean fields Thursday and even with my skeptical mind I was quite impressed with what I saw. You all know that I call soybeans the great liars because often they can look good and will be not quite what we thought and sometimes they don't look particularly good but are much better than you expected. That's what happened to me last year when I had myriad issues getting soybeans to grow but the yield turned up way above my expectations. My soybeans this year look much better than last year, so I'm hoping for good things.

We are about three weeks away from Labour Day, which always serves as somewhat of a tangible benchmark for me and my crops. In other words, imagine for a minute that by Labour Day those same soybeans I looked at today would be turning and hopefully my corn will be denting. Having said that, it makes right now a critical time for crop development. Not only do I need a good next three weeks to bring my crop home; it's ditto across the Great North American Corn Belt.

What we did get this past week was the latest USDA World Agricultural Supply and Demand Estimates (WASDE) report which should have added a little bit of clarity to where we are now. Leading up to this, we must remember how dry parts of July were and at the same time the numerous rain showers we've received during the last two weeks. Right off the bat, the USDA gave us a little bit of a surprise by boosting both corn and soybean acres by 1.4 million acres.

This new corn acreage figure from USDA put us at 96.7 million acres and it also increased projected harvested corn acres to 88.6 million acres. On top of that, USDA cut the yield forecast by 2.3 bushels per acre (bpa), putting it down to 180.7 bpa. This puts total U.S. domestic production now at 16.013 billion bushels (bb), up slightly from July. Once again, as we said before, this will be the second largest crop on record trailing only last year. Ending stocks are set to come in at 1.653 bb, which was down from the 1.79 bb reported last month. At first glance, this would seem to be a bearish report -- but despite that, the yield cut must have sent the grain algorithms awry. Corn was up $0.20 on the day only to retreat 8 cents Thursday.

USDA estimated soybeans to come at 4.519 bb with a yield estimate of 52.7 bpa planted on 86.8 million acres. If it comes to fruition, this will be the largest U.S. soybean crop on record. New crop domestic ending stocks came in at 320 million bushels. When you combine this big U.S. crop with the big numbers coming out of Brazil, global soy production is at record levels. Part of the expansion in the U.S. soybean complex is being eaten up by industrial use, primarily biodiesel and renewable diesel. You have to credit the Americans; we're developing that policy.

Even though I described the report as somewhat bearish, others described it as somewhat of a bullish report and it was hard to argue, especially when prices jumped on the day. However, keep in mind how big these crops are. They are huge and they're about three weeks away from being really made. At the same time, we are seeing cash prices for grain that are significantly higher during the last two years here in Ontario and Quebec. New crop cash corn is approximately $6.12 a bushel and new-crop cash soybeans are $15.32 a bushel.

Reasons for this are many and of course demand is very strong for both corn and soybeans. However, it's pretty clear that the strained geopolitical situation between Russia and Ukraine, as well as Iran and the United States is putting a premium on these prices compared to what they would be in a vacuum. Russia and Ukraine continue to attack each other's grain export infrastructure. The constant back and forth between Iran and the U.S. continues to put jitters into the oil market. Our Canadian dollar continues to be a bystander fluttering in the 71-cent level U.S., which is a major stimulant to our Ontario and Quebec cash grain prices.

On top of this, Chinese President Xi Jinping is set to visit the U.S. on Sept. 24. This will be significant for soybean prices in the U.S., as our grain algorithms will have it dialed in. China has been buying American soybeans in the last several weeks and the hope is for this to continue. The visit by the Chinese president will offer hope for more buying in soybeans and also corn. Mark Sept. 24 on your calendar and anticipate the grain algorithms doing the same thing, too.

Needless to say, we have to get through at least the next three weeks before this crop is made 95%. If we get there and if we get to Sept. 24 when the Chinese president visits the U.S., we will have some major league grain supply issues all around us. Keep in mind we're looking at the second biggest corn crop on record after last year and the biggest soybean crop ever in the United States. The bears should be taking control of the game.

The biggest thing we have to remember is that farmers don't get paid for growing grain; we get paid for selling it. If these crops finish as advertised, the supply side of the equation is going to get pretty heavy. That means we shouldn't be afraid of taking some money off the table when the opportunity presents itself. The grain markets gave us an unexpected invitation on August USDA report day and may still. The trick, as always, is recognizing them when they arrive.

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Philip Shaw can be reached at philip@philipshaw.ca

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