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Ontario, Canada - The Year in Review

by 5m Editor
30 December 2011, at 7:49am

ONTARIO, CANADA - Amid record US pork exports and high retail pig meat prices, Bob Fraser (Sales & Service at Genesus Ontario) presents the trends in feed ingredient prices in 2010 and 2011 and the forecast for corn and soybean meal prices in Canada in 2012.

The big story this year is been one of DEMAND! As the US has become an ever increasing pork export nation, that rising tide has very much lifted the boat in Canada and Ontario. See the charts below.



This translates into Bob Hunsberger’s latest work of Ontario 2012 profitability potentially looking something like this.

An encouraging prospect certainly given the ride of the last few years. However what might disrupt the picture? First of all supply – the table is basically already set for 2012 with the pigs either on the ground or in vitro. There has been virtually nothing that has increased supply. As to demand as Jim Long, Genesus President & CEO has outlined in his commentaries from his world travels, barring some unforeseen disruption, worldwide demand and the following North American exports will remain a driver well into the future. The challenges appear to remain from the cost side and of course the big one feed. Let’s take a perspective on that.

The following three charts expertly prepared by John Bancroft OMAFRA give a nice overview of corn, soybean meal (SBM) and distillers dried grains with solubles (DDGS) over the past year and compared to 2010 and the four-year average.

Then John’s following analysis gives an interesting picture for some consideration to risk management strategies.


Corn market trend (Huron FOB farm price)
from Weekly Hog Market Facts by John Bancroft of OMAFRA
The graph shows the weekly average price trend for corn since 2007 (last 5 years) plus a snapshot of January-June 2012 estimated trend based on futures data.
The red line is the average since 2007 until the present ($185 per tonne)
The two green lines mark the range from $140 to $200 per tonne, in which the price has fallen 62% of the time over the last 5 years.
The orange line in 2012 is the snapshot of the future price trend based on the closing CME corn futures and a local basis on Friday 16 December 2011. These will change daily as the market to new market information. Estimated future values are intended as a guide to converted CME corn future prices and do not represent a purchase/sale value.



Soybean meal market trend (Hamilton price + $20 per tonne)
from Weekly Hog Market Facts by John Bancroft of OMAFRA
The graph shows the weekly average price trend for corn since 2007 (last 5 years) plus a snapshot of January-June 2012 estimated trend based on futures data.
The red line is the average since 2007 until the present ($412 per tonne)
The two green lines mark the range from $375 to $450 per tonne, in which the price has fallen 49% of the time over the last 5 years.
The orange line in 2012 is the snapshot of the future price trend based on the closing CME soybean meal futures and CME Canadian dollars future on Friday 9 December 2011 and a 5-year adjusted average basis. These will change daily as the market to new market information. Estimated future values are intended as a guide to converted CME soybean meal future prices and do not represent a purchase/sale value.

We see SBM trading below its five-year average and back into its five-year normal trading range. Corn presently seems to be rapidly heading back to earth. Do these spell booking opportunities?