The corn and soybean futures markets are incorporating a risk premium due to the uncertainty in production. Seasonally, the row-crops experience a rally during the planting period until acreage and weather is more certain.
Quick look:
Soybeans: Demand for Brazilian soybeans from China remains stellar.
Corn: We anticipate higher prices in the latter half of the crop year.
Wheat: United States soft winter wheat harvest begins soon, so Ontario farmers should sell the rest of their 2024 crop.
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Ontario has received more than 200 per cent of normal precipitation over the past 30 days which has delayed planting progress. The market anticipates lower yields if the crop is planted later than normal. The markets have factored in worst case scenarios for the U.S tariffs and retaliatory measures from China and certain countries.
Soybeans
Ontario soybean prices have risen about 50 cents per bushel over the past couple weeks. There are five main factors driving the Ontario soybean market. First, Ontario soybean stocks will drop to bin-bottom levels at the end of the crop year. Canadian crop year-to-date soybean exports for the week ending April 20 were 3.6 million tonnes, up 400,000 tonnes from last year. Crop year-to-date domestic usage was 1.2 million tonnes, up about 200,000 tonnes from year-ago levels. The market needs to encourage soybean acreage in Ontario. The Statistics Canada acreage survey had a year-over-year decrease of 243,000 acres.
Secondly, we mentioned in our previous issue that U.S. soybean acres may be down one million to two million from the March Prospective Plantings Report. The market will be more sensitive to weather and crop development during the growing season because there is less of cushion on acreage.
U.S. soybeans f.o.b. the Gulf are now competitive with Brazilian origin into non-Chinese destinations. This has provided support for the U.S. and Canadian soybean market despite the Chinese tariffs on U.S. soybeans.
Strength in soybean oil has enhanced the crush margins for soybeans. Stronger demand for biodiesel and seasonal strength in the vegetable market has enhanced soyoil prices and resulted in stronger margins.
Finally, Brazilian soybean prices have been percolating higher now that the harvest has wrapped up. The Argentine soybean harvest is about 15 per cent complete but Argentina is a major exporter of meal and oil. This is a brief period where farmer selling from South America eases. It’s the same time as U.S. farmers are busy planting. The herd mentality of limited farmer selling has resulted in a stronger world market. Chinese demand for Brazilian soybeans remains stellar.
What to do: Last month, we advised farmers to sell 10 per cent of their 2024 production bringing total sales to 90 per cent. Soybean elevator bids in Ontario are near the highest levels for the 2024/25 crop year. We’ll sell the final 10 per cent from 2024 once the upcoming crop is more certain.
Corn
Ontario corn prices are trading at 18-month highs as the market experiences seasonal strong demand and limited farmer selling. Canadian crop year-to-date corn exports for the week ending April 20 were 1.8 million tonnes, up from only 709,000 tonnes last year. Exports have been running around 100,000 tonnes per week and this is draining supplies in the commercial system.
Domestic feed demand is also moving through a seasonal high. Our cattle on feed inventory projection has numbers slightly above year ago levels while dressed weights are also above last year.
We’re projecting Ontario corn ending stocks for the 2024/25 crop year to drop under 700,000 tonnes, down from the 2023/24 carryout of 1.4 million tonnes and down from the five-year average of 1.6 million tonnes. When harvest occurs in the fall, on-farm supplies will be at bin-bottom levels. During the summer, the Ontario corn market needs to trade above world values to curb offshore movement. Secondly, the corn market needs to trade at a premium to wheat values to encourage wheat feeding in Ontario.
At the time of writing this article, French corn was offered at US$240/tonne f.o.b. La Pallice. Ontario corn was quoted at US$220/tonne f.o.b. St. Lawrence. Ontario corn is competitive with French corn into Northern European destination. It’s only about US$25/tonne to move corn from the St. Lawrence to Northern European ports.
U.S. corn is quoted at US$220/tonne f.o.b. the Gulf while Brazilian origin is valued at US$230/tonne f.o.b. Paranagua. French corn production for 2025 is expected to be down one million tonnes from 2024.
In Europe, we’re going to see a large volume of wheat trade into feed channels over the next few weeks and in the summer which will stem demand for Ontario corn for July through October. In the short-term, there is strong export demand keeping Ontario prices elevated.
The U.S. fundamentals are also in a very precarious situation. U.S. corn ending stocks for the 2024/25 crop year will be down from the five-year average. U.S. corn prices need to move to a premium over Brazilian and Argentine origin in the summer. Given the lower corn stocks from 2024/25, the 2025 crop cannot afford a crop problem.
U.S. corn acreage will be up from year-ago levels however, the corn market will be extremely sensitive to yield and crop developments. Brazilian corn becomes more competitive with U.S. corn for July and August. The North American corn market will likely peak in June barring adverse weather.
What to do: This week, we’re advising farmers to sell 20 per cent of their 2024 production bringing total sales to 80 per cent. We’ve been holding back on our sales recommendations in anticipation of higher prices in the latter half of the crop year. Market behaviour has materialized as expected and we want to be selling into this strength.
Wheat
The U.S. hard red winter wheat harvest will begin in June and above average yields are expected. This will be followed by the European and Russian wheat harvests in July and August. The Northern Hemisphere caps off the season in August and September with the U.S. and Canadian spring wheat harvests.
The U.S. hard red winter wheat carryout for the 2024/25 crop year will finish around 11 million tonnes. Production in 2024 was 20.9 million tonnes. The U.S. commercial system will be holding half of the 2024 crop moving into the harvest period. Keep in mind that U.S. winter wheat farmers sell nearly 50 per cent of the hard red and soft red winter wheat production in the summer months.
The function of the wheat market moving forward is to encourage demand through lower prices. Earlier in spring, we were expecting stronger export demand for U.S. wheat due to the cap on Russian wheat exports. However, this business has not materialized due to the trade war and alternating trade flows as we mentioned in our previous issue.
We now have U.S. hard red winter wheat production for 2025 at 19.6 million tonnes, down from the 2024 crop of 20.9 million tonnes but above the five-year average of 18.4 million tonnes.
The U.S. soft red winter wheat production is expected to finish at 8.7 million tonnes, down from the 2024 crop of 9.3 million tonnes. We’re hearing of potential quality issues due to excessive rains. This may be supportive to the Ontario market as we are expecting a year-over-year increase Ontario exports to the U.S. Ontario winter wheat production is estimated at 2.8 million tonnes, up from the 2024 crop of 2.4 million tonnes and up from the five-year average of 2.5 million tonnes.
European soft wheat or common wheat (non-durum) production is expected to reach 126 million tonnes, up from the 2024 output of 112 million tonnes. Similar to U.S. farmers, a large portion of the European wheat harvest moves into commercial positions at harvest. European wheat will trade into domestic feed channels in the summer months and this will be the price floor.
In Russia and Ukraine, crop forecasts are quite variable as a large portion of the winter wheat region has received below normal precipitation. China’s winter wheat region also bears watching over the next month because conditions have been dryer than normal.
What to do: This week, we’re advising Ontario farmers to sell the final 10 per cent increment of their 2024 production bringing total sales to 100 per cent. We have to finish sales before the main U.S. harvest.
