The Ontario corn harvest was 65 per cent complete as of Oct. 28, and the soybean harvest was in the final stages.
Corn and soybean prices are hovering near seasonal lows and are expected to percolate higher throughout November and December. Wheat prices have come off their highs in the short term but we’re expecting them to trend higher after the Southern Hemisphere harvest.
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Soybeans: The U.S. crush was the highest on record in September.
Corn: U.S. corn basis is expected to strengthen later in winter, which will support the Ontario corn market.
Wheat: Chicago wheat futures will be under pressure until January as the Argentine and Australian harvests progress.
Soybeans
The Ontario soybean harvest is in the final stages and the market is functioning to encourage export demand. Bids from the domestic crusher are a minor discount to buyers fobbing for export. As of Oct. 28, U.S. soybeans were offered at US$418/tonne f.o.b. the Gulf and Brazilian soybeans were quoted at US$434/tonne f.o.b. Paranagua. Ontario soybeans were valued at US$405/tonne f.o.b. St. Lawrence port. Ontario soybeans are competitive with U.S. origin into the Middle East and southeast Asian destinations.
Ontario and U.S. soybean crush margins are quite healthy, enhancing domestic demand. The U.S. crush for September was a record high and we’re expecting similar data for October.
U.S. soymeal values have been grinding lower, which will also result in stronger offshore movement. U.S. meal values are more competitive than South American origin for the time being. Soyoil prices have been consolidating at higher levels over the past month. Strength in the energy complex, along with stronger world vegetable oil values, have created a larger soyoil contribution to crush profitability.
The downside is limited in Ontario soybean prices, given the healthy domestic demand and the year-over-year increase in offshore movement during the first five months of the crop year.
Brazilian farmers plant about 75 per cent of the soybean crop in November. Rains are becoming more frequent, which is normal for this time of year. During the first two weeks of December, the early planted soybeans start flowering and setting pods. This portion of the crop was off to a rough start last year due to drier conditions. At the same time, temperatures make seasonal highs.
November is also the main month for planting soybeans in Argentina. There are major heat waves in November and December. We’re expecting the soybean market to incorporate a risk premium due to the uncertainty in production. This has potential to spur additional export demand for Ontario and U.S. soybeans.
Early estimates have the upcoming Brazilian soybean crop in the range of 160-170 million tonnes, up from 153 million tonnes last year. Argentina’s soybean crop is estimated in the range of 49-55 million tonnes, up from this last spring’s harvest of 48 million tonnes.
What to do: We’ve advised Ontario farmers to be 20 per cent sold on their 2024 production. This week, we’re advising farmers to increase sales by 10 per cent, bringing total sales to 30 per cent. We’re planning to make our next sale in late November or early December, just prior to lakes closing and the beginning of the South American harvest.
Corn
Ontario corn prices in the elevator system have been hovering around $5-$5.25/bu. since June. Basis levels remain under pressure as the Ontario harvest moves into the final stages. The forecast looks favourable for harvest progress.
As of Oct. 28, U.S. corn was offered at US$213/tonne f.o.b. the Gulf while Brazilian corn was quoted at US$217/tonne f.o.b. Paranagua. Argentinean corn was quoted at US$226/tonne f.o.b. seaport. French corn was offered at US$240/tonne f.o.b. La Pallice. Ontario corn was quoted at US$210/tonne f.o.b. St.Lawrence port.
The Ontario corn market is functioning to encourage export demand as offers are competitive into northern European ports. The downside is limited capacity in the country system.
The U.S. corn market is also enhancing demand at the current levels. U.S. crop year-to-date ethanol production is running three per cent ahead of last year. U.S. corn export sales commitments are up 34 per cent from year-ago levels. Domestic feed demand is also up from year-ago levels and cattle marketing weights are up three per cent from 12 months earlier.
The U.S. corn basis is expected to strengthen later in winter, which will support the Ontario corn market.
In Brazil, the first corn crop, of about 25 million tonnes, is planted in November and harvested during February and March. The main pollination phase is in late December and January.
The second corn crop, which is about 102 million tonnes, is planted in January after the soybean harvest. Total Brazilian production is expected to be up five million tonnes from last year.
In Argentina, the planting window is from October through November, with the last corn planted in December in southern Argentina. It’s very early in the season. Argentine corn production estimates range from 45-52 million tonnes, up from the previous crop size of 50 million tonnes.
Given lower ending stocks in South America, the market will be extremely sensitive to weather over the winter.
What to do: There is no change to our strategy. We’ve advised Ontario farmers to be 30 per cent sold on their 2024 corn production. Our next sale recommendation will occur in late November or early December.
Wheat
Earlier in September, Russian wheat prices were in the range of US$216-$220/tonne f.o.b. the Black Sea. During the third week of October, the Russian government increased the export price to US$250/tonne f.o.b.
Companies owning Russian elevators and sourcing facilities may sell at slightly lower values on a cif basis (costs, insurance and ocean freight; the price of wheat at the destination port) to get around government policy. However, this action by the government is supportive to the world wheat complex.
As of Oct. 28, French soft wheat was offered at US$245/tonne f.o.b. Rouen. U.S. hard red winter wheat was quoted at US$265/tonne f.o.b. the Gulf, while U.S. soft red winter was valued at US$257/tonne f.o.b.
U.S. wheat is competitive on the world market into Central America and southeast Asia. Russian wheat continues to be advantageous to North Africa and the Middle East. Australian standard white wheat was quoted at US$248/tonne f.o.b. Port Adelaide, South Australia.
The Australian harvest will occur in late November through December and and this will limit the upside for wheat. The natural trade flow for Australian wheat is into southeast Asia. U.S. wheat exports are running 17 per cent ahead of last year but will lose some market share during the next two months.
Australian and Argentine harvest pressure will weigh on the Chicago wheat futures until January.
Looking forward, world fundamentals are still tight. For the 2024-25 crop year, total ending stocks for the major exporters excluding the U.S. (Canada, Europe, Russia, Ukraine, Australia, Argentina), are expected to come in at 30 million tonnes, down from 39 million tonnes last year and down from the five-year average of 38 million tonnes.
The world is in a situation where the market cannot afford a crop problem next spring. We’re expecting a major rally in the wheat market when the Northern Hemisphere winter wheat comes out of dormancy.
Russian wheat prices are expected to increase later in the crop year as the exportable surplus declines. If Russia has production issues next spring, the government will intervene and could implement export quotas.
Ontario wheat prices have struggled to move higher over the past month. Canadian and U.S. millers appear to be well covered through January. Export movement has been limited with competition from the U.S. and Europe.
What to do: We’ve advised producers with feed quality wheat to be 50 per cent sold on their 2024 production. Farmers with milling quality should be 30 per cent sold. We’re planning to sell the bulk of the volume in late winter or early spring.
During spring 2024, the Chicago wheat futures rallied $2/bu. from early March to late May. There is high probability of a similar price pattern to occur in spring 2025 because world fundamentals are tighter.
