Corn market remains bleak due to good U.S. growing conditions, despite lower stocks

Soybean prices continue to be hit by Chinese tariffs on American soybeans

The June 27 USDA report showed that U.S. farmers planted more corn, soybeans and spring wheat. The recent Statistics Canada planting survey showed that there was no change to Ontario soybean acres while there was a marginal decline in planted area for corn. Optimal growing conditions across North America have enhanced yield prospects for corn, soybeans and spring wheat; therefore, the grain and oilseed markets are functioning to encourage demand through lower prices. The U.S. winter wheat harvest is over 50 per cent completed. At the same time, escalating trade tensions continue to wreak havoc on currency markets and alter world trade flows. The first set of Chinese tariffs were scheduled for Friday, July 6, and the soybean futures appears to have incorporated a risk discount over the past month. The Chinese Yuan fell to an 11-month low on Tuesday, July 3 while the U.S. dollar continues to hover near 52-week highs. The Canadian dollar also dipped to a 12-month low the last week of June before staging a minor correction.

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Quick look:

  • Soybeans: Brazil and Argentina are expected to increase soybeans acres next year at the expense of corn acres.
  • Corn: World corn stocks look like they will be under the five-year average.
  • Wheat: Russian and Ukrainian winter wheat harvest is coming in better than expected.


Ontario farmers planted 3.02 million acres of soybeans this spring according to Statistics Canada’s planting survey, which was released on June 29. Ontario soybean acreage was unchanged from the March survey but down from the 2017 seeded area of 3.075 million acres. Over the past 30 days, the central growing region of Ontario has received 60 per cent to 85 per cent of normal precipitation while the northern area has received less than 60 per cent of normal rainfall. The southern area from Toronto over to Windsor has received 15 per cent to 150 per cent of normal precipitation. Therefore, most analysts are factoring in average type yields. Ontario soybean production is estimated at 3.7 million tonnes, down from 3.8 million tonnes last year.

On a f.o.b.-to-f.o.b. basis, U.S. soybeans are trading at a sharp discount to Brazilian origin. The North American market has likely factored in the 25 per cent tariff from China. However, it’s difficult to say if exports to China will improve because there are also non-tariff barriers to U.S. soybeans. Chinese demand for Canadian origin has been quiet as of recent. U.S. soybeans are saturating non-Chinese markets which has also stifled export business for Ontario soybeans in the short term. We also want to draw attention to the South American situation. This fall, Brazilian farmers will likely plant an additional two million acres of soybeans while Argentinian producers could increase soybean area by nearly one million acres. The year-over-year increase in soybean acres coming at the expense of corn. This is key to our marketing strategy.

Ontario old crop soybean prices are in the range of $10.80/bushel to $11/bushel while new crop soybean prices are $11/bushel to $11.25/bushel.

What to do: Earlier in May, we advised producers to finish old crop sales and sell 25 per cent to 30 per cent of new crop. At this stage, Ontario farmers should be patient for the Chinese to step forward for Canadian soybeans as this may strengthen the local basis. We’ll make our next sales recommendation later in fall and the 2018 crop will be sold before the South American harvest begins gets into full swing next March.


Statistics Canada’s planting survey showed that Ontario farmers planted 2.155 million acres of corn this spring. This was marginally 20,000 acres lower than the March survey but up 35,000 acres from last year. There are some areas in Ontario where the corn crop is struggling because of drier conditions. However, we’re still projecting average type yields at this time with the southern area making up for lower yields in the north. Ontario corn production has potential to reach 8.7 million tonnes, which is the same as last year’s output.

We want to remind readers that Brazilian production finished at 85 million tonnes, down 12 million tonnes from last year; Argentinean output was 33 million tonnes, down from year-ago production of 41 million tonnes. We believe the lower South American production will result in a year-over-year increase in U.S. export demand for the 2018-19 crop year. The USDA is expecting exports to experience a marginal year-over-year decrease but we feel they’ll increase their export projection later in the crop year. World corn stocks will drop to 154 million tonnes at the end of the 2018-19 crop year, down from the five-year average carryout of 202 million tonnes.

This is a tight situation; there is no doubt about it. Keep in mind that stocks have potential to fall further due to lower corn acreage in South America this fall. If adverse weather develops in Brazil and Argentina over the winter, the corn market will incorporate a $1/bushel to $1.50/bushel risk premium due to the uncertainty in production.

What to do: Ontario old crop corn prices are hovering around $4.40/bushel to $4.50/bushel. New crop prices are trading at a minor discount. This inverse tells farmers to sell old crop now and don’t store into new crop positions.

In previous issues, we advised producers to sell 15 per cent to 20 per cent of new crop but not to be overly aggressive. The corn market looks fairly bleak because of the favourable U.S. growing conditions. Secondly, the corn market has been painted with the same tariff brush as soybeans because of the sorghum. However, sorghum is a small crop and this is psychological more than anything. We feel that corn has more potential upside over the winter.


Ontario farmers seeded more winter wheat last fall but it appears that production will be similar to year-ago levels due to the year-over-year increase in abandonment. Statistics Canada’s planting survey also had lower than expected spring wheat acres compared to their March report. Without going into detail, Ontario winter wheat production is expected to come in near 2.2 million tonnes and spring wheat production will finish around 0.1 million tonnes.

It’s important to realize that total Canadian hard red spring wheat production is expected to come in near 23.5 million tonnes, up from the 2017 crop of 22.2 million tonnes. U.S. farmers also increased hard red spring wheat acres to 12.7 million, up from the 2017 seeded area of 10.3 million. U.S. spring wheat production is projected to come in at 15.8 million tonnes, up from the year-ago output of 10.5 million tonnes. The increase in U.S. hard red spring with production will more than offset the decrease in hard red winter wheat. The USDA made no major changes to hard or soft red winter wheat acreage. The U.S. winter wheat harvest was 51 per cent complete as of July 1 while the Kansas harvest was 71 per cent complete. We’ve mentioned in past issues that the U.S. winter wheat farmer sells approximately half of the crop in the summer months. Wheat futures tend to make a seasonal low in late July or early August.

The Russian and Ukraine winter wheat harvests are well underway and yields are coming in better than expected, especially in the Ukraine. The total Russian wheat crop is now estimated around 68 million tonnes, down about 17 million tonnes from last year; Ukraine wheat production is expected to finish around 26.5 million tonnes, the same as last year. A larger portion of the wheat in Russia and Ukraine moves into commercial ownership at harvest. This tends to weigh on the world market. Russian milling wheat 12.5 per cent protein is quoted at US$198/tonnes f.o.b. the Black Sea while U.S. HRW 12.5 protein is offered at US$222/tonnes.

The EU winter wheat harvest will move into full swing in mid July. In the short term, the world wheat markets are absorbing the Northern Hemisphere winter wheat harvests which will be followed by the U.S. and Canadian spring wheat. Keep in mind the world is coming off a record carryout.

Ontario farmers should be finished with old wheat sales. Nearby prices for soft red winter wheat are hovering around $5.90/bushel; hard red winter wheat prices are around $6.10/bushel and hard red spring wheat bids are in the range of $5.90/bushel to $6/bushel. The wheat markets are showing a $0.40/bushel to $0.50/bushel carry for delivery next summer.

What to do: It’s difficult to forward sell new crop at this time because the protein and quality are uncertain. Producers should avoid selling new crop wheat during the summer months. Try and hold off on new crop sales until late September. Our strategy is to sell regular increments throughout the crop year based on seasonal strength in the demand. During the winter period, there is potential for stronger corn prices to spill over into the wheat complex.

About the author

Markets Analyst

Jerry Klassen is the manager of Canadian operations for Swiss-based grain trading house GAP SA Grains & Products.



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