The most recent U.S. and Canadian crop surveys indicate that above average yields are expected for Ontario and U.S. corn and soybean crops.
Quick look
Soybeans: China is buying soybeans, meal and vegetable oil from countries that are not implementing tariffs on Chinese products. This is distorting trade flows and enhancing price volatility in the soybean complex.
Corn: The U.S. corn market is functioning to encourage demand through lower prices.
Wheat: The U.S. winter wheat harvest is in the final stages. Lower prices have enhanced export demand for North American wheat.
Soybeans
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Ontario soybean ending stocks for the 2023/24 crop year are expected to drop to historical lows. Current values in Ontario are above the world market to curb export demand. Ontario domestic crusher bids appear to be high enough to attract soybean imports from south of the border. The domestic crush pace will slow in July and August as crushers take downtime for upgrades and maintenance.
For the 2024/25 crop year, we’re projecting an average Ontario soybean yield of 51.8 bu./ac., resulting in a crop size of 4.2 million tonnes. This is up from last year’s output of four million tonnes and up from the five year average figure of 3.9 million tonnes. There will be significant harvest selling pressure during the first five months of the crop year. Ontario export offers will drop below world values to enhance demand.
Using a trend yield of 52 bu./ac., U.S. soybean production is expected to finish near 120.5 million tonnes, up from the 2023 output of 113 million tonnes and up from the five-year average of 114 million tonnes.
U.S. soybeans are competitive with south American origin into China for new-crop positions. However, as of of June 27, China had not purchased any new-crop soybeans from the U.S. This past May, President Joe Biden announced tariff hikes on an additional $18 billion of Chinese goods.
There is a large U.S. crop coming and the weaker export demand will overhang North American values. Given the current price structure, the economics almost work for U.S. soybeans to trade into Ontario during November and December. This will overhang the Canadian market.
Longer term, the trade anticipates a year-over-year increase in South American production. This crop will be harvested in spring 2025.
During the first week of July, India and Indonesia announced forthcoming tariffs on certain Chinese products. This resulted in a significant rally in the world vegetable oil market. Ideas are that China would retaliate by sourcing its palm or vegetable oils from other countries. Farmers can expect enhanced volatility in the soybean market due to tariff trade distortion.
It appears that if elected President later this year, Donald Trump plans to increase tariffs on Chinese items. If China doesn’t step forward for Canadian soybeans, this is fairly negative for the North American soybean market.
What to do: Farmers should be 100 per cent sold on old crop soybeans and 20 per cent sold on expected new-crop production.
Corn
Ontario corn ending stocks for the 2023/24 crop year are expected to drop to 10-year lows. Ontario domestic values are sharply above the world market, halting export demand. Ethanol margins remain profitable and feed usage is also higher than expected late in the crop year.
Ontario corn production for 2024 is expected to finish near 10 million tonnes, up from the 2023 output of 9.6 million tonnes and up from the five-year average of 9.2 million tonnes. Currently, Ontario export offers for November are above the world market; however, this will reverse once we move into the harvest period.
U.S. corn production is expected to finish in the range of 385-388 million tonnes. This compares to the 2023 output of 390 million tonnes and the five-year average of 365 million tonnes. Given this larger production figure, the 2024/25 U.S. corn ending stocks are projected to finish near 60 million tonnes, up from the 2023/24 carryout of 54 million tonnes and up from the five-year average of 45 million tonnes.
A carryout sharply above the five-year average will cause the market to trade at five-year lows.
During the 2019/20 crop year, corn futures traded in the range of $3.50-$4.25. During the U.S. harvest period, look for the December corn futures to trade around $3.25-$3.50. Longer term, we could see Brazilian farmers decrease first crop corn acres in favour of soybeans.
Argentine corn acres will likely be similar to this past season. U.S. corn offers out of the Gulf are more competitive than South American origin for both old and new crop positions.
There may be production problems in Ukraine and parts of Europe but the U.S. corn crop is sufficient to offset any minor changes in other producing countries. As of July 9, we estimate the Argentine corn harvest was 65 per cent complete, while Brazilian farmers had taken off nearly 60 per cent of the Safrinha (second) crop. Harvest pressure from South America is also weighing on the world market.
What to do: We’re advising farmers to sell 20 per cent of their expected 2024 crop production. The tight old-crop fundamentals for Ontario corn are supporting new-crop prices. Later in fall, the market needs to encourage export demand and the big U.S. crop is negative for the market.
Wheat
We’re expecting the Ontario winter wheat crop to finish near 2.1 million tonnes, down from the 2023 output of 2.7 million tonnes. The five-year average figure is also 2.1 million. Ontario spring wheat production is estimated at 70,000 tonnes, down from 127,600 tonnes last year.
At the time of writing this article, the Ontario winter wheat harvest is in the early stages and will likely be stretched over the month. Ontario farmers typically sell 80 per cent of their production in the first five months of the crop year. This will limit the upside in the wheat market throughout the fall.
On a side note, western Canadian non-durum spring wheat output is estimated at 27.4 million tonnes, up from 22.6 million tonnes last year. There’s a big crop in Western Canada.
In Europe, yields are coming in lower than expected in France and Germany. Wet conditions resulted in yield drag and it’s been a very awkward growing season in Europe. The European harvest was about 20 per cent complete as of July 9.
In Russia, the winter wheat harvest is in the early stages. Yield reports are better than expected but production will still be down 10-12 million tonnes from last year. The focus in Russia has changed to the spring wheat crop, where expanding dryness and adverse temperatures are resulting in yield drag.
The U.S. winter wheat harvest is moving into the final stages. The U.S. spring wheat harvest will move into high gear during August, which will be followed by Canadian and Russian spring wheat. This will wrap up the Northern Hemisphere harvest. We are once again expecting a sizeable wheat rally from Sept. 15 through Nov. 15. Keep this in mind when planning sales.
The Chicago and Kansas wheat futures have been trending lower and are trading near three year lows. However, U.S. hard red winter wheat offers f.o.b. the Gulf made lows at US$248/tonne on June 25. Offers were at $272/tonne on July 5. Similarly, U.S. soft red winter wheat offers f.o.b. the Gulf were $217/tonne on June 25 and had risen to $235/tonne on July 5. While the futures have been trending lower, the cash market has been percolating higher as basis levels strengthen.
U.S. export sales are running 49 per cent above last year and the stronger demand is strengthening cash premiums. The U.S. export sales pace will slow once Russian winter wheat is available in export position.
What to do: We don’t usually sell wheat prior to harvest due to quality concerns. The wheat market usually makes seasonal lows in August. We’re planning to make our first sale later in fall. We’re expecting a year-over-year increase in import demand from India and China. Russian spring wheat production will be down from last year, supporting Russian export prices.
