Recent weather suggests Ontario planting will occur in line with the five-year average or slightly later. A later planted crop tends to result in lower yields.
Quick look
Soybeans: Ontario soybean production is expected to reach 4.031 million tonnes.
Corn: Leafhopper damage has lowered Argentine yield forecasts.
Wheat: European production will be lower and there are quality concerns.
The Ontario wheat market will be sensitive to world values due to lower acreage and production for 2024. Statistics Canada will release its March 31 Stocks Report on May 7.
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The USDA released its April World Agricultural Supply and Demand Estimates (WASDE) on April 11. The report was viewed as supportive for corn and neutral to bearish for soybeans and wheat. Traders are focused on North American planting conditions and the fundamentals for new crop.
The Canadian dollar deteriorated against the U.S. greenback, dropping to five-month lows. U.S. inflation increased in March, which will keep Canadian prices elevated.
Many geopolitical risks and weather issues in the Northern Hemisphere will cause volatile markets for grain and oilseeds this summer.
Soybeans
Total Ontario soybean stocks are estimated at 1.250 million tonnes, and demand from April 1 through July 31 is projected at one million tonnes. The domestic market reflects a premium over world values to attract imports. Later in June and July, producer selling increases once the new crop is more certain. This pattern typically results in a stronger basis during April and May and a weaker basis in June and July.
As of April 15, U.S. soybeans were offered at US$447/tonne f.o.b. the Gulf, down $15/tonne from two weeks earlier. Brazilian soybeans were quoted at $425/tonne f.o.b. Paranagua, unchanged from early April. Brazilian basis levels are strengthening now that the harvest is in final stages.
Lack of recent export sales in the U.S. resulted in softer basis levels. Over the next two months, export offers from the U.S. and Brazil will move to equivalent values.
The WASDE report estimated the Brazilian soybean crop at 155 million tonnes, unchanged from March and down from 162 million tonnes last year. However, Brazilian forecaster Conab estimates the crop at 146 million tonnes. Usually, the USDA comes closer to Conab after the harvest it completed. We’re expecting Brazilian export offers to increase due to lower production.
Traders feel comfortable with the Argentine forecast of 50 million tonnes, which is double last year’s crop. Argentinean exports are about four million tonnes as its policies favour domestic crushing to export soyoil and soymeal.
In the U.S., we continue to forecast a soybean crop of 116 million tonnes, up 2.9 million tonnes from the 2023 crop and up 2.4 million tonnes from the five-year average.
The forecast calls for drier conditions in the Midwest over the next two weeks, so the crop should be planted in line with the five-year average, but there are concerns about precipitation in the western half of the corn belt.
Traders are gearing up for a similar pattern as last year. There will likely be a stretch of drier conditions during June. During the 2023 season, the soybean market made a seasonal low on May 31 and rallied $2/bu. by the end of July.
Ontario soybean production is expected to reach 4.031 million tonnes, unchanged from last year and up 100,000 tonnes from the five-year average.
What to do: We’ve advised farmers to be 80 per cent sold on 2023 production and 20 per cent sold on new crop. We’re looking to make our final sale in June.
Corn
Total Ontario corn stocks as of March 31 are expected to be 5.8 million tonnes. Domestic demand from April 1 to Aug. 31 is projected to reach 3.9 million tonnes, while exports could be as high as one million. The Ontario corn basis will function to attract farmer selling. We’ll likely see 150,000 to 200,000 tonnes of corn imports from the U.S. Otherwise, Ontario corn stocks will drop to historical lows.
We could see fairly strong prices late in the crop year. We all remember fall 2023, when prices peaked around Sept. 30. The key to price development will be how much corn Europe pulls from Ontario from May through July. In any case, Ontario on-farm corn stocks at the end of August will drop to about 550,000 and dip to around 300,000 by Sept. 30 before new crop is available.
When European wheat is harvested in July, nearly 40 per cent moves into feed channels. This may temper Ontario corn exports in the latter part of July, August and September.
Corn prices as of April 15: U.S. corn US$190/tonne f.o.b. the Gulf; Brazilian corn at $205/tonne, up $15/tonne from early April; Argentinean corn at $210/tonne f.o.b. tidewater; Ontario corn at $185/tonne f.o.b. St. Lawrence port; French corn at $208/tonne f.o.b. La Pallice. Ontario corn is competitive into Northern European ports. At this stage, it is likely that Ontario corn exports from April 1 through Aug. 30 will reach our projection of one million tonnes.
There is a major change in Argentina. Leafhoppers have hindered yield prospects as farmers struggle to control the insect. The plant-sucking pest causes damage itself but it carries phytopathogens that seriously reduce yields.
The USDA lowered Argentine corn output from 56 million tonnes to 55 million tonnes, but traders are expecting downward revisions to about 52 million tonnes. Last year’s crop was 25 million tonnes.
The USDA had Brazilian output at 124 million tonnes on the April report, unchanged from March but down from 137 million last year. The bulk of the Brazilian crop is determined in April. Trade estimates range from 109-114 million tonnes. Recent price behaviour leans toward private trade forecasts rather than USDA.
The USDA decreased 2023-24 ending stocks by 50 million bushels on the April WASDE report. We’re expecting further downward revisions due to stronger than expected export pace and ethanol use. The focus is on planting progress and weather. We’re expecting a U.S. corn crop near 363 million tonnes, down from last year’s output of 390 million tonnes.
We see Ontario corn stocks dropping to low levels late in the crop year. There are problems in Argentina and Brazilian prices are increasing on lower production prospects. The world market will be very sensitive to weather due to the year-over-year decline in U.S. production.
If adverse weather occurs in the corn belt, U.S. fundamentals tighten and the market will function to ration demand through higher prices. Argentine new crop will be in export position in late May, while Brazilian Safrinha supplies will be on the world market in July.
What to do: This week, we’re advising farmers to sell 10 per cent of their 2023 production, bringing total sales to 70 per cent.
Wheat
The market has been functioning to encourage demand throughout the 2023-24 crop year. Ontario on-farm wheat stocks as of July 31, 2024 are expected to be 150,000 tonnes, up from the July 31, 2023 level of 30,000 tonnes.
Domestic millers are well covered until new-crop positions, and elevator bids are based on export values. Ontario farmers have been reluctant sellers from January onward as elevator bids hover around $7/bushel for soft red winter. We’re forecasting the 2024 Ontario winter wheat crop to finish near 1.9 million tonnes.
Russia’s main winter wheat growing region has received below normal precipitation over the past 30 days, with some locations receiving 50 per cent of average. Little rainfall is expected from May 15 through June 30.
We’re expecting a weather market in the wheat complex during June. Russian export offers rose earlier this month nearly US$15/tonne. Russia was on track to produce 91 million tonnes, similar to last year but we’re looking for lower forecasts later in spring.
In the U.S. Southern Plains, conditions are favourable. We’re looking for the U.S. hard red winter crop to finish near 21 million tonnes, up from our earlier estimate of 19 million tonnes and up from last year’s crop of 15.9 million tonnes. Our U.S. soft red winter estimate remains at 8.7 million tonnes.
European common wheat production is estimated at 118-121 million tonnes, down from the 2023 crop size of 125.6 million tonnes. Europe will have lower production and serious quality issues. There will be a drain on European wheat stocks in the 2024-25 crop year. We’re expecting upside in the European wheat milling market.
Traders are watching developments in China and India. They are skeptical about Chinese production prospects due to uncertainty in winter wheat abandonment. Indian output will likely finish around 105 million tonnes, down from the government’s goal of 112 million tonnes.
What to do: We’ve advised farmers to be 80 per cent sold on 2023 wheat production. May and June are critical for Northern Hemisphere winter wheat. We’ll be patient to sell the final 20 per cent.
