Ontario corn and soybean prices are at six-month highs. Farmers should sell the final 20 per cent increment of their 2023 corn and soybean production.
Quick look
Soybeans: Traders are factoring in a year-over-year increase in U.S. soybean production. Brazil’s final crop estimate will be lower due to extensive flooding. Argentina’s crop was 80 per cent complete as of May 26, weighing on world soymeal and soyoil prices.
Corn: The U.S. Midwest is experiencing greenhouse conditions for corn development. Brazil’s Safrinha corn harvest will be in high gear by mid June while the Argentine corn harvest was only 35 per cent complete as of May 26.
Wheat: The market has factored in lower Russian wheat production. U.S. harvest pressure will limit additional strength.
Soybeans
Read Also
Scouting advised for soybean aphids
Soybean aphids have been spotted in a few fields in southern Ontario that haven’t seen soybean aphids in quite a…
Ontario and U.S. farmer selling tends to slow during planting time. After seeding is done, farmers finish up old crop sales, especially if conditions are optimal.
Ontario on-farm soybean stocks are expected to drop to historical lows at the end of the 2023-24 crop year. We expect Ontario imports of U.S. soybeans from April 1 through Aug. 31 to reach 180,000 tonnes.
At the time of writing this article, Ontario crusher bids were $16.60/bu. or US$12.15/bu. South of the border in Blissfield, Michigan, elevator bids were US$12/bu. The spread between Windsor and prices in Michigan needs to widen to attract imports. This is supportive for Ontario prices and may cause minor strength in the Ontario market.
Ontario prices are at six-month highs and we’re advising farmers to sell their remaining stocks into this strength. Keep in mind that Ontario and U.S. crushers take downtime for maintenance and upgrades during the summer months.
North American crush margins will come under pressure over the next month. Argentina is the world’s largest exporter of soyoil and soymeal. The soybean harvest is moving into the final stages and offers are becoming more aggressive for soybean products. Argentine soybean production is estimated at 50 million tonnes, which is double last year’s output. U.S. exports of soyoil and soymeal will decrease.
On May 26, Brazilian soybean offers were US$465/tonne f.o.b. Paranagua while U.S. values were quoted at $477/tonne f.o.b. the Gulf. Brazilian basis levels have strengthened.
Over the next month, we expect U.S. offers to grind lower, while Brazilian prices will remain at current levels. U.S. soybeans will be more competitive into China by the end of August.
The Brazilian harvest has basically wrapped up. Final estimates are in the range of 153-155 million tonnes, down from last year’s output of 162 million tonnes. The Brazilian crop for 2024-25, which will be harvested in February 2025, is expected to reach 169 million tonnes.
For the U.S., traders are forecasting an output of 121-122 million tonnes, up from the 2023 output of 113 million tonnes. We may see some switching of corn acres into soybean in the Midwest. For 2024-25, the world will contend with a sharp year-over-year increase in soybean production.
What to do: We’re advising Ontario farmers to sell their final 20 per cent increment of 2023 production, bringing total sales to 100 per cent. We’ve advised farmers to be 20 per cent sold on new crop.
Corn
Ontario corn stocks as of March 31 were 5.556 million tonnes. Total domestic demand from April 1 through Aug. 31 is estimated at four million tonnes. In my previous article, we said Ontario corn exports had potential to reach 900,000 tonnes during these five months, which would cause on-farm stocks to drop to a historical low of 320,000 tonnes. The Ontario corn market will function to ration demand by trading above world values.
U.S. and Brazilian corn is more competitive than Ontario origin into northern Europe. Elevator bids in Ontario have been consolidating over the past two weeks and are struggling to move higher.
At the time of writing this article, Ontario corn was quoted at US$215/tonne f.o.b. St. Lawrence port. French corn was quoted at $235/tonne f.o.b. La Pallice. Brazilian corn was quoted at $206/tonne f.o.b. Paranagua while U.S. corn was offered at $202/tonne.
European corn imports from countries outside EU totalled 26.1 million tonnes during the 2022-23 crop year year. Import demand dropped to 17.5 million tonnes in 2023-24 and will likely fall to 16.5 million tonnes in 2024-25.
In Europe, nearly 40 per cent of the common wheat production moves into feed channels. The 2024 wheat crop is expected to be lower quality due to excessive rain, causing more to trade into feed channels. The main European wheat harvest occurs in July so this will stem corn demand.
EU corn production is expected to reach 68 million tonnes this year, up from the 2023 output of 62 million tonnes.
The U.S. 2023-24 ending stocks are expected to reach 54 million tonnes, up from the 2022-23 ending stocks of 35 million tonnes and up from the five-year average of 45 million tonnes. The upcoming crop is developing under favourable conditions and the bulk of the crop was planted in a timely fashion. U.S. farmers will be active sellers of old crop corn stocks.
The Argentine corn harvest is ongoing and Brazil’s Safrinha corn harvest will be in full swing by mid-June. A fair amount of corn will come onto the world market over the next few months.
What to do: We’re advising Ontario farmers to finish sales on their 2023 corn production. Prices are at six-month highs and it’s prudent to sell the final 20 per cent increment given current market risks.
Wheat
In my previous article, we advised farmers to finish old crop sales and sell 20 per cent of new crop. Our last recommendations for the final 30 per cent of the crop were at the highest prices of the crop year. We advised farmers to sell into the strength as the market rallied.
Most farmers in Ontario had the bulk of their wheat sold by Dec. 31, 2023. Ontario on-farm stocks as of March 31 were only 75,000 tonnes out of a 2023 production figure of 2.8 million tonnes (spring and winter wheat).
Sometimes, the only person to give a pat on the back or say “that’a boy, good job” has to come from yourself. In the March 4 issue, we stated that the world had become dependant on Russia for big crops and low prices. If there was a production or export problem in Russia, the wheat market had significant upside. We were only 60 per cent sold at this time.
In the following issue on March 18, we stated the weather outlook for southern Russia had potential to turn drier from April 15 through May 15. If drier conditions materialized, the market would have potential to jump quite sharply.
It happened. The Russian winter wheat region received less than 25 per cent of normal precipitation during April. I monitor quite a few market commentaries and we were one of the first analysts to draw attention to the Russian weather forecast and overall conditions. This also emphasizes the need for farmers to sell regular increments of production throughout the crop year.
Conditions in Russia are plateauing. There is rain in the forecast for southern Russia. Conditions are not deteriorating and the winter wheat crop is likely made. We will only know the final production figure for Russia’s winter wheat later in fall. The Russian spring wheat crop, which is estimated at 24 million tonnes, appears to be in good shape so far.
Western Australia has been experiencing drought-like conditions but other regions of the country are in good shape. Again, unless conditions deteriorate further, the market has likely factored in the lower crop estimate. Keep in mind the Australian crop has a ways to go before harvest in December.
The U.S. hard red winter wheat harvest will begin in June. Very simply, this crop will be about four million tonnes larger than last year. The U.S. farmer sells 50 per cent of his/her winter wheat in the summer months.
The European harvest materializes in July. The Russian winter wheat harvest occurs in the latter half of July and first half of August. This is followed by the U.S., Canadian and Russian spring wheat harvests during August and September.
There is no shortage of wheat from June through September. The world wheat market has breathing room to move higher during October and November.
What to do: We’ve advised farmers to be 100 per cent sold on their 2023 crop and sell 20 per cent of their expected 2024 production. This will allow movement off the combine to free up storage or cash flow. Our next sale recommendation will likely occur in the fall.
