More U.S.-China trade spats could hit crop prices

North American crop planting is ahead of normal

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We estimate that Ontario farmers will have planted 50 per cent of their corn and 10 per cent of their soybeans by May 10.

The crop planting pace is in line with the average planting dates for Ontario.

Quick look

Soybeans: Three million acres of soys in Ontario is about the same as the five-year average.
Corn: Ontario corn acreage is expected to be down due to decrease in ethanol demand.

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Wheat: Ontario’s wheat crop could be almost double the volume of 2019.

For the month of April, the growing region of Ontario received normal- to below-normal precipitation, while temperatures were 3 C to 5 C below normal.

Farmers have marginally altered planting intentions over the past month due to erosion in ethanol values. We’re now looking for soybean acres and corn acres to be similar to 2019. Acres that were earlier intended for corn have been switched to spring cereals.

We are rating the Ontario winter wheat crop 60 per cent good to excellent. The earlier-seeded winter wheat is well established while some later seeded winter wheat has experienced root growth restriction.

Overall, we expect above-average yields on the winter wheat. Most farmers have completed nitrogen application on the winter wheat.

Ontario elevator bids for corn are slightly lower compared to mid-April, while wheat prices are down about 50 cents per bushel. Soybean prices are unchanged from two weeks ago. Favourable planting conditions across the United States have enhanced crop prospects for corn and soybeans.

U.S. winter wheat harvest will be in full gear in mid-June and the market anticipates a tidal wave of U.S. farmer selling.

The June Canadian dollar has been consolidating in a range over the past month. Monetary policy appears to be supportive but the fiscal deficit will come in larger than earlier anticipated. Weaker energy values and lower overall exports in general will lower demand for Canadian dollars for the remainder of 2020. Equity markets have staged a minor recovery off March lows. We’re still somewhat bullish on the U.S. dollar in the short term and bearish on the Canadian dollar until the market digests negative second quarter gross domestic product data.


We haven’t changed our acreage projection for soybeans. Ontario farmers are expected to plant three million acres of soybeans this spring, down from 3.1 million acres last year. Keep in mind the five-year average is also three million acres. Using a five-year average yield of 46.7 bushels per acre, the soybean crop has potential to finish near 3.9 million tonnes, up from the 2019 crop size of 3.7 million tonnes.

China has been buying U.S. soybeans over the past month, which has been a supportive factor for North American prices. U.S. soybean offers out of the Gulf of Mexico have been competitive with Brazilian origin. On the flip side, political influences are causing uncertainty in future price behaviour.

U.S. President Donald Trump blames the COVID-19 pandemic on China and the Trump administration insinuates there was an intentional cover-up by Chinese authorities. Talk in the trade is that the White House is considering retaliatory action, which includes sanctions or tariffs.

If China bows out of its Phase 1 commitment to buy agreed upon amounts of goods from the U.S., the market will have an extremely bearish outlook. Once again Canadian farmers find themselves vulnerable to U.S.-China relations.

The U.S. soybean crop is expected to reach 112 million tonnes, up from the 2019 output of 97 million tonnes; therefore, the U.S. needs this demand. As of May 3, U.S. farmers had planted 23 per cent of soybeans, up from five per cent last year and up from the five-year average of 11 per cent.

We still have the growing season ahead of us and the market usually experiences a minor rally at some stage during summer.

What to do: Major economies around the world are slowly reopening after the COVID-19 pandemic, which will enhance demand for vegetable oils. We will use a rally during the summer to finish off 2019 sales but we also want to wait until the upcoming Ontario crop is more certain. We’ve advised producers to be 80 per cent sold on old crop and 20 per cent sold on new crop.


We’ve trimmed our corn acreage projection. We’re expecting Ontario farmers to plant 2.2 million acres of corn, down from our earlier projection of 2.4 million acres and unchanged from the 2019 seeded area of 2.2 million acres. The five-year average is 2.15 million acres so this number is not unreasonable given the situation with the ethanol industry.

Using a five-year average yield, production has potential to finish near 8.7 million tonnes, up marginally from the 2019 output of 8.6 million tonnes. The main factor driving prices for 2019-20 was the late harvest.

We may see downward revisions by Statistics Canada for the 2019 crop. The market appeared to be trading a tighter supply situation than what was estimated by official government data. Canadian crop year-to-date exports for the week ending April 26 were 20,900 tonnes, compared to 1.087 million tonnes last year.

We believe that the Ontario corn carryout will be extremely tight at the end of the 2019-20 crop year. Therefore, the domestic market will be very vulnerable to growing conditions. Secondly, we’re anticipating larger U.S. imports during the summer. This will make the domestic market sensitive to currency fluctuations.

U.S. farmers are seeding corn at breakneck speed with 51 per cent of the crop planted as of May 3, up from 21 per cent last year at this time and the five-year average of 39 per cent. We continue to project a U.S. crop size of 389 million tonnes, up 41 million tonnes from the 2019 crop. Without going into details of demand, the U.S. carryout for the 2020-21 will reach 78 million tonnes, up from the five-year average of 48 million tonnes. We don’t expect a recovery in ethanol prices over the next six months.

The Argentina corn harvest is about 38 per cent complete. There is no change to the Argentine crop projection, which is 50 million tonnes, down from 51 million tonnes last year.

In Brazil, timely rains are needed in Parana, Sao Paulo and Mato Grosso do Sul. Traders are trimming their crop estimates for Brazil due to the dryness. It looks like Brazil’s total corn crop may finish at 98 million tonnes, a shade lower than earlier projections around 101 million tonnes and last year’s crop size of 101 million tonnes. Weakness in the Brazilian real has weighed on the world corn market. In the short term, U.S. corn out of the Gulf of Mexico is competitive with Argentine origin, while Brazilian offers are quiet for the time being.

What to do: We’ve advised Ontario farmers to be 100 per cent sold on old crop corn and 20 per cent sold on new crop.


The Ontario winter wheat crop had limited winterkill and is developing under favourable conditions. Ontario winter wheat production is projected to reach 2.6 million tonnes, up from the 2019 crop size of 1.4 million tonnes. We’re hearing that some farmers increased their spring wheat acres from earlier intentions at the expense of corn. We now project Ontario farmers to seed 125,000 acres of spring wheat, 30,000 more acres than last year. Production will likely finish around 200,000 tonnes, up from the 2019 production of 151,000 tonnes. Approximately 90 per cent of Ontario spring cereals are seeded at the time of writing this article.

The U.S. winter wheat crop was rated 55 per cent good to excellent as of May 3. We’re now forecasting U.S. soft red winter wheat production to come in at 8.3 million tonnes, up from 6.5 million tonnes last year. The tight soft red winter stocks situation will be alleviated with the year-over-year increase in production on both sides of the border. We’ve increased our U.S. hard red winter wheat production estimate to 22 million tonnes, which compares to last year’s crop size of 22.6 million tonnes.

Traders are focused on Russian and Ukraine wheat production. In Russia, the export target has been met and additional quotas or permits will not be granted until July 1. Food inflation is a concern, especially with the declining ruble. Trade estimates have the Russian wheat crop at 72 to 80 million tonnes compared to last year’s output of 74 million tonnes. Timely rains are needed over the next couple weeks or we could see significant reductions in winter wheat output.

About 50 per cent of the Russian wheat crop is winter and 50 per cent is spring.

In Ukraine, wheat production is estimated in the range of 25 to 27 million tonnes, down from 29 million tonnes last year. The Ukrainian government has an agreement with traders that wheat exports would be limited to 20.2 million tonnes for the 2019-20 crop year.

Ukraine and Russia combined are on track to export 54 million tonnes for 2019-20; therefore, a production problem has a serious impact on the world wheat market.

In Europe, logistical constraints due to COVID-19 are slowly being alleviated. We’re looking for a year-over-year decrease in winter wheat production due to lower seeded area in Germany and France. Western Canada is on the dry side and the forecast for May has limited precipitation. This is good news for seeding progress. However, if drier conditions persist into June, the spring wheat market could experience a significant rally as production prospects dim.

In conclusion, the wheat market is contending with a fair amount of uncertainty, which will underpin the market in the short term. Throughout the 2019-20 crop year, Ontario wheat prices were elevated above world values due to lower production. However, Ontario wheat will trade below world values later in summer to encourage exports. Ontario producers should look at selling their final 20 per cent increment of the 2019 crop over the next two weeks, bringing total sales to 100 per cent.

What to do: We want to remind producers that we’re 20 per cent sold on new crop.

About the author

Markets Analyst

Jerry Klassen

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



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