Ontario farmers plan to plant more soybeans this spring while corn acres will be similar to last year. Producers planted less winter wheat during the fall of 2023 and plan to decrease spring acres in 2024.
Cash corn and soybean prices have been percolating higher over the past couple weeks. A decrease in farmer selling is the main reason for stronger markets. Stocks in the commercial pipeline are decreasing. Ontario wheat prices have been grinding lower as domestic millers have cov- ered nearby requirements.
Quick look
Soybeans: Brazilian production will be lower than forecasted.
Corn: StatsCan estimates Ontario farmers will plant about the same amount of corn as last year.
Wheat: has Russian offers have increased, which helped stabilize the market.
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From Feb. 15 through March 15, Ontario received average precipitation but temperatures were four to six degrees above normal. New crop production is uncertain. Prices are near four-year lows and there is limited downside. Farmers are not anxious to make new crop sales.
Brazil’s soybean harvest was 68 per cent complete as of March 17. Harvest selling pressure is production has wrapped up.
Argentine farmers had harvested five per cent of the corn as of March 17 and the soybean harvest will move into full swing by the end of March. Recent rains have hindered harvest progress.
The USDA will release its acreage report March 28. We’re expecting lower corn acres and a year- over-year increase in soybean acres. The managed-money has large short positions on the corn, soybeans and winter wheat. This acreage report will be the catalyst that sparks aggressive short covering.
There has been a cooling of the Pacific sea surface temperatures often referred to as La Nina. This tends to result in drier conditions in the western corn belt.
It’s premature to factor in trend yields for U.S. corn and soybeans. We are looking for the wheat complex to strengthen in late April and May. Southern Russia has a drier forecast from April 15 strengthening the world wheat complex.
The Canadian dollar is expected to depreciate against the U.S. greenback. We’re expecting the Bank of Canada to decrease its key benchmark rate in July due to softer economic growth. The U.S economy continues to outperform, which has caused U.S. inflation to come in higher that anticipated. Liberal fiscal policy is negative for the Canadian dollar due to the budget deficit and the higher carbon tax. A weaker Canadian dollar will be supportive for Ontario corn and soybean prices.
Soybeans
Ontario farmers intend to plant 3.038 million acres of soybeans this spring, according to Statistics Canada. This is up 4.3 per cent or 42,000 acres from the 2023 planted area of 2.913 million acres. Using a traditional abandonment rate and a five-year average yield of 49.2 bushels per acre, production has the potential to reach 4.03 million tonnes, unchanged from last year and marginally higher than the five-year average of 3.946 million tonnes
We’re expecting basis levels for both old and new crop positions to strengthen over the next couple of months. Farmer selling will ease and on farm stocks are expected to drop to relatively low levels at the end of the 2023-24 crop year. Uncertainty in new crop production will be supportive for basis levels for September through December through spring.
On March 17, Brazilian soybeans were quoted at US$421/tonne, up $16/tonne from two weeks earlier. Argentine soybeans were valued at US$427/tonne, up $22/tonne from early March. U.S. soybeans were quoted at $464/tonne, up $16/tonne from March 4.
The Brazilian harvest is moving into the final stages. Traders are expecting the Brazilian crop to finish in the range of 150-152 million tonnes, down from the current USDA estimate of 155 million tonnes and down from last year’s crop of 162 million tonnes. Argentine export sales will pick up steam at the end of March or early April. The Argentinean soybean crop is forecasted to reach 50 million tonnes, double last year’s output. Farmer selling pressure from South America will decrease during summer.
We continue to project a year-over-year increase in U.S. soybean acres with production forecasts in the range of 120.5-123 million tonnes, up from the 2023 crop size of 113.4 million tonnes.
Chinese demand for the 2023-24 crop year is expected to be 105 million tonnes, unchanged from last year. For 2024-25, we’re not looking for significant changes to Chinese imports as the economy struggles and pork production stagnates. A potential Trump win could result in lower exports from the U.S. if tariffs increase on Chinese goods.
Soyoil values have been percolating higher. Stronger than expected biodiesel demand has caused the U.S. crush to exceed earlier forecasts. We’re also seeing lower forecasts for Indonesian and Malaysian palm oil. The soymeal market remains under pressure as Argentinean exports will surge during the later half of April through September.
What to do: We’ve advised farmers to be 80 per cent sold on their 2023 production and 20 per cent sold on new crop. We’ll sell our final 20 per cent increment when upcoming Ontario and U.S. production is more certain. Producers have a start on new crop, which is prudent given the current environment.
Corn
According to Statistics Canada, Ontario farmers are expected to plant 2.265 million acres of corn this spring, relatively unchanged from last year’s area of 2.261 million acres. Using a five-year average yield of 167 bu./ac., production has potential to reach 9.455 million tonnes, down from the 2023 output of 9.632 million tonnes and slightly higher than the five-year average of 9.219 million tonnes.
The year-over-year decrease in production will come on the heels of a historically low carryout from the 2023-24 campaign. We’re expecting Ontario corn exports to increase from April 1 through June 30, resulting in a significant drawdown in on-farm and commercial stocks. The basis will be very sensitive to weather and yield development through the summer. Farmer selling of old crop will slow due to tighter old crop stocks and uncertainty in new-crop production.
On March 17, Brazilian corn was offered at US$194/tonne f.o.b. Paranagua while U.S. corn was quoted at $194/tonne f.o.b. the Gulf. Export offers from the two major exporters are up $7/tonne from earlier in March. French corn was offered at US$210/tonne f.o.b. La Pallice. Ontario corn was quoted at US$182/tonne f.o.b. St. Lawrence port for April. Ontario corn is competitive with French origin into Northern European ports, enhancing export demand. Stronger offshore buying interest will contribute to firmer Ontario corn basis.
The USDA increased Argentinean corn production by one million tonnes to 56 million tonnes, up from last year’s crop of 36 million tonnes. The USDA had Brazilian output at 124 million tonnes, down from the year-ago output of 137 million tonnes. Trade estimates for Brazil are closer to 114 million tonnes so we are looking for further decreases in the USDA forecast.
We’re expecting U.S. farmers to plant 90 million acres of corn this spring, down 4.9 per cent or 4.6 million acres from the 2023 area of 94.6 million acres. Our 2024 U.S. production forecast is 363 million tonnes, down from the 2023 record of 390 million tonnes and down from the five-year average of 365 million tonnes.
As of March 12, the managed money short position on corn was 252,319 contracts. The lower acreage estimate at the end of the month will be the catalyst to spur short covering. The market will incorporate a risk premium due to uncertainty in U.S. production.
La Nina conditions usually result in a drier growing season for the western corn belt. The U.S. fundamental structure will tighten in the 2024-25 crop year, resulting in higher prices. Keep in mind Brazil’s larger Safrinha crop also moves through pollination in April. We’re expecting a volatile corn market from April onward. The funds are expected to cover short positions and also build to 30,000 contracts. The funds like to be long corn in lower production years.
What to do: We’ve advised farmers to be 60 per cent sold on their 2023 production. Our plan is to sell 20 per cent in April and the final 20 per cent increment in late June or early July. The corn market has real potential to move higher.
Wheat
On March 18, 11.5 per cent protein Russian wheat was offered at US$235/tonne f.o.b. the Black Sea, up from $203/tonne two weeks earlier. U.S. hard red winter wheat was quoted at $265/tonne f.o.b. the Gulf while U.S. soft red winter was valued at $220/tonne f.o.b. the Gulf. French soft wheat was offered at US$214/tonne. The wheat market has stabilized now that Russian offers have come off the lows.
The forecast for the main winter wheat region of Russia is for below normal precipitation from April 15 through May 31. This is a key period when the crop is coming out of dormancy. The 2023 crop was estimated at 92-95 million tonnes. A year-over-year decline of 15 million tonnes could be noted for the 2024 crop. Prior to the Russian invasion, the Ukraine produced about 30 million tonnes of wheat but is now producing 23 million tonnes.
French and German wheat acres are down about seven per cent from last year. The EU 2023 wheat crop was 134 million tonnes and earlier forecasts have the 2024 output near 124 million tonnes.
U.S. hard red winter wheat acres were down from last year but a recovery in yields will result in a production level of 19.5 million tonnes, up 3.5 million tonnes from last year. U.S. soft red winter wheat production for 2024 is estimated at 10.8 million tonnes, which would be a year-over-year decrease of 1.4 million tonnes.
India’s wheat area continues to experience drier conditions. Traders have lowered forecasts for the 2024-25 crop year and this comes on the heels of a historically low carryout.
We’re forecasting a year-over-year decrease in China’s winter wheat crop due to larger abandonment rate or winterkill. China recently cancelled a larger volume of purchases from the U.S. because prices fell. This will eventually come back to haunt them because world conditions point to higher prices.
Ontario farmers planted 1.009 million acres of winter wheat last fall, down from a year earlier of 1.108 million acres. We’ll only have a better idea of winterkill later in summer. We’re forecasting a crop of two million tonnes, down from the 2023 output of 2.7 million tonnes.
According to Statistics Canada, Ontario spring wheat acres are expected to reach 44,700 this year, down from 2023 area of 80,200 acres. Ontario spring wheat production will be around 69,000 tonnes, down from 127,600 tonnes last year.
What to do: We’ve advised farmers to be 70 per cent sold on their 2023 production. We’re planning to sell the remaining wheat in April or May. We’ll have a better idea how the Northern Hemisphere crop is developing but the production risks point to higher prices at this time.
