Fertilizer shortages may lead to lower grain output through delayed or suboptimal nitrogen application and encourage farmers to plant less fertilizer-intensive crops such as soybeans, the report noted.

In the U.S., where farmers import up to 50 per cent of urea fertilizer in some years, spring planting could face challenges as supplies remain around 25 per cent below typical levels, according to The Fertilizer Institute.

WHY IT MATTERS: Nitrogen fertilizer prices have risen around 40 per cent since the onset of the conflict in the Middle East, intensifying financial pressure on farmers

Nitrogen fertilizer, which accounts for roughly 20 per cent of grain production costs, has seen prices rise 40 per cent since the onset of the conflict, Goldman said. A quarter of global nitrogen trade and about 20 per cent of LNG shipments — key for nitrogen production — transit the Strait of Hormuz, which has been effectively blocked since the war in Iran started.

Supply disruptions could tighten availability and increase production costs elsewhere, the bank warned.

“Spare fertilizer production capacity outside the Middle East appears limited,” Goldman added, citing production constraints in Russia, which typically accounts for around 15 per cent of global nitrogen fertilizer exports due to facility attacks and export limits, as well as China’s likely extension of fertilizer export restrictions beyond August.

While U.S. farmers remain relatively insulated for now due to advanced procurement ahead of planting season, disruptions in Europe, Australia and the Southern Hemisphere could bolster demand for U.S. grain exports and raise U.S. grain prices, the bank said.

However, delays to March fertilizer shipments might affect April availability, compounded by the lack of U.S. strategic reserves or quick domestic production scalability.

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Canadian farmers are forecasted to spend $22.5 billion on crop inputs in 2026, wrote FCC senior economist Leigh Anderson in a Sept. 10 report.

“This could make 2026 one of the most expensive crop years, potentially rivaling the record set in 2022,” Anderson said.

Fertilizer prices elevated

Fertilizer costs are expected to reach nearly $10 billion.

“Fertilizer prices have been rising over the summer, even though this is usually a quiet time when prices tend to drop,” Anderson wrote.

High prices have suppressed summer demand among Canadian farmers — many of whom have delayed purchases.

However, U.S. farmers planted 7.4 per cent more corn than last year, which elevated demand for nitrogen and supported prices. Demand has also been strong in other parts of the world, including Europe.

Global phosphate supplies are tight and prices remain high.

Geopolitics like the war in Ukraine also continue to influence fertilizer supply. A peace deal could ease energy and fertilizer prices and help restart European nitrogen plants. Continued conflict would keep prices high.

Additionally, U.S. tariffs on Russia may increase nitrogen costs, particularly for Eastern Canada.

China has resumed limited exports of urea and phosphate after years of restriction, Anderson added. This could help ease global shortages.

Pressures on crop prices

Canadian farmers are facing the disruption of canola and pea exports to China. Crop price ratios currently favour Canadian farmers planting oilseeds over cereals due to strong biofuel demand. However, Anderson said future demand and acreage will depend on trade disputes with China.

China hasn’t bought any new crop soybeans from the U.S.

“If this continues, both soybean and canola prices could drop further,” Anderson wrote.

FCC’s analysis of fertilizer-to-crop price ratios shows a slight affordability decline for 2026 with potential for that decline to worsen, depending on the trajectory of fertilizer and crop prices.

In the midst of increased uncertainty, Anderson urged farmers to focus on what they can control.

“Leveraging agronomic expertise, economic decision tools, and collaborative relationships with suppliers can help producers realize efficiencies and sustain profitability,” he said.

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“Since last January’s outlook, crop margins have improved, though for most producers they remain close to breakeven levels,” wrote FCC senior economist Justin Shepherd on Wednesday.

Stronger prices

Overall, cash prices have strengthened since January and, while not at 2022 peaks, exceed long-term historical ranges.

For canola producers, strong Canadian exports and positive news about U.S. biofuel incentives have improved demand expectations, Shepherd said.

In July, U.S. Department of Agriculture lowered its forecast for 2025/26 global wheat production and wheat ending stocks—based in part on lower expectations for Canada. Excluding China, global ending stocks are nearly at a 20-year low, wrote Shepherd.

Biofuel policy is driving higher soybean crushings in the U.S. with the expectation that industrial use in 2025/26 will exceed food consumption for the first time.

Corn production is forecasted to jump this year in part due to a large Brazilian crop, “but higher consumption is expected to lead to ending stocks roughly unchanged year over year,” Shepherd added.

The U.S. corn crop is forecasted at 410 million tonnes, up from last year’s 378 million tonnes, noted analyst Jerry Klassen. U.S. corn will displace some feed barley in Alberta and will take 20 to 30 cents off the cost-per-pound gain for beef cattle.

Average crop year?

Normalized Difference Vegetation Index (NDVI) readings of the three Prairie provinces indicate average levels, suggesting yield potential within or slightly above the normal range, said Shepherd. July saw more rain than the previous year, though he noted some areas are seeing drought conditions.

Cypress County in southeastern Alberta has declared an agricultural emergency for the fourth time in five years. However, as of the week ending July 15, crop conditions were improving in much of the province. Heavy rainfall in Saskatchewan also benefited some of the less mature crops.

This year Ontario and Quebec saw planting delays due to excess moisture, however heat and rainfall have supported corn and soybean crops to progress toward typical development stages, said Shepherd.

Revenue outlook improved

Farmers’ revenue outlook has improved compared to FCC’s January forecast.

“This improvement is primarily attributed to slightly stronger pricing, as cost structures have remained relatively stable and yield projections are average across the major provinces,” Shepherd wrote.

Margins are expected to be higher than last year, but they continue to fall below the five-year average. For many producers, particularly once land costs are factored in, returns are projected to be at or near breakeven.

“It should be noted that actual results may improve should yields – or marketing opportunities – exceed our model’s baseline assumptions,” he added.

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Shawn Madsen, operations manager for Southland Pulse Inc. located northwest of the city, said the precipitation came right before growers brought their planters out into the fields. He rated the soil conditions as “pretty good”.

“For seeding, (it was) probably perfect conditions,” Madsen added. “But we need the rain again. We’re getting to that point where it’s getting pretty dry and we’ll see if there’s something in the forecast.”

He also said seeding has progressed to the point where some local growers will be finished their seeding in a matter of days. However, the story is different in other areas.

“Probably 100 kilometres to the north … northwest, northeast, I would say that number significantly dips down to around 50 per cent and less,” Madsen added.

He expects there to be slightly more pulse acres seeded this year. Agriculture and Agri-Food Canada, in its April estimates, projected 3.516 million dry pea acres in Canada to be planted, compared to 3.212 million in 2024. However, AAFC also estimated small declines for lentil, chickpea and dry bean acres.

Pea markets have shown some price movement. Delivered bids for green peas in the Prairies ranged from C$14.50 to C$17 per bushel as of May 12, up 50 cents on the high end from the previous week, according to Prairie Ag Hotwire. Yellow peas were C$9.35 to C$10.25/bu., down 50 cents.

Despite this, activity has been quiet.

“(Market volatility has) gotten buyers kind of spooked to put something on paper. Farmers have just been busy planting and they are putting marketing on hold right now,” Madsen explained. “Farmers will probably take a look at what they have left and maybe start to market those last few bushels.”

On May 8, Statistics Canada reported that as of March 31, the country had 1.356 million tonnes of peas in stock, 947,000 on farm and 409,000 in commercial stocks. The figure is up from 955,000 tonnes in total (726,000 on farm and 229,000 commercial) in 2024.

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“Absent tariffs, profitability was already looking tight for the 2025-26 crop year,” wrote FCC senior economists Justin Shepherd and Graeme Crosbie.

“Considering the impact of tariffs (or potential tariffs) makes that outlook even more challenging.”

Western wheat and canola

FCC’s latest profitability estimates for Western Canadian wheat and canola showed average returns of $50 to $75 per acre, excluding the cost of land, and assuming average regional yields.

Shepherd and Crosbie noted the difficulty of predicting prices in the current trade environment and said there’s considerable downside risk to those estimates.

If prices saw a 15 per cent decline, it would result in a loss of $25 per acre on canola, and breakeven returns on wheat.

Canola futures had made gains from the start of the year before China announced it would impose 100 per cent tariffs on Canadian canola oil and meal. Nearby futures fell by more than 10 per cent compared to Jan. 1, FCC data showed.

In the past three weeks, canola futures have rebounded near to where they were to start the year.

Nearby wheat futures had gained nine per cent by mid-February compared to Jan. 1, but slid to hover around where they started.

Eastern soybeans and corn

FCC’s latest profitability estimates for soybeans and corn in Eastern Canada are around $375 per acre. This excludes the cost of land and assumes average regional yields.

If prices fell by 15 per cent, returns would fall to $240 per acre for corn and $280 per acre for soy.

Soybean and corn futures experienced similar trajectories to canola and wheat — rising in late January and February before dropping off in March. During that period, the emerging forecast for a large South American soybean crop pressured prices.

Will farmers change course?

Eastern farmers have historically stuck to their soybean, corn and winter wheat rotations, wrote Shepherd and Crosbie.

Statistics Canada estimated Ontario and Quebec farmers would plant 3.9 million acres of soybeans and 3.1 million acres of corn.

American farmers are expected to plant nearly five million more corn acres than last year, as global stocks-to-use are tighter relative to soybeans, Shepherd and Crosbie said.

Likewise, Western Canadian canola and wheat acres tend not to deviate much year to year — even between 2019 and 2022 when China restricted imports of Canadian canola seed.

Statistics Canada predicts 21.5 million acres of canola to be seeded in 2025 along with 19.1 million acres of spring wheat.

“We could see some ‘swing acres’ go into flax and lentils this year,” Shepherd and Crosbie wrote. “Our profitability estimates for 2024-25 and 2025-26 show these two crops as having decent returns.”

These crops have also historically seen more variation.

Manitoba could also see more soybean acres. These have tended to vary year-to-year, and potato acres may decline as potato buyers have been reportedly scaling back contracts.

Shepherd and Crosbie said that now, more than ever, it’s important to understand individual farm production costs.

“There will be volatility and, at times, opportunities to lock in returns. This is maybe truer in 2025-26 than in other years given prices are reflecting more geopolitical policy and less supply/demand fundamentals, and these policies can be implemented (or reversed) with the stroke of a pen.”

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Quick look:

Soybeans: U.S. farmers are expected to plant less soybeans.

Corn: Ending stocks from major exporters will drop below the five-year average.

Wheat: Demand for North American wheat will increase in spring 2025.

Statistics Canada will release its Dec. 31, 2024 Stocks Report on Feb. 7, 2025. Stocks reports are important because they confirm the 2024 production and provide an estimate of feed usage.

Soybeans

The Ontario domestic soybean market is functioning to ration demand away from export channels. Soybean bids from domestic crushers are at a premium to elevators sourcing for offshore movement.

We’re expecting Ontario on-farm soybean stocks to come in at one million tonnes on the Dec. 31 stocks report and drop to bin bottom levels at the end of the 2024/25 crop year. However, regular imports from the U.S. over the next few months will cap the upside potential for Ontario soybean prices.

The soybean market is bracing for Chinese tariffs on U.S. soybeans in retaliation to U.S. tariffs on Chinese products. This will weigh on U.S. prices. Ontario imports of U.S. soybeans in the latter half of the crop year may be larger than earlier anticipated. Apparently, China has been storing up on soybeans in anticipation of a “Trump era”.

At the time of writing this article in mid-January, Brazilian soybeans were offered at US$381/tonne FOB Paranagua while U.S. soybeans were quoted at US$421/tonne FOB. the Gulf. Argentine soybeans were offered at US$435/tonne FOB Rosario. There is no change to Brazilian crop forecasts with most estimates around 169 million tonnes, up from 153 million tonnes last year. Argentina’s output remains at 52 million tonnes which would be a year-over-year increase of 3.8 million tonnes.

The USDA’s final crop survey had the U.S. soybean crop at 118.8 million tonnes, down from the December WASDE report’s 121.4 million tonnes, but up from the year-ago output of 113.3 million tonnes. U.S. on-farm stocks as of Dec. 1 came in at 39.5 million tonnes.

U.S. farmers sold 67 per cent of the crop or 79.4 million tonnes from Sept. 1 through Dec. 1. U.S. stocks are not as burdensome as earlier anticipated. U.S. farmers will decrease soybean acres in 2025 as they anticipate lower prices due to Chinese tariff retaliation.

What to do: We’ve advised farmers to be 60 per cent sold on their 2024 production. We’re taking a “wait and see” approach on potential Trump tariffs and not speculating on trade policy. We’re planning our next sale after the Brazilian harvest as the U.S. soybean market usually experiences a seasonal rally prior to planting.

Corn

Ontario corn stocks as of Dec. 31 are estimated at 3.4 million tonnes and commercial stocks are expected to come in at 3.8 million tonnes. From Jan. 1 through March 31, Ontario corn prices are determined by domestic demand and the market is rather sluggish.

Vessels coming into the St. Lawrence require an “ice premium”. Also, vessels want to be in the Gulf or South America due to favourable weather and high demand. Later in April, ocean freight costs transition and there very good rates from St. Lawrence to Europe. There is a natural trade flow (steel) from northern Europe to the U.S. Great Lakes and vessels return to Europe with grain. If Trump puts tariffs on steel, this will increase freight rates for grains and oilseeds out of the St. Lawrence due to lower vessel traffic.

The Ontario corn market experiences seasonal strong demand from April through June largely due to the increase in off-shore movement. We’re expecting a year-over-year increase in Ontario exports to Europe due to a year-over-year decrease in corn production there.

The USDA’s final crop survey had U.S. corn output at 377.6 million tonnes, down from the December estimate of 384.6 million tonnes. U.S. corn ending stocks are expected to finish near 39 million tonnes, down from the 2023/25 carryout of 45 million tonnes.

The five-year average carryout is also 39 million tonnes. If the carryout is near the five-year average, the market has tendency to trade within the five-year average price range. We can expect the corn futures to rally up to the range of $5.50 to $6.00/bu.

Ending stocks from the major exporters will drop below the five-year average. The market cannot afford a crop problem in North America or prices will rally to historical highs. We expect the futures market to incorporate a risk premium in the spring due to the uncertainty in production.

What to do: We’ve advised farmers to be 50 per cent sold on their 2024 production. We’re planning on making our next recommendation in March or April. We continue to be very bullish on Ontario corn prices.

Wheat

Ontario on-farm stocks as of Dec. 31, 2024 are projected to come in at 425,000 tonnes on StatCan’s stocks report. Given our demand projections, Ontario on-farm and commercial wheat stocks on July 31 will drop to historical low levels which will result in stronger domestic basis levels.

The market will need to ration demand away from export channels and trade at a premium to world values. Strength in old crop values will also pull up new-crop prices and provide a good opportunity for new crop sales.

Ontario farmers planted 1.184 million acres of winter wheat this past fall, up from 1.009 million acres during the fall of 2023. Using a traditional abandonment rate and a five-year average yield of 90 bu./ac., production has production has potential to reach 2.7 million tonnes, up from the 2024 output of 2.4 million tonnes. The market needs to encourage demand during the first half of the 2025/26 crop year.

U.S. farmers planted 6.4 million acres of soft red winter wheat this past fall. Using a traditional abandonment rate and a five-year average yield of 69.4 bu./ac., production has potential to reach 9.3 million tonnes, relatively unchanged from last year.

We’re forecasting a minor increase in export demand for the 2025/26 crop year which will cause U.S. ending stocks to drop to 2.1 million tonnes, down from the 2024/25 ending supplies of 2.9 million tonnes and the five-year average of 2.7 million tonnes. The fundamentals tighten for U.S. soft red winter wheat in the 2025/26 crop year which will enhance demand for Ontario soft red winter wheat.

Russia is the world’s largest wheat exporter and has a large influence on the price structure. Russia capped wheat exports from Feb. 1 through June 30 at 11 million tonnes, down from 29 million tonnes last year. Russia’s winter wheat acreage is expected to be down five per cent this year which will result in lower production for the 2025/26 crop year. This market environment will enhance demand for North American wheat in the spring of 2025.

What to do: The wheat market is expected to rally $1.50-$2.00/bu. in April 2025. This is when we’ll finish old crop sales and start making sales on new crop for fall delivery. The next major rally in the wheat market is expected in late October and November 2025.

-Jerry Klassen is an analyst with Resilient Capital.

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Cam Mock, senior relationship manager at Farm Credit Canada, highighted some of the challenges Ontario farmers will face this year in a macroeconomic update and crop sector outlook at the annual Grey County Soil and Crop Winter Meeting in Durham last month.

Mock noted that despite good yields, farmers may face problems getting their crops to market as the threat of tariffs looms. But this is just one of the concerns he believes could affect profits in 2025.

“Inflation in Canada, as of about October 2024, was sitting around two per cent which was essentially the Bank of Canada’s target,” he said. “So the mission of raising short-term interest rates and interest rates in general was to curb the inflation that we saw coming out of the pandemic that had been a bit of a runaway train.”

He added that current rates are signalling there may be further cuts, which would trigger positive economic growth in the wake of years of stagnation. He expected there may be a rise in GDP in 2025, but said overall data was showing signs the economy was slowing down.

A recent business outlook survey conducted by the Bank of Canada indicated that business sentiment is low, and Mock said the results were indicative of either a recession or slow economic growth.

“Businesses were middle of the road at best as to how they were feeling about things. The Canadian consumer is under pressure,” he said, adding that more than 14 per cent of household disposable income in Canada went to serving debt in 2024. “That’s pretty darn close to the highest that it’s ever been.”

“About 60 per cent of GDP is made up of consumer spending, so if consumers are pressed, and they’re not spending and not disposing of money as they have been, it’s pretty material to the economy overall,” he said.

A low Canadian dollar would traditionally make Canadian goods more appealing to the U.S. market, but President Trump’s tariff threats have Mock believing this could dampen interest from south of the border.

“That tariff thing keeps creeping in and if that were to come into place, it would make exports a lot less desirable,” he said.

The value of the dollar will also have an effect on commodity prices heading into 2025.

Vanessa Scott, manager of business development at FCC, said Canadian corn prices in particular are going to be influenced by exchange rates and U.S. supplies.

“Canadian prices, if they do not trend higher, will likely be the result of a weak Canadian dollar,” she said, adding that FCC is keeping an eye on U.S. domestic use and exports which will change going forward. “The new Trump administration is certainly a big factor, and we’re all unsure on the tariff front as well as biofuels. He could be unfavourable towards biofuels, which would also impact core demand.”

Scott noted soybeans may be more significantly impacted by tariffs. Further to this, she noted that the team at FCC is watching China, which has been shifting its supply chains.

“They’ve been moving more to South American supply, so that is an impact here in North America,” she said.

Turning to diesel and fertilizer prices, Scott said other global economic pressures may affect prices and supply in Canada. She said the war in Ukraine has curtailed production. Additionally, the war between Israel and Hamas may have an impact on Middle Eastern production going forward.

“Israel accounts for eight per cent of global phosphate exports and six per cent of potash. However, Israel is specifically involved in specialty fertilizers so if the war escalates to other regions, fertilizer prices, and most notably nitrogen ,would be impacted,” she said.

Farmland Prices Continue Upward Trend

The desire for farmland remains steady, despite a slight drop following the end of the pandemic. The latest farmland values in Ontario have risen by more than 10 per cent according to the latest data.

“That really speaks to, that even in uncertain times and high borrowing costs, land values just charge ahead,” said Mock, adding that economists do not foresee this trend changing in 2025.

He added that fewer farms are being “sold over the fence” presenting a better buyer’s market.

“There’s not a lot of land for sale and not a lot of room for it to grow in value,” adding there continues to be a rise in crop sharing arrangements which can offer some tax benefits for both parties.

Overall, Mock concluded that the current economy will continue to present challenges and he recommended farmers stay aware of changes to the markets to mitigate risk.

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Haley said feed barley went for C$300 to C$305 per tonne for January-February-March during the week of Nov. 25, while that for April-May-June was at C$305 to C$310.

“Corn is virtually the same price. It just depends on the day,” he added.

“What’s helping barley’s cause is the price of corn. You need more corn DDGS for more protein in the ration in order to get the same bang for barley,” Haley continued.

He said when feeding corn, the DDGS must be 20 to 25 per cent, but only five to 10 per cent when feeding barley due to its higher protein content.

But with the market virtually covered for the balance of December, there won’t be much movement of prices or additional product.

“There’s going to be some demand starting in the last half of January. We’ll see who cracks first. Is the seller going to want to move some grain before then or is the buyer going to need it?” Haley posed.

When it comes to wheat, he said Ag Value has been moving only small amounts of soft wheat as there’s very little demand for hard red spring wheat.

Haley noted the line elevator companies have covered their domestic sales and exports. About the only factor that can cause prices to shift he said is the incoming Trump administration due to “a lot of unknowns.”

However, Haley suggested corn prices on the prairies will become cheaper than barley in about five to six months.

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Evan Peterson of JGL Commodities in Moose Jaw, Sask. said barley and corn were priced at C$300 per tonne, feedlots preferred barley for feeding livestock.

“It’s getting closer (for corn), but with the weakening Canadian dollar, those corn imports are actually higher in price,” he said. “We saw that spread of corn over barley at about C$15 to C$20/tonne and now it’s at about C$5 or so.”

While corn prices aren’t competitive right now, Peterson added, they may be in a little while.

“Right now, corn hasn’t made a big move, but I feel like it’s kind of on the verge and getting closer.”

The colder winter weather can cause problems for trucks carrying grains going to feedlots, Peterson said. However, more cattle are entering feedlots as well.

“With these cattle moving a little later into feedlots, we’re now starting to see demand kind of pick up versus where we were a month ago. We were waiting for it, but now it’s finally here,” he added.

Peterson predicted feed barley to have between C$5 to C$10/tonne of room to the upside, with corn prices staying put for the rest of 2024.

“I think we’re going to need some corn to take some pressure off of the barley, especially into the spring, or else stocks will get depleted quicker than we think and we will see barley become quite expensive in the spring,” he said.

Prairie Ag Hotwire reported delivered bids for feed barley in Saskatchewan ranging from C$4.50 to C$4.75 per bushel as of Nov. 26, steady from the previous week. In Manitoba, prices were from C$4 to C$4.54/bu., up four cents from last week. In Alberta, there was a wide disparity from C$4.35 to C$6.42/bu., up 11 cents.

For feed wheat, Saskatchewan’s delivered bids were from C$6 to C$7.38/bu. and unchanged from last week. In Manitoba, the only price reported was C$6.80/bu., up 18 cents. Alberta delivered prices ranged from C$6.26 to C$8.44/bu., steady from last week.

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Quick look:

Soybeans: December is the prime time for selling soybeans.

Corn: Both the Canadian and U.S. corn crops will be above the five-year average.

Wheat: Milling wheat stocks are tight globally.

The 14-day weather forecast looks favourable for harvest progress. In this issue, we’re advising farmers to increase milling wheat sales to 30 per cent because wheat markets make seasonal highs prior to the Southern Hemisphere wheat harvest.

Soybeans

The Ontario soybean market is trading at 52-week lows as harvest nears the half-way mark. Yield reports confirm a crop size of 4.3 million tonnes, up from four million tonnes last year and up from the five-year average of 3.9 million tonnes. Domestic crushers have covered their nearby requirements and commercial stocks are building. Export terminal bids are premium to local crushers due to stronger export demand.

From Sept. 1 through Dec. 31, Ontario farmers will deliver an estimated 3.2 million tonnes into the commercial system. Total domestic demand is estimated at 630,000 tonnes, while export demand is estimated 2.3 million tonnes for a total of 3.03 million tonnes. Basis levels are expected to strengthen later in December as commercial stocks decrease.

From Jan. 1 through March 31, farmers will deliver an estimated 550,000 tonnes into the system while domestic and export demand is estimated at 750,000 tonnes. The domestic Ontario market needs to trade at a premium to world values during the winter to curb exports and attract about 150,000 tonnes of imports from the U.S.

The soybean futures are also in the process of making seasonal lows. We believe the U.S. soybean harvest was at about 60 per cent complete as of Oct. 13. The U.S. crop was estimated at 124.7 million tonnes on the October World Agricultural Supply and Demand Estimates report, up from 113.8 million tonnes last year.

U.S. farmers will deliver 75 per cent or 93 million tonnes into the commercial pipeline from Sept. 1 through Dec. 1. This next point is very important. U.S. farmer selling slows in December and January but the main Brazilian harvest only starts in February and moves into high gear in March. The Argentine harvest begins in March and continues through April.

December is a prime opportunity for Ontario farmers to sell soybeans because U.S. farmer selling slows and the South American harvest hasn’t started. Ontario basis levels are strengthening during December, while the soybean futures are making seasonal highs.

In many years, the soybean futures market incorporates a risk premium as the South American crops move through the critical pod filling stage. Keep in mind that a year-over-year increase of three million tonnes is expected for Argentine soybean production while Brazilian output is expected to be up 16 million tonnes from last year.

What to do: We’ve advised farmers to be 20 per cent sold on their 2024 production. We’re planning our next sale in late November or early December as stocks in the Ontario commercial pipeline decrease and the soybean futures market makes seasonal highs.

Corn

Early yield reports confirm Statistics Canada’s production estimate of 9.6 million tonnes, down from the 2023 crop size of 10 million tonnes but up from the five-year average of 9.2 million tonnes. From Sept. 1 through Dec. 31, Ontario farmers will sell 6.5 million tonnes of corn into the commercial pipeline, while domestic and export demand is only about 3.4 million tonnes. Basis levels are coming under pressure as harvest progresses.

We estimate the U.S. corn harvest was 41 per cent complete as of Oct. 13. The USDA continues to project a crop size around 386 million tonnes. This is down from last year’s crop of 390 million tonnes but up from the five-year average of 386 million tonnes.

U.S. farmers will sell about 50 per cent of the crop into the commercial pipeline from Sept. 1 through Dec. 1. U.S. domestic and export demand makes seasonal highs in December.

There are four main factors that will cause the Ontario corn market to strengthen later in the crop year. Compared to last year, corn production is down 6.2 million tonnes in Ukraine and down 3.5 million tonnes in Russia. There is a lower exportable surplus in Russia and Ukraine due to the year-over-year decline in production.

Secondly, Brazil and Argentina have been contending with drier conditions. Brazilian farmers are in the early stages of planting the first corn crop, which is about 18 per cent of total production. The second crop is planted after the soybean harvest in February.

Argentine farmers have just started in the central region. Total Argentinean corn acreage is expected to be down 15-20 per cent from last year.

Thirdly, European corn production is expected to finish near 57 million tonnes, down from the five-year average of 65 million tonnes. This will enhance demand for Ontario corn in the latter half of the crop year.

Finally, we’re expecting the USDA to lower its 2024/25 corn carryout later in the crop year. Energy prices are expected to percolate higher, enhancing ethanol margins and production. U.S. domestic feed usage will be higher than last year as cattle are fed to heavier weights. We have a higher U.S. export demand projection compared to the USDA.

The market needs to encourage acreage in spring 2025 and cannot afford a crop problem. If there are drier conditions in the U.S. next spring, the corn market will get hot.

What to do: We’ve advised Ontario farmers to be 30 per cent sold on their 2024 corn production. Our next sale will occur in late November or early December. We’re looking for the corn market to percolate higher after the U.S. corn harvest is completed.

Wheat

Russia is the world’s largest wheat exporter and sets the price structure on the world market. Russian wheat production is expected to finish in the range of 81-83 million tonnes (mmt), down from last year’s output of 92 mmt. Russian wheat exports are forecasted to reach 45-48 mmt, down from the 2023/24 exports of 56 mmt.

Russian wheat prices surged from US$221/tonne f.o.b. the Black Sea to $232/tonne f.o.b. the week of Oct. 7. Traders fear escalating tensions in the Black Sea and the potential for wheat export limits from Russia and Ukraine. Russian and Ukrainian farmers have also been contending with drier conditions while planting winter wheat.

We’re expecting Black Sea prices to continue the upward trend later in winter as the exportable surplus decreases. The Russian spring wheat harvest was plagued with rain, downgrading the quality, so the exportable surplus of milling quality is actually down 20 mmt from year-ago levels.

Keep in mind the EU is also struggling with lower supplies of milling quality wheat due to ongoing rains during harvest. The world is rather tight on milling wheat stocks.

Australia experienced drier conditions over the past month and there have been reports of frost damage in certain regions. Traders have trimmed their Australian production estimates from earlier forecasts. Argentina is also contending with drier conditions and production will be down from earlier projections. The main point is that fundamentals for major exporters are getting tighter, not loosening.

In Canada and the U.S., domestic millers are well covered for nearby requirements through December, so the market is based on export demand. World values tend to peak just before the main Australian and Argentinean harvests, which occur in December. Farmers in Ontario need to sell in late October or early November.

What to do: We’ve advised Ontario producers with feed wheat quality to be 50 per cent sold on their 2024 production. Plan to sell the remaining feed quality in spring. Producers with milling quality should be 10 per cent sold. This week, we’re advising farmers to increase milling sales to 30 per cent of total production.

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