Ontario farmers had completed the soybean harvest and corn progress stood at 90 per cent complete as of Nov. 28. Adverse weather delayed harvest for the final portion of the corn crop. Farmer selling has subsided over the past two weeks. Commercial stocks of corn and soybeans are at seasonal highs; therefore basis levels remain under pressure for row crops.

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U.S. corn has taken the dominant position in the world market.U.S. corn has taken the dominant position in the world market.

Delayed Ontario corn harvest lowers yield estimates

The Ontario soybean harvest was about 85 per cent complete and corn progress stood at 70 per cent as of…

Quick look
Soybeans: U.S. offers will dominate the world market in December and January.
Corn: Brazil’s corn output will be drastically lower than last year.
Wheat: Russia’s plans for a tariff quota could affect the world market.

Elevator bids for corn and soybeans are being set by the world market. Winter wheat conditions heading into dormancy were variable and acres will be down from last year. The wheat market is functioning to encourage export demand as local flour millers are well covered into spring.

This week we’re advising farmers to marginally increase sales of corn and soybeans. Statistics Canada will release its final crop survey on Dec. 4.

U.S. farmers have wrapped up the corn and soybean harvests. Export values out of the Gulf for corn and soybeans are competitive with South American origin, which is enhancing export demand. Strong meal demand has enhanced the crush margin structure for soybeans and ethanol margins remain favourable.

U.S. domestic feed demand is moving through a seasonal high. Approximately 70 per cent of the Brazilian soybeans are in the ground and the trade expects that 20-25 per cent will need to be replanted.

We’re anticipating a sharp year-over-year decline in Brazilian corn output. As of Nov. 28, we estimate that Argentine farmers have planted 10 per cent of the intended soybean acres and 30 per cent of the corn.

The corn and soybean futures are expected to incorporate a risk premium due to uncertainty in South American production. The world wheat market remains focused on Ukraine and Russia. Argentinian and Australian wheat harvests continue under favourable conditions.

Canada is technically in a recession after two quarters of contraction. Liberal fiscal policy is considered negative for future growth prospects. The Canadian dollar has a neutral to negative outlook heading into spring as the Canadian recession is expected to deepen.

The U.S. economy is expected to experience minimal growth in the first half of 2024 and may also slip into contraction. Slower U.S. and global growth prospects will limit demand for the resource-based currency. Look for further Canadian dollar depreciation against the U.S. greenback.

Soybeans

Ontario farmer selling of soybeans has subsided now that harvest has wrapped up. Ontario production was estimated at 4.2 million tonnes, up from the 2022 output of four million tonnes. Ontario farmer deliveries from Aug. 1 through Dec. 31 are estimated at three million tonnes. Farmers will sell and deliver 500,000 tonnes from Jan. 1 through March 31.

Currently, the commercial pipeline is full. Companies are focused on export movement as the domestic crushers appear to have their nearby demand covered. Commercial supplies will decline over the winter. This will allow the basis to improve.

Bids from the domestic crusher are discount to export values. However, that will change later in February. Available supplies will decline and the domestic crusher bids will be premium to offshore demand.

Brazilian soybeans were 70 per cent planted at the end of November. The southern states continue to receive excessive rain, while central and northern regions are experiencing drought-like conditions. Trade estimates suggest that 20-25 per cent of the soybeans will need to be replanted and this will occur after the ideal planting window.

The USDA was forecasting Brazil’s soybean crop at 163 million tonnes, up from last year’s output of 158 million tonnes. We’re looking for the crop to finish around 150 million tonnes. At this stage, production estimates are all over the map but these forecasts are shrinking.

The Argentinean crop is estimated at 48 million tonnes, up from last year’s drought-stricken production of 25 million tonnes. Argentina elected a new leader, President Javier Milei. He is on the far right of the political spectrum and there may be a reduction in export taxes. Export taxes on soybeans are 33 per cent.

World export values have dropped nearly US$10/tonne over the past couple of weeks. U.S. soybeans out of the Gulf are competitive with Brazilian origin, which is supportive for the cash and futures markets. In December and January, we expect U.S. offers to dominate the world market.

Brazil will have a smaller crop but its exportable surplus will be available in late February and March. The U.S. will have a tight carryout at the end of the 2023-24 crop year. During spring 2024, U.S. farmers are expected to plant 87 million acres of soybeans, up 3.4 million acres from last year.

What to do: This week, we are advising Ontario farmers to sell 10 per cent of their 2023 soybean production, bringing total sales to 50 per cent. There is uncertainty in South American production and exports. The soybean market is functioning to encourage production.

Corn

Ontario corn production is projected to come in at 10.1 million tonnes, up from the 2022 crop of 9.4 million tonnes. On-farm stocks as of Sept. 1 were 496,900 tonnes. Farmers are expected to sell 6.5 million tonnes from Sept. 1 through Dec. 31.

On-farm stocks as of Jan. 1 are estimated at 4.1 million tonnes. Domestic demand in the first four months of the crop is estimated at 2.8 million tonnes and exports are projected to reach 0.6 million tonnes.

Commercial stocks as of Jan. 1 are estimated at 3.7 million tonnes. Domestic prices have decreased as commercial stocks build to seasonal highs. Basis levels will remain weak through the winter. Export demand improves from March through May, which should result in higher prices.

At the time of writing this article, Brazilian corn was offered at US$221/tonne f.o.b. Paranagua while U.S. corn was quoted at US$215/tonne f.o.b. the Gulf. French corn was valued at US$235/tonne f.o.b. La Pallice. Ontario corn was quoted at US$200/tonne f.o.b. St. Lawrence port.

Ontario corn appears to be competitive with French and U.S. origin into Northern European ports. This should limit the downside in the Ontario market.

Traders have lowered their total Brazilian production estimates from 115 million tonnes to 112 million tonnes, much less than last year’s crop of 137 million tonnes. The first crop is estimated at 22 million tonnes, while the main second crop is forecasted to reach 90 million tonnes. The second crop is planted after the soybean harvest. It looks like this second crop will be planted later than usual, making it vulnerable to drier conditions in summer.

The Argentine crop that will be harvested in April 2024 is expected to reach 55 million tonnes, up from the previous output of 34 million tonnes. U.S. farmers are expected to plant 91 million acres of corn this spring, down from 94.9 million acres last year.

What to do: We’ve advised farmers to be 40 per cent sold on their 2023 production. There will be a window in March when the market will experience a seasonal rally. A year-over-year decline in U.S. acres coming on the heels of lower Brazilian production will cause the market to strengthen.

Ontario basis levels will improve in late winter and early spring as commercial stocks decline. We’re planning to make our next sale in late February or early March.

Wheat

Last week, Russian milling wheat with 12.5 per cent protein was trading at US$220-$225/tonne f.o.b. Novorossiysk. U.S. hard red winter was valued at US$276/tonne f.o.b. the Gulf and U.S. soft red winter was quoted at US$238/tonne. French soft wheat was offered at US$247/tonne f.o.b. Rouen. Ontario soft red winter wheat was quoted at US$220/tonne f.o.b. St. Lawrence port.

Russia has set the price structure on the world market during the first half of the crop year. Moving forward, this is likely to change. Russia’s agriculture ministry has proposed a tariff quota for wheat. All the details are not known but it appears exports will be limited in the latter half of the crop year.

Keep in mind that Russia’s spring wheat crop experienced adverse weather during harvest. The quality of the overall Russian wheat crop is uncertain. Russia continues to focus on Ukraine port infrastructure in the Black Sea region. There is no war risk premium in the market.

The Argentine harvest was nearly 30 per cent complete at the end of November, while the Australian wheat harvest stood at 40 per cent. Argentine crop forecasts continue to come in around 15 million tonnes, up 2.5 million tonnes from last year. Australia’s crop will finish in the range of 25-26 million tonnes, down from 40 million tonnes last year.

U.S. flour millers have their demand covered through March. The U.S. market is also functioning to encourage export demand. Ideas are that U.S. export sales will increase later in February or March.

The U.S. hard red winter wheat is in much better condition compared to last year. However, Kansas will need timely rains in March and April. We’re expecting a rally in the U.S. wheat market as the winter wheat comes out of dormancy and export sales improve.

The French and German wheat markets are being weighed down by weaker feed grain prices. Approximately 35 per cent of European production trades into domestic feed channels. Russia has been fairly aggressive into traditional French markets. Should Russian exports slow, this would greatly enhance the French export potential.

What to do: Ontario wheat prices experienced a minor bounce from September through November. We’ve advised farmers to sell 50 per cent of their milling and feed wheat production during this seasonal strength. We’re planning on making our next sale recommendation during March.

There is usually a seasonal rally when Northern Hemisphere wheat comes out of dormancy. Export demand for U.S. and French wheat will improve during March and April.



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