Market Trends Report – September & October 2024
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US and the World
It is that time of year again across the great North American corn belt. It is early but harvest is starting almost everywhere. In the United States USDA has estimated as of September 8th 5% of the American corn crop has already been harvested. For the corn left in the field 64% of it is rated good to excellent which is above last year’s 52%. At the same time 97% of soybeans were setting pods with 25% having dropped their leaves. When the crop starts turning, harvest comes at you fast. Over the next several weeks harvest activity will be ramping up across North America.
On September the 12th the USDA released their latest WASDE report. US corn production is set to go up by 39 million bushels from August to 15.186 billion bushels. This is based on a record yield of 183.6 bushels per acre on harvested acreage of 82.7 million acres. Total feed and residual corn use was set at 5.825 billion bushels, and ethanol was at 5.45 billion bushels. New crop ending stocks were projected to come in at 2.057 billion bushels which was down 16 million bushels from August. The September 12th report reiterated the fact that big supply is still winning in this market with two successive 15 billion plus bushel corn years.
USDA made little change in their projections for soybean production this year in the United States. They actually lowered soybean production by 3 million bushels with the national average yield unchanged from August at 53.2 bushels per acre. This puts our total production at 4.586 billion bushels. Ending stocks are projected to come in at 550 million bushels, which was at the lower end of pre report estimates. USDA is predicting a huge 169 MMT soybean crop for this upcoming year in Brazil. The Argentinian crop is set to come in at 51 MMTs. The USDA is estimating that American farmers will harvest 1.982 billion bushels of wheat in 2024/25. They will be updating that number September 30th.
On September 13th, corn, soybeans and wheat futures were higher than the last Market Trends report. December 2024 corn futures were at $4.13 a bushel. The November 2024 soybean futures stood at $10.06 The December 2024 wheat futures closed at $5.94 a bushel. The Minneapolis December 2024 wheat futures closed at $6.35 a bushel with the July 2025 contract closing at $6.74 a bushel.
The nearby oil futures as of September 13th closed at $68.65/barrel down vs the nearby futures recorded in the last Market Trends report of $76.65/barrel. The average price for US ethanol in the US was $2.11, below the $2.16 a US gallon recorded in the last Market Trends Report.
The Canadian dollar noon rate on September 12th, 2024, was .7361 US, up vs the .7296 US reported here in the last Market Trends report. The Bank of Canada‘s lending rate was reduced to 4.25%.
Ontario
It has been an uneven weather year for much of the province but the weather in September has been spectacular with ever increasing shorter days but very warm and sunny. This type of weather has been very conducive to finishing crops in Ontario and should add yield to our final numbers. As we head into the later days of September and the first days of October producers will be hoping for more of the same. A wide-open fall is always welcome.
It is hard to say what yields will be like in Ontario this year although many private crop tours are going on during the month of September. There will be some variability especially in the deep South West of Ontario where heavy rains damaged crops early. However, generally speaking, corn and soybeans should be pretty good at the end of the day especially in eastern Ontario. This may be part of the reason why basis levels have softened a bit going into September. It should also be noted the soybean harvest has started on several early fields from Windsor to the Quebec border.
The Canadian dollar continues to flutter in the 73-cent level having briefly flirted above $0.74 over the past few weeks. It continues to add stimulus to corn and soybean prices across the province. Keep in mind with the big crops outside of Ontario this will keep the pressure on our cash prices and cash basis levels. At a certain point we will need to export out both corn and soybeans. The lowest common denominator is always a cheap price. Unfortunately, there are a lot of cheap agricultural grain competition on the high seas in 2024.
Old and new crop corn basis levels are $0.70 to $1.05 over the December 2024 corn futures on Sept 12th across the province. The old and new crop basis levels for soybeans range from $2.65 cents to $2.74 over the November 2024 futures. Ontario SRW wheat prices are in the $6.30 range. On September 12th the US replacement price for corn was $6.01/bushel. You can access all these Ontario grain prices in the marketing section at http://gfo.ca/marketing/daily-commodity-report/
The Bottom Line
Prices have moved a long way down through 2024, but are the lows in? What we have seen is a little bit of resilience in all three grains over the last few weeks even though it’s completely obvious that there is grain everywhere. There is also the spectre that corn might challenge the $3.85 low and soybeans drop way below $10 with harvest pressure. However, corn ending stocks continue to get smaller and a dry Brazil is what it is. It would seem the ship is turning course.
Part of the narrative in the soybean market is the abundance of soybeans almost everywhere and the potential in Brazil this coming season with the USDA predicting another record Brazilian crop of 169 MMTs of soybeans. At the same time the run up in prices for soybeans has had a lot to do with the current dryness in Brazil. If this story runs its course and gets worse, it will obviously present a very bullish factor for soybean prices. However, what happens if it rains? Keep in mind that early dryness in a planting season is often beneficial, just like it is in Ontario. It’s always hard to quantify.
It’s also hard to quantify how big this US crop might get. We may have reached the seasonal low early, but this crop is a huge one. There is some thought that trend yield in the United States goes up about 1.9 bushels per year due to genetics and science. That suggests that the final yield for this crop might be even higher than the USDA estimated on September 12th. As we head into fall that number might become confused as combines roll. Will we see a higher number come January or is the highest number already in on September 12th. It’s always hard to say but the corn price will surely react to what’s actually flowing through the combine.
Prices have been so depressed all through 2024 that we’d all like to see a price rally soon. At the same time, we should keep in mind the market signals that this would send to South America during their planting season. They are planting corn in Brazil now and soon will be planting soybeans. Will short term rallies in grains boost acreage in Brazil and Argentina in the next six weeks? Clearly, it is very likely so as producers we always must be cognizant of the intentions in South America and how that will affect prices.
Commodity Specific Comments
Corn
We have seen corn prices appreciate in the last three weeks even though it’s been pretty evident for some time that the crop is huge, and this was confirmed by the USDA on September the 12th. 15.186 billion bushels is nothing to sneeze at especially coming a year after another 15 billion plus crop of US corn. There should be no surprises because prices are so much less than a year ago.
There is a large carry in the market this year. In other words, futures months out into 2025 are much higher than December of 2024. Producers will have to determine their cost of storage if they want to take advantage of that carry. Nobody knows when the bin doors will be slammed shut this year, but it could happen especially after January 1st sparking a post-harvest rally.
The December 2024 corn contract is currently priced at 17.75 cents below the March 2025 contract which is a bearish indication of new crop corn demand. Seasonally, we know that corn prices tend to peak in early June and bottom out in early October. The December 2024 futures contract is at the 21st percentile of the past five-year price distribution range.
Soybeans
When you think soybeans, you often think about Chinese demand which has historically been insatiable. However, over the past few years it is become increasingly evident that they prefer Brazilian soybeans to American soybeans because it comes with less strings attached. That is certainly playing out as the Chinese are buying American soybeans but more in a piece meal fashion. They’re getting their minimum needs met with the focus to go back to Brazil as soon as they can.
Having the November futures contract above $10 is certainly causing some joy in the market. However, keep in mind that much of that has to do with the dryness in Brazil which will begin planting in earnest in October. We all know as farmers that the drought ends when it rains and of course with regard to market action usually that coincides with the market slide. There are lots of soybeans in the world and keep in mind that’s still a major reason why soybean prices are at these relatively low levels.
The November 2024 soybean contract is currently priced 32.75 cents below the March 2025 contract which is considered a bearish for new crop beans. Seasonally, soybean prices tend to peak in early July and bottom out in early October. The November 2024 soybean contract is currently at the 23rd percentile of the past five-year price distribution range.
Wheat
In the last three weeks wheat has rallied about $0.60 off its lows in late August which is so uncharacteristic of this market. It is a very good thing and probably reflects some uneven growing conditions in the United States as well as Russia and Ukraine. There has also been dryness in Argentina affecting the wheat crop. On September 13th. The Chicago wheat futures price actually rose to its highest level since early July and closed higher for the fifth time in the past six trading days on September 13th. However, this wheat price buoyancy so far not resulted in the price going over the last 100 day moving average.
Late September represents one of the most opportune times to plant wheat in Ontario as early planting is always good for yield the following year. The jump in wheat prices as of September 13th would give us a price of approximately $7.27 a bushel for wheat sold off the combine in July of 2025. How enticing will this be for Ontario producers poised to plant wheat? As always, the fall weather will be a huge determinant in how much wheat gets planted this year in Ontario.
The Bottom Line (cont.)
The Bank of Canada reduced its overnight rate to 4.25% on September 4th reflecting an improved performance of the Canadian economy as well as a lower inflation number of 2.5%. This naturally would be a disincentive to buy the Canadian dollar but over the last few weeks the Canadian dollar has actually appreciated from the $0.72 US level. However, it has been consistently low for quite some time now which inadvertently creates a continued stimulus for Ontario cash grain prices. At a certain point that is going to change, but there is nothing on the horizon that gives us clues to when that might happen.
As mentioned earlier the soybean market has risen recently based on the perceived dryness in Brazil. As of September 12th, soil moisture levels in Mato Grosso and Parana are at 30-year lows. This is significant because 40% of Brazilian soybean production comes from these areas. This is looming over the soybean market now at a time when American soybeans are cheaper significantly than Brazil beans on an FOB basis. Clearly, there’s a lot going on here.
As we move into October harvest pressure will be building up everywhere including Ontario. Basis changes surely will be fast moving depending on when the onslaught of corn and soybean harvesting ramps up. Keeping abreast of these changes will be important, just as we have one eye on the futures market. Geopolitical concerns such as Ukraine and Russia are always there which can affect prices at any moment.
The challenge for Ontario grain producers is to continually balance all of these marketing factors. The market is fluid and unforgiving but at the same time rewards can come when you least expect it. Standing marketing orders sitting at your elevator or end user can be a great way of capturing marketing opportunities. Daily market intelligence will remain key. There will be many marketing opportunities ahead.
