Market Trends Report – December & January 2025
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US and the World
It is the end of the calendar year and what a year it is been. We have seen record crops coming out of the United States and big crops growing in the fields of South America. This is all led to a market environment where “big supply” has been winning the day. At the same time, it is that time of year when farmers are switching gears, putting machinery away and moving into a marketing mindset which is all about 2025. However, before that happens the USDA released their December WASDE report on December 10th.
The USDA December WASDE report often times is an uneventful report. Market players have a good idea on how much crop is there on the old crop side and at the same time are looking forward with anticipation to January for those final USDA numbers. On December 10th, the USDA actually surprised the market with some major cuts in US domestic ending stocks by the tune of 200 million bushels. This placed US corn ending stocks at 1.738 billion bushels which was 62 million bushels below the lowest pre report trade estimate. Corn for ethanol was increased by 50 million bushels and US corn exports were increased by 150 million bushels. This was responsible for the reduction in corn ending stocks. Production numbers remained the same from November USDA report.
On the soybean side of the ledger everything was the same from the November report. US production is still set at 4.46 billion bushels with the yield forecast of 51.7 bushels per acre. US domestic ending stocks for soybeans are set to come in at 470 million bushels. Brazilian soybean production is set to still come in at 169 MMTs, with Argentina coming in at 52 MMTs. US wheat ending stocks came in at 795 million bushels which was a decrease from November’s estimate of 815 million bushels. Compared to the big news on the corn side, USDA’s estimates of soybeans and wheat had little fresh news.
On December 13th corn and wheat futures were higher than the last Market Trends report. Soybean futures were lower. March 2025 corn futures were at $4.42 a bushel. The January 2025 soybean futures stood at $9.88/bu. The March 2025 wheat futures closed at $5.52 a bushel. The Minneapolis March 2025 wheat futures closed at $5.98 a bushel with the September 2025 contract closing at $6.22 a bushel.
The nearby oil futures as of December 13th closed at $71.29/barrel up vs the nearby futures recorded in the last Market Trends report of $67.02/barrel. The average price for US ethanol in the US was $1.94/barrel, below the $2.01 a US gallon recorded in the last Market Trends Report.
The Canadian dollar noon rate on December 13th, 2024, was .7027 US, down vs the .7103 US reported here in the last Market Trends report. The Bank of Canada‘s lending rate was reduced 50 basis points to 3.25%.
Ontario
In Ontario harvest is effectively over as of mid-December but for most producers it has been over for quite some time as we had beautiful weather through October and November. There are still some select cornfields throughout the province, but this is mostly done by choice. Even early December offered good harvest weather for those still at it.
The Bank of Canada did drop its interest rate to 3.25% since their last interest rate announcement and this was negative for the Canadian dollar. The loonie has also been weak versus the US dollar which has been surging since the American election. This is actually had the effect of increasing the basis levels for wheat and soybeans in Ontario. It has also helped the old crop corn basis from eroding further.
Having the Canadian dollar hovering at the 70-cent level helps with Ontario cash grain prices but is the bane for those who might be buying equipment sourced from the United States. There is also the threat of the 25% tariff coming from the new American administration which is causing nervousness in Canadian currency trading. As it is, producers will need to be cognizant of where the Canadian dollar is with pricing old crop grain in the next few months.
Old crop corn basis levels are $0.85 to $1.32 over the March 2025 corn futures on December 13th across the province. New crop corn basis levels were $0.85 to $1.21 over Dec 2025 futures. The old crop basis levels for soybeans range from $2.40 cents to $3.28 over the January 2025 futures. New crop soybeans range from $2.82 to $3.00 over the November 2025 futures. Ontario SRW wheat prices are in the $6.46 bu range. For July 2025 new crop the bid is in the $6.91 bu range. On December 13th the US replacement price for corn was $6.36/bushel. You can access all these Ontario grain prices in the marketing section at http://gfo.ca/marketing/daily-commodity-report/
The Bottom Line
Grain markets have shown a little bit of life over the last little while, but we still have a long ways to go. In fact, the most active corn futures have retraced over 60% of their losses since the mid-May highs. Soybeans and wheat have not been as buoyant. There are still lots of headwinds ahead.
We know that some of the biggest headwinds are coming from South America. The most recent USDA report did show a continuing projection of record South American crops. As we head into January farmers need to keep abreast of this as any weather market down South will be affecting futures prices. It might be cold here, but any extended hot and dry period in Brazil will certainly chase soybean prices.
As it is, soybean prices need some help, we either need lower supply or better demand, but at this point big supply is winning. We also have soybean meal heading to new lows as processors are crushing more for oil than meal and then again, we have that South American crop coming. To top it off the non-commercial interests or funds are near record short in the soybean meal market. It would be nice to turn the page, but it is going to take some type of production calamity in South America this year to make that happen.
Over the last three weeks soybean prices have been moving within a $0.25 price range which is unusual. Generally, soybeans are much more volatile than that. Keep in mind with all the bearish fundamentals on soybeans the downward move below $9.80 on the nearby contract could signal another move down. Generally speaking, in January soybean prices tend to sag a bit but of course this January we have the possibility of tariffs in our future. It is hard to paint this with any type of bullish brush.
Commodity Specific Comments
Corn
The USDA report was friendly to corn with the 200 million bushel cut back on stocks. Initially corn prices went up but hit a brick wall at the $4.50 level before retreating back. Corn has seen a little bit of blue sky lately, but the $4.50 level seemed to be very resistant. Needless to say, for the rest of this year it is likely to trade sideways.
In November the USDA actually cut US domestic yield pretty aggressively and you’ve got to wonder if they will do it again in January. The basis levels for corn in the United States have been fairly buoyant for this time of year. The final numbers can be explosive in January so market watchers will be looking with a keen eye to see whether USDA cuts it again.
The March 2025 corn contract is currently priced at 7.25 cents below the May 2025 contract a neutral 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 26th percentile of the past five-year price distribution range.
Soybeans
Our Brazilian friends are looking at another record crop of soybeans in Brazil which could possibly put world ending stocks later this year to the highest levels ever. It is not the scenario for higher soybean prices but of course at this stage it’s still a theory. If we get a hot and dry period in the southern hemisphere that will cut back on things. As always, we’re in a weather market with this and our prices will adjust accordingly.
Does this mean that the soybean market is right ready to tip over? Well, let’s hope not but supplies are sufficient. We’ve got support levels on the nearby contract of around $9.80 and we’re very close to that now. The specter of tariffs is out there, and we all remember when China put tariffs on American soybeans last time. Needless to say, American soybean have been competitive going into China which might set up some sales pre-January 20th. As it is, Brazilian soybeans will always be their choice going forward.
The January 2025 soybean contract is currently priced 6.75 cents below the March 2025 contract considered neutral for soybeans. Seasonally, soybean prices tend to peak in early July and bottom out in early October. The January 2025 soybean contract is currently at the 18th percentile of the past five-year price distribution range.
Wheat
World wheat ending stocks are at some of the lowest levels in decades so you could imagine a scenario where wheat prices explode higher if we have any type of market calamity around the world. As per usual, wheat is grown everywhere and there just seems to be enough wheat to fill the gaps when shortages develop. There is always the Russia Ukraine hot war, but it seems like that is dialed in even though nothing could seemingly be worse for the wheat trade in the Black Sea. Fresh news of a production calamity will likely only send wheat prices higher.
The beautiful Ontario fall weather helped put in some very nice wheat fields across the province. However, it is unknown at this point whether we are into record acres territory. As it is, we should hit a million acres and then see how much is left come April. With the Canadian dollar hovering on the 70-cent level, it holds out the real possibility of Ontario wheat prices for July 2025 to be contracted over $7.00 a bushel. As always, market orders for wheat in this market environment at $8 and above are always benchmarks to strive for.
The Bottom Line (cont.)
The recent move by the Bank of Canada reducing interest rates by 50 basis points was negative toward the Canadian dollar. In fact, there has been all kinds of buzz in Canada regarding weakness in the Canadian dollar even though it is down about 1 cent from the last Market Trends report. The combination of the Trump presidency and the buoyancy in the US dollar will always be negative for the Canadian dollar. Combining this with the interest rate cut has only made for a slippery slope. This again, is a stimulus for Ontario cash grain prices.
Are we going to get a Christmas rally in the grains? Generally speaking, between November 20th and the end of the year there usually is a rally in grain prices. For instance, in the past decade the average rally for corn is usually about $0.33 and for soybeans it is more like $0.90 per bushel. Unfortunately, on years with big carries like 2024 we are usually on the shorter side of those averages. We’ve already had about $0.26 of that in the corn market, so it’s hard to know where we’re at with regard to further price appreciation. In soybeans over the same time period, we’ve had about a $0.25 rally, but of course we’ve got ending stocks that are approaching the biggest ever on a global basis.
It is hard to know how that will pan out in the next three weeks. It’s likely more of the same but then again, we have the January USDA final numbers in the offing as well as the inauguration of a new tariff friendly American administration on January 20th. In other words, the next three weeks to a month should be tumultuous for Ontario cash grain prices.
The challenge for Ontario grain farmers is to continue to balance all of these market forces. 2024 has not been easy from a marketing perspective. The bearish market environment continues. Keep in mind, it’s always darkest before the dawn and there will eventually be an end to this. Key is always daily market intelligence. Risk management never grows old. There will be many marketing opportunities ahead.
