Market Forces Coming Together for a Bumpy Ride Ahead

On Thursday, we had a full day of rain in southwestern Ontario which is unusual for the fall of 2024. While we dodged raindrops most of the summer, nobody really worried about a drought which gave us beautiful harvest weather. Thursday reminded me more of Novembers of the past: gray and gloomy. Much of the Ontario and Quebec harvest is finished with good results, depending on where the weather was kind.

As farmers, we’re very used to weather markets softly sitting in the back of our mind. In other words, there are certain times of the year in North America where we know prices are affected by crop weather. It just so happens to be the same thing in South America right now and that is affecting our market prices to a great degree.

Thursday, soybeans came within 14 cents of their contract low, dropping $0.20 on the day. After the mild bullish surprise of the last USDA World Agricultural Supply and Demand Estimates (WASDE) report, soybean prices have fallen four straight days. We have dropped 55 cents a bushel since then.

Remember that the USDA WASDE report took soybean yield down 1.4 bushels per acre (bpa). U.S. domestic soybean production went down 121 million bushels (mb). Soybean stocks went down 80 mb. However, we have had destruction in the soybean market since that day and much of it relates to good weather in South America.

Keep in mind that I read some of the same marketing weather reports that you do. It is always hard to know what the weather is really like in the Southern Hemisphere. At our planting time in the Northern Hemisphere, we are part of it, and we can feel the warmth and sunny weather or the sogginess of a wet spring. So, we’re being told that South American weather is very good now for crop development and it probably is. However, they will get their “hot and dry” and we might get a weather scare in the next few weeks. That’s the nature of the game.

Thursday, we got the latest estimates from CONAB, the Brazilian equivalent of USDA. Brazil’s crop agency, Conab, reported that soybean production would come in at 166.14 million metric tons (mmt) for this crop year. This is a slight increase from last month. Conab also reported that 2023-24 soybean exports were revised up from 92.4 mmt to 98 mmt. This is forecasted to increase even more this year to 105.48 mmt. In other words, it looks like our South American co-patriots are full speed ahead in their soybean production fields. Weather has been benign which is always good for South American production.

It leaves us in a bit of a quandary when it comes to our crop marketing. We are very accustomed to a post-harvest rally here in North America and I would argue that we should expect that. However, keep in mind that rally never really happened last year. At the same time, we have nearby soybean futures prices of $9.87 bushel. December corn futures finished Thursday at $4.19. Nobody in North American farm country is celebrating those prices.

We definitely need some fresh news to get not only the soybean market going but grain markets in general. I recently read a marketing article out of China that quoted a China National Cereals, Oils and Foodstuffs Corporation (COFCO) executive saying Chinese soybean imports would drop 9.5% for this upcoming year, which ends in September of 2025. The executive reported that China had stockpiled soybeans ahead of the U.S. election. For instance, China imported 8.09 mmt — the highest amount for October in four years. In other words, here we are. Chinese demand for soybeans isn’t the insatiable monster it used to be.

Of course, we all know what the elephant in the room is when it comes to trading with China. The incoming American administration-imposed tariffs on China the last time they were elected. China responded with tariffs on American soybeans going into China and we all know what happened to the market at that time. Prices sunk. We all know that trade wars are easy to win, but since that time the Chinese have taken steps to get most of their soybeans from Brazil. Clearly, that will continue.

It all points to a bumpy ride ahead not only for our market prices but for farmers ourselves. “Big Supply” is still clearly winning the day. However, keep in mind it is always darkest before the dawn. Nothing ever goes to plan. November 2025 soybeans now sit at $10.13. December 2025 corn stands at $4.37. Will we have the opportunity to do better than that moving ahead? I think it likely. Key will be that daily marketing intelligence. Having those standing marketing orders set for 2025 will help too.

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The views expressed are those of the individual author and not necessarily those of DTN, its management or employees.

Philip Shaw can be reached at philip@philipshaw.ca  

Follow him on social platform X @Agridome