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Monthly Market Trends

Monthly market trends commentary is written by Philip Shaw, B.Sc. (Agr.), M.Sc.

October-November 2016

US and World

Harvest continues in the United States as American farmers harvest some of the best crops ever. As of October 9th, 38% of US corn has been harvested in the top 18 producing states. At the same time 56% of US soybeans have been harvested. The weather has been friendly to American crop conditions this year and as combines roll, we are finding out just how good those crops are.


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In the USDA October 12th USDA WASDE (World Agricultural Supply and Demand Estimates) report, the government raised US soybean production to 4.269 billion bushels and increased projected national soybean yield to 51.4 bushels per acre. The harvested acreage of soybeans was increased 2% from 2015 at 83 million acres. The USDA cited the yield bump in the soybeans to increased pod counts 11 major soybean-producing states. With this increase in production the USDA also raised the new crop ending stocks by 30 million bushels to 395 million bushels.

While the soybean number was impressive from USDA, the corn production number got smaller pegged at 15.057 billion bushels with the estimated US national yield of 173.4 bushels per acre. This is still at a record level with harvested acreage projected to be 86.8 million acres up 8% from 2015. The USDA recorded record crops in Idaho, Illinois, Iowa, North Dakota, South Carolina, Washington and Wisconsin. The USDA lowered their new crop corn ending stocks to 2.32 billion bushels down from their September projection of 2.384 billion bushels. The USDA also in increased US wheat-ending stocks by 38 million bushels.

On October 16th, corn and futures were higher and soybeans nearby futures prices were lower than in the last Market Trends report. December corn 2016 futures were at $3.54 a bushel. The November 2016 soybean futures were at $9.62 a bushel. The December 2016 Chicago wheat futures closed at $4.21 a bushel. The Minneapolis December 2016 wheat futures closed at $5.28 a bushel with the September 2017 contract closing at $5.51 a bushel.

The nearby oil futures as of October 16th closed at $50.35/barrel down from the nearby futures of last month of $43.03/barrel. The average price for ethanol on October 14th in the US was $1.79 a US gallon up from last month at $1.74 a US gallon.

The Canadian dollar noon rate on October 14th was .7594 US down from the .7594 US reported here last month. The Bank of Canada's lending rate remained at 0.50%


In Ontario soybean harvest is in full swing. Yields have been variable as always depending on drought conditions this past summer. However, the old axiom that rain in August makes soybeans rang true in 2016. Yields are above average in many parts of the province. In fact, weather has been good for harvesting early in October and many producers have been challenged with dry soybeans, but green straw. After getting off to a slow start, wheat planting has intensified in the weeks before October 14th. However, it is unlikely that Ontario wheat acres will be over 1 million this year.

Corn harvest is also starting to ramp up across much of Ontario. The corn is dryer in many areas that experienced drought this past summer and yields do reflect that. The Ontario corn basis reflects that, continuing up at import levels. Corn basis has actually increased slightly since last month reaching up to a $1.30 over in Eastern Ontario. The basis of appreciation and futures jump in corn over the last month has offered up the best corn prices in several months.

That being said, the cash price market for corn in Ontario will remain fluid and may change as harvest season continues. In some areas in the triangle from London to Sarnia to Chatham, there is some of the best corn in the province. In other areas there will be a corn deficit and basis levels may reflect that through October. We have flipped over the old crop new crop months into 2017. Ontario producers may want to refine 2017 new crop standing orders partly because of basis appreciation this fall.

Old crop corn basis levels are $1.00 to $1.30 over the December 2016 corn futures on October 14th across the province. The new crop (2017) corn basis varied from .60 to $1.00 over the December 2016 corn futures. The old crop basis levels for soybeans (for the crop now being harvested) range from $2.30 cents to $2.63 over the November 2016 futures. New crop soybeans (2017) range from $2.18-$2.34 over the November 2017 futures level. The GFO cash wheat prices for delivery to a terminal on October 14th was $4.80 for SWW, $4.74 for HRW, $4.80 for SRW and $5.62 for Red Spring Wheat. On October 14th the US replacement price for corn was $5.09/bushel. You can access all of these Ontario grain prices by viewing the marketing section.

The Bottom Line

Sometimes you get surprises in commodity markets and with December corn rising to its highest level since July at $3.54, we are here. With a US crop of over 15 billion bushels coming out of American fields it wouldn't have seemed possible only a few short weeks ago. However, with the corn price rising significantly over the last few weeks, maybe the lows were made in August.

It may be a flash in the pan, but it may not. Even wheat futures have had their day pushing off recent lows. However, wheat prices aren't worth anything in parts of the United States wheat belt. Planters are rolling and at these price levels, some of those wheat acres might be grazed in the US.

The harvest still might have some surprise for us coming out of the United States. Demand will certainly remain strong as our South American friends are starting to plant in their fields. This could hold the key to future price direction especially if that South American crop gets in trouble and planting delayed. More corn will likely come out of both Argentina and Brazil this year partly to satisfy deficits caused by last year's poor winter crop.

Demand remains the stalwart for US grain futures and cash prices. The October USDA report pegged corn demand at 14.525 billion bushels and soybeans at 4.101 billion bushels. These demand figures could easily have been production figures a few years ago. However, they show the dynamism within the market. Eventually there will be a dent in supply as this demand grows and price will have to ration this demand at some future time. Knowing when the that will happen is anybody's guess.

Commodity Specific Comments


In the last couple of days leading up to October 14th corn reached its highest level since July. It was almost like the bulls were breaking out, except for the fact that we all know that we have over 15 billion-bushel crop in the United States. You might argue that it is time to take advantage and reward the market. However, keep in mind that there is quite a bit of carry in the corn market.

This past week the NOA called for a weak La Nina to form in the southern hemisphere, which can be negative for South American production. This is a bit of a stretch at this time, but with Brazilian corn planters rolling, it may have an effect on conditions. One should expect more Brazilian corn this year simply because they ran out last year.

The December 2016 March 2017 corn futures spread is -9.5 cents as of October 14th, which is considered neutral. The December contract is currently priced in the lower 10% of the five-year price distribution range. Seasonally, the five-year seasonal index shows that corn futures tend to trend up through the first week of November.


The Americans are harvesting the biggest soybeans crop ever, but they are also exporting that crop at a record pace. For instance, the October 12th USDA report pegged soybean exports at 4.101 billion bushels, up from last year at 3.943 billion bushels. It is a captive market with the South Americans tapped out of soybeans during this time.

For the week of October 14th, soybeans actually finished higher even with the bearish response from the USDA's 4.27 billion bushel production figure. The 2016/17 exports are up 26% from a year ago. Even with a record crop coming out of the fields bullish demand is mitigating the price dropping significantly as combines roll.

The November 2016 January 2017 soybean futures spread is it -7.75 cents, which is considered neutral. The November contract is currently priced in the lower 20% of the last five-year price distribution range. Seasonally, the soybean futures market tends to trend up through the first week of November.


Wheat prices have actually increased on the futures market, which has surprised almost everybody. However speculators had actually built up short positions three times as high as any bullish position and it has led to higher prices. Wheat is so cheap that buying it at these levels might seem prudent to end-users. As it is, wheat is rolling into the ground across the American plains, although acreage should be down this year.

Ontario is not immune from low wheat prices and that may be affecting planting this fall season. Wheat planting got off to a slow start in southwestern Ontario, but conditions improved significantly going into the October 14th weekend. However, it is unlikely that Ontario will have as many wheat acres as we did last year.

The Bottom Line (cont.)

In Eastern Canada we continue to benefit from a lower Canadian dollar currently hovering in the 75/76 cent US level. This has been the default within our Ontario cash grain market over the last year and remain so. Where it is going to move from here is anybody's guess. There are some economists who think Bank of Canada Gov. Stephen Poloz may cut rates in the next few months to further stimulate the Canadian economy. If that happens, our loonie will sink further.

The challenge of course for Ontario farmers is to hedge our grain prices, while measuring our Canadian dollar volatility risk. Everyone has a different way of measuring the trade-off between the inverse relationship between the Canadian dollar and the US dollar and grain futures prices. Daily market intelligence on the value of all three variables is essential to our management decisions.

The market is fixated right now on grain coming out of US and Ontario fields. The great assumption all year has been it is a huge crop in the United States and not so huge (corn) in Ontario. At the same time you have the noncommercial speculator interests within the grain market who trade the headlines. Any variation on the theme going forward within the next eight weeks may send the market in directions unexpected. Expect greater volatility as harvest comes to an end.

There are certainly other markets factors to measure. The US election, the growing Chinese economy and geopolitical events in Syria have the capacity to shake up market direction. It has been a year of big crops, but also big demand and bearish sentiment. Seeing corn prices at their highest now since July shows how volatile markets can be. The challenge for Ontario farmers is to manage that marketing vision ahead. Marketing opportunities are and will be apparent. Marketing where you are comfortable and profitable never grows old.


Grain Farmers of Ontario keeps an archive of previous monthly Market Trends Commentary.

View the archive

For more information, please contact

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