Canada Markets

The monster corn crop estimate found in Tuesday's World Agricultural Supply and Demand Estimates (WASDE) update likely gets most of the headline news; but it was the surprising shift of acres from soybeans to corn that is sure to have a lasting impact throughout the coming year.

A 2.5-million-acre reduction in soybean planted area took the market off guard as the average estimate was looking for a slight increase. It should have come as no surprise considering that is exactly what the market was telling producers to do this spring. Between early seeding with excellent corn planting conditions (for most areas), trade tensions and tariff wars with China (at a critical time) and the soybean/corn price ratio performance, all indications were that soybean area should come up short of early intentions. See more in the previous blog at https://www.dtnpf.com/…. By the time the U.S. and China met in Geneva and agreed to de-escalate the tariff war, it was June 11 and 97% of the corn was planted with 90% of the soybean crop already in the ground.

The problem for the market now is the yield that the already-tight ending stocks figure is based upon. At a record 53.6 bushels per acre (bpa), it may turn out to be far too optimistic. To date, yield appears to have peaked at the current record of 51.9 bpa (set in 2016-17) and has trended steady to lower since with disease and insect pressure due to tight rotations potentially taking their toll. In fact, the last three years have failed to top 51 bpa with 2024 at 50.7 bpa, 2023 at 50.6 bpa and 2022 at 49.6 bpa.

With much of the Corn Belt south and east of Iowa receiving below to much below-normal precipitation for the past two weeks, and actually the last two months overall, and little expected for the next two weeks, it becomes increasingly difficult to count on a record-high yield. Especially of that magnitude.

The accompanying chart shows in orange what the ending stocks would look like if yield in 2025 ended up at a record high 52.5 bpa with all else equal. And that is still assuming exports will fall 170 million bushels (mb) from 2024-25 levels due to limited supplies. Should exports only decline 155 mb compared to last year (as an example) with yields at 52.5 bpa, ending stocks would be the lowest seen since 2013-14 when prices spent time trading above $15/bushel.

That simply demonstrates how sensitive the market will be to signs of improved relations with China. The fact that they have not made any new-crop soybean purchases to date has the market nervous to say the least. But this week's social media post by President Trump urging them to buy U.S. soybeans, followed closely by the 90-day extension of the tariff pause, suggests it is just a matter of time.

Even if China does avoid the U.S. to some extent, it will likely just result in a reshuffling of which importing country buys from which exporting country, as seen in the 2024-25 world corn market. On Tuesday, USDA predicted world importers will take in almost 186 million metric tons (mmt) of soybeans compared to 178 mmt in 2024-25. Major exporting countries (Argentina, Brazil and Paraguay) are only expected to be able to supply 128 mmt of that due to increased domestic consumption (up from 118 mmt in 2024-25). The difference must come from somewhere and the only real alternative is the U.S. With that in mind, even a 155-mb cut in U.S. exports used in the example may be difficult to achieve, let alone the 170-mb reduction USDA is assuming.

As a review, soybean crush is expected to increase 110 mb from 2024-25 levels on an increase in biofuel blending mandates. Even with the increased crush, soybean oil exports are expected to fall to a mere 700 million pounds from 2.55 billion pounds in 2024-25. With that, it might be difficult for soybean crush to be reduced.

Ending with a quick look at market participants themselves -- managed money traders may have incorrectly been aggressively selling ahead of the WASDE report. For the week ended Aug. 5, they had been net sellers of 29,619 contracts or 148 mb, taking them to the largest net short of 2025 at 65,930 contracts or 330 mb. The $.60/bushel rally seen in November soybeans since Sunday evening was surely helped by some of those short positions being bought back. As a side note, their record net long was set in April 2012 at 243,389 contracts, should yield fall or exports improve enough for them to buy aggressively.

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Mitch Miller can be reached at mitchmiller.dtn@gmail.com

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