Agriculture commodity markets in 2023 and beyond
Corn being unloaded from a transporting truck at grain elevator.

A primer on navigating the complex terrain of agriculture commodity markets. Learn how to balance leadership and personal relationships while navigating management in various situations.


By Colin McNaughton and Moe Agostino

Agri-retailers and farmers must be dizzy with all the political, weather and economic voilatility going on this year.

The world of agriculture commodity markets in 2023 has proven to be tumultuous, marked by a series of unexpected challenges that are dramatically reshaping the landscape for key crops such as wheat, canola, corn, soybeans, and more.

This year began with La Niña’s dry conditions taking a toll on Argentina’s wheat, corn, and soybean production; however, a record Brazilian soybean and corn crop offset that—and it was precisely what China ordered as its relationship with the US maintained its usual state of tenseness and fragility.

In fact, due to China’s significant differences on such matters as Taiwan or human rights failures, the second-largest economy in the world has been attempting to diversify its buying of commodities such as corn and soybeans away from the US.

Because of the diversification, Brazil has taken market share from the US and is now the largest corn exporter to China.

Brazil has doubled its production and tripled its exports in just 10 years.

All this has resulted in a softer US demand and export outlook and has led to more hedge fund selling (by big speculators), driving prices lower.

With Volatility came Plenty of Weather Scares

The year started with many weather forecasters projecting a transition from La Niña (hot/dry) to El Niño (wet/cool) conditions by March of this year. Still, it kept getting delayed—first into July, then August, and now by this fall or winter.

The warming and rise of Pacific Ocean temperatures can cause this weather pattern to shift. However, according to forecasters, also requires data readings of negative-7 OSI (Oscillation Southern Index), which has only just become present.

The lasting effects of La Niña provided very good conditions for planting. However, they turned very dry very early in the year, resulting in a “flash” drought in May and June for the growing regions of the US, Western Canada, and Ontario.

It was soon followed by rains at the end of June and into July in the US and Ontario—precipitation was very spotty in Western Canada.

But in a complete 180-degree flip, the weather then got both hot and dry again in a second “flash” drought by the end of August and September in the US and Western Canada to provide a poor grain fill finish for both soybeans and corn.

Ontario had plenty of rain to end the growing season, so it had a much better crop yield for corn and soybeans.

Crops in the US western corn belt were dying—running out of gas—and not drying down, while crops in the eastern corn belt (east of Illinois) were dealing with a lack of maturity and were behind by one to three weeks in some spots.

Big US Crops Even with a Drought

The 2023 drought has been worse than last year.

In the dual charts shown above, it has the 2023 image on the left and the 2022 image on the right.

The 2023 chart data shows it to be worse, with the US Midwest at 69.17 percent in a D0-D4 drought (abnormally dry) versus the 2022 numbers showing 32.56 percent, according to NOAA (National Oceanic and Atmospheric Administration) as of September 12, 2023.

The NOAA is a Washington, DC-based scientific and regulatory agency within the United States Department of Commerce.

An old definition from the NOAA of what states make up the US Corn Belt includes Michigan, Ohio, Wisconsin, Illinois, Iowa, Minnesota, South Dakota, and Nebraska, but not North Dakota, Kansas, Missouri, or Texas.

It’s important to note that we are using the old definition that doesn’t include North Dakota, Kansas, Missouri, or Texas. However, the authors of this article believe that the definition of the Corn Belt should include those states and other fringe states that have begun to grow more crops over the years.

The precipitation total for the US Corn Belt from April to the end of August was 15.22 inches (38.6588 cm) versus normal at 17.65 inches (44.831 cm), which is a total of 2.66 inches (6.7564 cm) less rain, making it the 13th-driest period it has been in 129 years.

But averages are deceptive, with 54 percent of US corn and 48 percent of US soybeans in drought as of September 12, 2023. We remember during the growing season that the dry US areas remained dry, and it kept raining in the same areas (very southern regions of the U.S.) with no real widespread soaking of one to three inches (2.54 to 7.6 cm) for everyone.

And then there’s the US derecho that no one is talking about. [>Ed. Note: from Wikipedia, a derecho—Spanish meaning straight—is a widespread, long-lived, straight-line windstorm associated with a fast-moving group of severe thunderstorms known as a mesoscale convective system.]

Now, here’s something that perhaps should be taken with the proverbial grain of salt:

The United States Department of Agriculture (USDA) noted in its September crop report that it had forecast large crop yields even though there is a drought—predicting a 173.8 bpa (bushels per acre) corn crop and a 50.2 bpa soybean crop.

In this report, for the first time, the USDA denoted its 10-region US corn yield objective data, showing an above-average corn population and ears with plenty of soybean pods.

But is the USDA underestimating the early dry start in May and June and the dry, no rain four weeks (as of this writing) seen in August and September in the US? This type of season hasn’t been seen since the mid-1950s, when a similar trend showed it to be very dry at the end of the growing season.

And let’s not forget the extreme heat much of the US saw, especially in areas of the Corn Belt where temperatures of 110–115°F (43.3–46.1°C) were not uncommon.

In the past, the USDA would also include the corn ear and soybean pod weight in its report, but it was missing in 2022 and not included again in the 2023 report.

We must consider that the corn and the soybeans planted are new thoroughbred hybrids. Seed companies advise ag retailers to tell farmers that these seeds must be planted early and given a long finish to ensure they develop to their full potential.

Ultimately, the yield comes from the corn kernel weight and soybean seed size. This is the missing link.

The USDA has reported corn ear or plant population and the number of pods in soybeans, but no one can measure corn kernel weight or soybean pod weight until it gets harvested, so this will be a big surprise and game changer in 2023.

You may be aware that crop sizes in the US are getting smaller. As the old saying goes, “Small crops get smaller,” but what concerns us is how much smaller.

It’s a fact that small crop yields drive prices higher, which is good for farmers, especially during harvest when they want to sell.

With a poor finish, the US harvest will be two to three weeks ahead of normal. What we are not hearing from US farmers this time of the year is “it’s not better than I expected,” but it looks like the later-planted May crops will yield better than the early-planted April crops.

A poor, hot, dry finish leads to a fast finish, and the US crops west of the eastern Illinois area have already started dying—not drying down.

Agronomists have stated that it can lead to a 10 percent reduction in overall yields. It’s like providing a killing frost at ½ milk line in corn.

For those who are unaware, the ½ milk line means it has not yet matured to a black layer. And should a killing frost come about and hit at the ½ milk line, it would end the life of that ear of corn and reduce yield.

To maximize yields, we need a long, slow-cooking finish to provide full maturity and increase the corn kernel and soybean pea size.

There is no other analogous year that compares to 2023. Neither are there any USDA statistics showing a 10 percent yield reduction in either US corn or soybean yields from the September crop report to the final January crop report.

Could the final tally for the 2023 crop year be one for the record books?

Most will Avoid a Killing Frost

As the 2023 growing season ends and we approach harvest, the weather forecast looks warm and dry for most of North America.

But at press time (mid-September), weather forecasters warned of a potential frost in northern Minnesota by the last week of September and in the southern states by the first week of October.

However, with an early harvest in the US and an end to the crop in western Canada by the end of September, the perils of frost may not be an issue for farmers.

In some of the Ontario counties, it was evident that they were behind by three to four days, falling behind by 60 to 180 heat units in a worst-case.

However, it would be very prudent to acknowledge that it could catch up quickly enough if there should be a warm, dry end-of-September forecast, which will help with our predictions of potential record Ontario crops of corn and soybeans.

Russian Wheat Production and Exports

To gain buyers for its grain—and because of the global sanctions it faced for its invasion of Ukraine—Russia has been aggressively selling its wheat to other countries as it undercuts everyone else’s prices.

It has led to the big speculators selling 80,000 contracts of Chicago wheat futures despite a Ukraine and a Black Sea Grain export deal that no longer exists.

Post-harvest, however, the global wheat ending stocks have fallen further down by 7 MMT (million metric tons), according to the USDA, as most countries were hit with drought in 2023, which is tightening global supplies.

Potential El Niño Impact in 2024

Following three consecutive years of La Niña, the El Niño-Southern Oscillation (ENSO) is currently in the El Niño phase, according to NOAA.

The ongoing El Niño is forecast to be an intense event, reaching its maximum intensity in late 2023 and persisting through early 2024, according to the official August 2023 NOAA ENSO Forecast. Should it be as predicted, it can provide cool, wet conditions for the US and allow the average US corn and soybean yields to improve. Typically, while corn and soybeans improve during an El Niño event, global wheat yields tend to fall.

Argentina’s soybean yields also tend to rise, as it is usually drier in the northern part of South America.

El Niño can also delay the monsoon rains in South America and have those same rains end sooner.

After a dry 2023, the 2024 season is expected to be cooler. However, data within the 89-year Gleissberg Solar Drought Cycle suggests that dry and hot conditions could return in 2025 if Mother Nature is to repeat as it did back in the 1930s.

The Gleissberg Solar Drought Cycle describes an amplitude modulation of solar cycles with a period of about 70–100 years, or seven or eight solar cycles. With solar activity on a recent upswing and expected to peak in 2025, the invigorated solar cycle would align with the Gleissberg Solar Drought Cycle.

Predictions for 2024

Even if the Gleissberg Solar Drought Cycle wasn’t predicting it, we are predicting more of the same for 2024.

Unless demand returns for US corn exports, a slight drop in yields may not matter as ending stocks remain above two billion bushels.

Russia, as the largest global producer and exporter of wheat, needs to have a production hiccup in 2024 to create fear and a spike in wheat prices.

If there isn’t a production hiccup, then it could be more of the same as 2023, with its tumultuous markets.

Potential back-to-back record South American corn and soybean crops will anchor grain prices in 2024.

With higher crude oil prices and OPEC refusing to increase production, higher diesel fuel prices will prevent inflation from falling to two percent anytime soon, and higher interest rates could stay elevated for longer than most expect.

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