The annual cornucopia of prairie crop market outlook and analysis is riotously pouring forth right now, and it’s always a bewildering abundance of data, analysis, projections and estimates.
Here are some bottom lines I got from some of the speakers yesterday. They all spoke of many things, but these are what I found most central:
MIKE KRUEGER – The Money Farm
Krueger, a longtime fundamental crop market analyst, thinks this crop year will be impossible to peg until early summer when North America’s growing conditions are better known. Until then, wild volatility is likely as underlying drought fights with projections of huge acreages of corn and soybeans and normal weather producing massive crops.
Krueger said his price ranges show the incredibly wide possibilities for this year’s crops: Corn: $4.50 to $9.00 per bushel; Soybeans: $10 to $20; spring wheat: $7.oo to $12.
North America could produce anything from a drought-ravaged, stunted crop to a big, fat, massive crop, and there’s no way to tell right now which way it will go. Until it’s clearer, the crop markets will be “volatile, wild, unpredictable.”
GERRY RITZ – Federal Agriculture Minister
Ritz was back in friendly territory at Grainworld Monday, as the successful transition of the prairie grain industry from Canadian Wheat Board dominated to free market allowed him to move on to less divisive parts of the federal government’s ag agenda. Ritz drew much attention to his government’s muscular embrace of trade and increasing market access, describing it as the “most aggressive trade agenda in history.”
A couple of hours later he was across the street at the Canola Council of Canada offices unveiling the council’s new long term strategy on vigorous market expansion, with a big role for the government to go in and beat down obstacles to trade. The strategy seems to fit perfectly with Ritz’s and Stephen Harper’s view of the role of industry and government: the private sector comes up with innovations and new products, the industry organizes itself to efficiently produce the goods, markets are developed and engaged – and the government bullyboys are sent in only if some nefarious foreign somebody tries to get in the way of the free flow of trade.
I imagine it must be nice for Ritz to be able to come to Winnipeg and mostly engage in constructive stuff, after all those years in which the caustic struggle over the future of the CWB dominated the agenda, and made the city seem like a battleground. Now it’s time for quieter work.
I wonder, does it seem dull now . . .
BRENDA TJADEN LEPP – FarmLink Marketing
FarmLink’s crop production estimates for the prairies for 2013-14 contained shifts in acreage most expected but are still much discussed: Canola acreage down 7.1 percent to 20 million; spring wheat up 3.2 percent to 17.5 million; Durum down; winter wheat keeps rising; barley flat, but with a shift from a focus producing malt-quality barley to producing feed-specific barley; Oats up 12 percent to an average acreage.
An interesting feature of Manitoba acreage is the tenuousness of corn seeding plans. The recent slide in corn is weakening farmer resolve to plant the stuff. Tjaden Lepp said the weakening profit outlook combined with the expensiveness of growing a corn crop has farmers shifting to less intensive options that fit the acreage, such as oats.
DAVID REIMANN – Cargill – Canola
Reimann, a risk management expert and market analyst, threw up a long term canola price chart to highlight the fact that many farmers probably don’t realize prices are still high, high by historical standards. They have slipped, but are well above levels that would have delighted farmers a few years ago. That means farmers have much to lose if prices slump, so farmers should be looking at protecting against the downside. Options-based approaches work well for farmers who want to cover the downside but still want upside potential.
With a massive inversion in the canola market right now, with nearby prices much higher than further-out prices, there is no reason to hang on to old crop canola.
Farmers might be super-bullish because of the super-tightness of canola stocks, but the “dirty little secret” of canola is that it follows U.S. soybean prices, so whatever happens to that crop will determine most of what happens to canola this year.
And for that: “It’s all up to Mother Nature.”
JON DRIEDGER – FarmLink Marketing – Flax
Driedger said the flax industry and acreage has downsized to fit the new reality of lost European markets and more modest demand prospects. After the bad times following the European ban due to Triffid, the industry has stabilized and acreage should modestly increase this year, but the crop’s potential is not just restrained by the European restrictions that still constrict most imports, but also by the surge in production from the Former Soviet Union, which quickly seeded flax to fill-in for Canada.
Chinese demand, which happily appeared just when the European market was lost, is nice, but will it be “steady and predictable?” Or will it be fickle and move in and out?
DALE HEIDE – Delmar Commodities – Soybeans
Heide, whose company crushes beans and sells soybean seed, can see a day not too far from now in which the prairie has about five million acres of soybeans. That would include three to four million in Saskatchewan, which shouldn’t be a problem considering the improving agronomics of upcoming soybean varieties.
Southern Manitoba, the eastern half of Saskatchewan, and southern Alberta – especially the irrigated bits – are the areas where the crop will flourish, Heide predicted.
LAWRENCE YAKIELASHEK – Toepfer – Wheat
Yakielashek repeated his call of last year for farmers to grow more high-yielding, lower quality wheats. The world will only pay premiums for about half of the red spring wheat that Canada produces, so growing more than that is giving up the ability to grow bigger crops of the product the world wants and will pay for.
With Russia, Kazakhstand, Ukraine and now India pushing expanding production of wheat out into world markets, famrers need to match what they’re growing with world market realities and what will profit them most on their farms.
JOHN GRIFFITH – CHS – Durum
The weather isn’t as dry this year in North Africa as it was last year, so farmers shouldn’t expect the same surge of demand that appeared this year. However, supplies are getting tight. As long as Canada produces a decent crop, the market should be adequately supplied, but if prairie farmers don’t grow the crop . . .
However, Griffith thought the biggest opportunity for durum to get its traditional premium to other wheats back is for the prices of those commodities to fall compared to durum, rather than durum rising independently.
RICK ANDERSEN – Informa Economics – Corn
The market seems to believe the rationing of demand is done. Andersen thinks old crop rationing has just begun. He forsees a year in which old crop corn prices have to rally – perhaps explosively – in order to stop all supplies disappearing, while new crop prices could slump to the ugly levels USDA recently forecast.
CHARLIE PEARSON – Alberta Agriculture – Barley
Declining cattle and pig numbers mean less demand for barley, which isn’t helping that crop rebuild its acreage. Barley is also less popular with farmers now that wheat and durum are open market commodities. Pearson thinks the most like price for new crop barley in Alberta will be $205-$230 per tonne and in Saskatchewan $170-$195, with a good possibility of moving modestly higher.
For barley acres to recover and win back farmers’ hearts it will need to offer better relative profitability. Farmers have more choices now.