Grainworld Day Two: prairie crops slip, sliding away as good times give farmers lots of great opportunities with big crops?

Day two of Grainworld, Canada’s biggest crop outlook conference, seemed to have two themes running through it: 1) some traditionally huge prairie crops just can’t stand up to the onslaught of big mean canola, wheat, corn and soybeans; 2) farmers have a wealth of profitable possibilities these days, and the future looks bright for ag.

So here’s what a few of them said about that:

RANDY STRYCHAR – Ag Commodity Research – Oats

Strychar, unquestionably THE most informed man about the oats industry, says rebuilding the horsefeed market is vital to keeping oats in the prairie farmer’s rotation. It’s not just a secondary market for dedicated oats growers, but an essential element of the crop’s acreage base and what allows it to still behave like a big crop, with open pricing and a futures contract and many buyers.

Oats, as a commercial crop, is verging on a collapse into special crops status – where Grainworld included the oats outlook – as even bullish fundamental situations fail for months to move markets higher and as farmers avoid the crop because of easy alternatives that don’t bring as many complications. Strychar said it would be a tragedy to see oats fall into a world of opaque prices and contracted acres, but right now that looks like where it’s going.

That’ll be bad for acreage, as farmers avoid a crop that doesn’t have transparent pricing and easy market, and bad for processors, who will have to pay 20-30 cents per bushel more to get farmers to grow the crop if it has to be done under contract.

PAT ROWAN – BARI – Malt Barley

Rowan was refreshingly frank about malt barley’s similar situation to oats, with farmers being less and less willing to seed the crop. U.S. production is almost 100 percent contracted and Canada’s may come to that one day. The crop is being chased out of the red river valley by crops like corn, canola and soybeans and will one day disappear completely from what was once a major growing area.

Rowan said even though companies like his are pouring money into finding new varieties around the world, the crop gets none of the mega-investment from the big crop breeding and biotechnology companies, so it has trouble developing new varieties that farmers will find give them a competitive return.

He also acknowledged that some malt barley breeders have treated farmers shabbily, causing many to turn away from attempting to produce malt barley and instead focus solely on producing big yields of feed barley.

“I think the malt industry has a black eye and deserves it,” said Rowan.

The old paradigm of growing barley with a hope of getting malt but a likelihood of producing feed doesn’t seem to work well any more, Rowan said. Farmers need to get rewarded for growing and well-managing a malt barley crop.

Rowan said his company plans to get closer with key farmers so that dependable relationships can be built.

GARY WILLIAMS – Scoular – Grain Industry

Gary Williams, whose company is building a massive crop and oil-hauling hub in southeastern Saskatchewan to connect to the U.S. market, said railways need to be freed-up to make more money so that they will have an incentive to build the kind of super-efficiency he said he sees in the U.S. system.

Too many prairie grain elevators have only 50 or 56 car spots, while efficient ones need to have 112 car spots. He also said prairie elevators handle too many crops. He thinks a big rationalization of the prairie system will occur within the next five years, with some elevators expanding storage capacity and some mid-sized ones converting to specific crop handling.

TODD ORMANN – Syngenta – Wheat

Ormann said hybrid wheat should be available by 2020. Wheat has been left behind by the breeding revolution that has vaulted corn and soybeans far above wheat in farmers’ hearts and minds, but Ormann said this shows how much room wheat  has to improve and earn farmers more money. The main gain from hybrid wheat won’t necessarily be higher yields, Ormann said, but consistency and toughness in years of bad weather. Just like the way today’s corn hybrids held up well – much better than expected – in the 2012 U.S. drought, so too could wheat . Wheat has the potential to be a much, much more rewarding crop for farmers and Syngenta thinks that potential could be realized in the next few years.

BRANT RANDLES – Louis Dreyfus – How Long Can the Good Times Last?

Apparently a long time, because Randles closed Grainworld with an outlook that contained four dynamics that should all add-up to continuing demand growth for prairie crops. One of those is China, whose demand “is very real and its needs will only grow.”

Randles didn’t seem to see any long term downsides ahead. He said now is a perfect time to drive ahead the campaign to build consumer acceptance of genetically-modified crops because the world needs them to feed the hungry masses. The greatest danger is complacency, which could allow problems to linger rather than be resolved.

 

About the author

Ed White — Ed White has specialized in markets coverage since 2001 and has achieved the Derivatives Market Specialist (DMS) designation with the Canadian Securities Institute.

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