Canola extends lead over spring wheat

Farmers are bullish about almost every crop, Statistics Canada’s March seeding intentions report shows.

However, it also offers more evidence of the long-term trend of farmers embracing canola and avoiding spring wheat. Each year farmers plan to grow more canola than the previous year, but they generally plan to grow less spring wheat.

This year, prairie farmers intend to seed 20.37 million acres of canola and 17.18 million acres of spring wheat.

That is a new record for canola acreage, well above last year’s 19.22 million acre intention.

However, it is the third lowest intended acreage for wheat in a decade, only marginally above 2007 and 600,000 acres more than 2008’s 16.58 million acres.

In 2003, farmers intended to plant almost 19 million acres of wheat and 10.94 million acres of canola. Intended canola acreage is now almost double what it was and well above the spring wheat total, capping a total role reversal.

Another long-term trend is for farmers to increase their actual planted acreage of canola from the March seeding intentions report but to decrease spring wheat acreage.

Many analysts expect to see that happen again this year.

“Every grower out there is trying to figure out a way to sneak in another 60, 80 or 100 acres more canola,” said Ken Ball, a broker with Union Securities in Winnipeg.

There is still room for canola acreage to grow. Some analysts had predicted farmers would intend to plant 22 million acres of canola this year, with a couple guessing 23 million acres.

The canola number in the planting intentions report, although a record, is actually bullish for canola because it is at the low end of expectations.

However, spring wheat acres could be vulnerable to any weather problems. Analysts say the higher spring wheat acres, as well as relatively big acres for most other crops, are a product of the collapse of summerfallow acres.

Statistics Canada predicts farmers will leave less than four million acres idle after leaving 12.4 million fallow in last year’s wet growing season and 10.7 million in similarly wet 2010.

Analysts aren’t surprised that in-tended summerfallow acreage would drop, but virtually all analysts were surprised by the tiny number.

“It adds two million more acres into the mix that I wasn’t expecting,” said Chuck Penner of LeftField Commodity Research, who thought six million was a more likely number.

“It allows all of the crops to expand their acres.”

Jon Driedger of FarmLink Marketing Solutions was also surprised by the summerfallow number, which is boosting crop acreage numbers.

“The summerfallow was so incredibly low, by far a record low. What that does is add acres to everything else,” said Driedger.

However, with farmers keen to plant canola above everything else, they will likely keep or increase their canola acres if weather problems occur but cut crops such as wheat and oats that are less financially attractive.

Winnipeg analyst Marlene Boersch said she thinks cereal grains will likely suffer most if seeding problems occur.

“It’s probably a little overstated,” said Boersch about the cereal grain acreages.

Another phenomenon likely to cut former CWB grain acreage is the slow development of forward sales contracts with grain companies, Boersh said. With farmers able to lock in profitable prices with some crops but generally not with spring wheat and durum, they might favour the crops that they can hedge.

However, if everything goes into the ground as farmers intended when they were surveyed by StatsCan, and there is good weather, then farmers might discover how far they can push the grain handling system, Boersch said.

“If the total acreage really is that high, we probably will have some problems with our export capabilities because we rarely do more than 30 million tonnes,” said Boersch.

“That could, in a good year, cause some problems.”

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