Thrifty farmers seek lower input crops

Farmers told Statistics Canada when surveyed in March that they plan to go bargain seeding this spring.

They said they planned to cut canola acreage, boost spring wheat acreage and make double-digit percentage increases in barley and durum.

Oat acreage would rise by 30 percent if farmers stick with what they were planning in March.

The cut in canola acreage and the huge increase in oat acres drew skepticism from analysts, but the shift to lower-input crops makes intuitive sense to some.

“We had been hoping for fertilizer prices to be dropping through the winter, and that just hasn’t happened,” said Chuck Penner of LeftField Commodity Research.

“Maybe farmers have gone into low-cost, hunker-down mentality.”

Jon Driedger of FarmLink Marketing said low margins on new crop canola might be making that crop seem a bit too risky to push this year. However, he was skeptical that farmers would reduce acreage to below 20 million acres.

“We view it that the market needs those acres, and markets are good at drawing in the ground they need when crops are tight,” said Driedger.

Stocks would be extremely tight if farmers actually seed only the 19.4 million acres they told Statistics Canada they were planning, he added.

ProMarket Wire’s Errol Anderson also doubts farmers will drop canola acreage that low.

Summerfallow acreage is predicted to drop by almost half to only 2.7 million acres, which suggests “farmers are going fencepost to fencepost.”

In that sort of situation, when farmers are putting everything they can into production, canola acreage tends to increase in the estimates as seeding happens.

Penner thinks the canola acreage stagnation is possibly a sign of recent problems from overusing canola within rotations, so farmers are falling back toward a long-term sustainable level without big margins to encourage excess canola production.

“For years we’ve been predicting we were going to hit the ceiling on canola acres,” said Penner.

“Maybe right around the 20 million mark is the ceiling now.”

Penner and Anderson are bullish on new crop barley. Even with a predicted 10 percent increase in acres, barley is growing on a much smaller base than just a few years ago.

As well, China’s robust demand for prairie barley has been a pleasant surprise for farmers this winter, which isn’t going away.

“China has not slowed down purchases,” said Penner.

Anderson said barley demand from China should remain as long as the Canadian dollar stays beneath 85 cents.

“It’s a sleeper. Of all the crops, I think that might be the one that’s interesting (in 2015-16),” said Anderson.

The large increase in oat acreage caused the most chin-wagging among analysts, with few claiming to have seen it coming. Virtually all analysts expected a significant increase in oat acres, but 30 percent exceeded reasonable expectations.

“I think that number’s too high,” said Driedger.

The Statistics Canada number is based on an almost 50 percent increase in Saskatchewan, which seems doubtful.

However, Driedger said oats in some parts of Saskatchewan can yield well, and some winter prices could result in margins better than local results with spring wheat.

“Maybe a $2.75 (per bushel) new crop price looks pretty good compared to what wheat prices were,” said Driedger.

Oat market analyst Randy Strychar said in a commentary that most oat market players don’t believe that anywhere near the 3.645 million acres of oats projected will actually be seeded this spring. Most are estimating 3.1 to 3.2 million acres.

Strychar said the recent weakness in oat futures prices compared to wheat had suggested to him that farmers would be backing away from oats, but perhaps three to 3.4 million acres were reasonable to expect, based on historical patterns.

He said the large Saskatchewan surge could be the result of “lower input prices for oats compared to other crops.”

He also said that while 30 percent seems big, it is only 14.4 percent higher than what farmers planned to seed last year, before bad weather stole acreage.

Anderson said he thought Statistics Canada’s oat number might not be too far out, especially because cash market prices haven’t fallen the way futures have.

“The cash has stayed in there.”

The 15.8 percent increase in projected durum acreage didn’t cause much surprise, considering that the crop’s margins and low stocks have provided ample reason for farmers to want to grow more in 2015-16.


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