King wheat has finally lost its crown, but analysts believe it has been only temporarily misplaced.
For the first time ever, Canadian farmers planted more canola than all wheat, including durum, according to Statistics Canada.
Growers planted a record 22.8 million acres of the oilseed versus 22.4 million acres of the cereal, according to the agency’s June seeding report.
Wayne Palmer, senior market analyst with Agri-Trend, said canola’s time at the top will be short-lived.
“It will be a one-year wonder.”
Spring wheat is in the midst of a price rally that he believes is just getting its legs.
“There is going to be fireworks for the rest of the summer,” said Palmer, a former futures broker and former futures trader on the Winnipeg Commodity Exchange.
In his 40 years in the grain business, he has never seen such a localized drought as the one in the northern U.S. Plains, where the rain keeps missing large portions of South Dakota, North Dakota and Montana.
Crop condition ratings are abysmal and deteriorating with each passing week.
“If this week is any indication, you’re looking at US$10 per bushel for Minneapolis wheat futures, for sure,” he said in June 29.
“I just think this is going to be a heck of a year.”
Those kinds of prices will quickly win back wheat acres in Canada, but he isn’t convinced wheat lost its spot as the top crop in 2017.
Palmer thinks Statistics Canada’s canola number is overstated. He believes it is closer to 22 million acres because of abandonment.
A look at trend lines shows canola acres have been rapidly climbing the last few decades while wheat area has been on the slide.
Chuck Penner, analyst with LeftField Commodity Research, said it is not a given that the trend will continue.
“It’s hard to say whether it’s the future or not,” he said.
That is because of the astonishing ascent in soybean acres in Manitoba and Saskatchewan at the expense of canola and other crops.
“It’s possible this could be the peak year for canola,” he said.
Growers planted 2.29 million acres of soybeans in Manitoba, a 40 percent increase over last year, and 850,000 acres in Saskatchewan, a whopping 250 percent increase.
“It’s actually surprising that canola can even hold its place with that type of shift going on,” said Penner.
Errol Anderson, analyst with ProMarket Wire, agreed with Palmer that wheat has only temporarily lost its crown. The protein market is on fire, and he believes it will remain hot through next spring.
He isn’t as bullish as Palmer, but he believes Minneapolis wheat futures could take a run at $8, up from $5.50 this spring.
“Who would have ever dreamt of a massive wheat rally like this?” said Anderson.
If the protein market remains strong, farmers could plant more wheat and less canola next year.
He believes barley could turn “red hot” because there is an export program into China, which is leaving Lethbridge feedlots scrambling for feed.
“Products that growers were down in the mouth about, wheat and barley, could turn out to be the stars this year,” he said.
Anderson said the June Sta-tistics Canada acreage report had little impact on crop prices. Market attention is focused elsewhere.
“It’s going to get forgotten because July weather trumps it,” he said.
Drought in the northern U.S. Plains has crept into the southern Canadian Prairies, and prominent weather forecasters are calling for a dry finish to the summer.
A hot and dry July would reduce yields and spark a price rally for many commodities because demand is “super,” said Anderson.
Penner agreed that it has become a weather market.
He saw few surprises in the seeding report. The numbers weren’t too far off Statistics Canada’s April seeding intentions report or analysts’ expectations.
Penner was mildly surprised that both barley and oat plantings fell slightly from the April report, but he thinks the June report maybe failed to capture late shifts into those crops due to seeding delays.
Hard red spring wheat was up 830,000 acres over last year to 13.85 million acres. He believes that is partly because of the reclassification of some wheat into the new Canada Northern Hard Red class and to decent prices in the spring.
One thing that caught Penner’s eye was the estimate of 5.2 million acres of durum, which was above the average analyst estimate of five million acres.
“Maybe if there is a bit of a surprise, that might be one of them. That’s not going to be friendly for the market,” he said.
Farmers are growing more lentils than peas for the third straight year: 4.4 million acres of lentils and 4.1 million acres of peas.
Analyst Larry Weber of Weber Commodities points out that history shows Statistics Canada tends to underestimate lentils and overestimate peas in the June report.
Based on the previous six-year average, he expects lentils to climb to 4.8 million acres by the final estimate and peas to fall to 3.9 million acres.
Anderson said the 28 percent decline in mustard acres from last year piqued his interest.
“Right now there’s nothing bullish about the mustard market, but give us six months,” he said.
Palmer said nothing really caught his attention in the acreage report. He is instead fixated on the steadily rising wheat futures markets.
“This year if you grew wheat, finally you’re going to get a great return,” he said.