Wheat acre drop surprises analysts

The results of Statistics Canada’s latest producer survey on 2019 field crop plantings are raising a few eyebrows, particularly the survey’s findings on seeded acreage of wheat.

According to StatsCan’s Principal Field Crop Areas report released June 26, Canadian farmers planted an estimated 24.6 million acres of wheat in 2019, down 0.6 percent from 2018.

The June wheat estimate was more than a million acres lower than StatsCan’s previous estimate of 25.7 million acres, released roughly two months earlier in late April.

Canola plantings for 2019 were reported at 21 million acres, down 8.2 percent from 2018, and about 300,000 acres lower than StatsCan’s April estimate of 21.3 million acres.

Other highlights of the June report include:

  • lentil acres at 3.8 million, up 375,000 acres from StatsCan’s April 2019 estimate and 0.3 percent higher than 2018 acreage
  • green and yellow field pea acres at 4.3 million, up 300,000 acres from StatsCan’s April estimate and nearly 20 percent higher than 2018
  • barley plantings at 7.4 million acres, up 350,000 acres from April and 14 percent higher than 2018
  • Canadian oat plantings at 3.6 million acres, up 300,000 acres from April estimates and 18.1 percent higher than a year earlier
  • national soybean plantings at 5.7 million acres, down 12.9 percent from 2018

All told, the report pegs total 2019 plantings of principal Canadian field crops at about 76.7 million acres.

Numbers in the June acreage report were based on a survey of 24,500 Canadian farmers, conducted between May 14 and June 11.

Brian Voth, a grain market analyst and president of intelliFARM, a grain marketing advisory company based in Manitoba, said there were a few surprises in the June acreage report, starting with the wheat estimate.

Total all-wheat plantings of 24.6 million acres is less than what many analysts had anticipated.

And the June number for hard red spring wheat plantings caught some analysts off guard.

At 18.8 million acres, Canada’s hard red wheat estimate was nearly 500,000 acres lower than StatsCan estimates released two months earlier.

“I think the biggest surprise was the (total) wheat number (including durum, spring wheat and winter wheat), which was down over a million acres from the April estimate,” said Voth.

“That’s a big change, coming down from April to now by a million acres. That’s fairly substantial and obviously no one in the trade was expecting that.”

Voth said he didn’t expect the spring wheat number to come down from April estimates, given what’s happened with canola markets over the past two to three months.

StatsCan’s numbers suggest that issues affecting the Canadian canola trade prompted more growers to increase oat, barley and lentils acres, as opposed to expanding wheat plantings.

Estimates of canola acreage were also a bit surprising, said Voth, especially in light of trade disputes that are affecting canola exports and widespread early-season dryness across western Manitoba, Saskatchewan, central Alberta and the Peace River region.

“Canola (acres) did not come down as much as the average trade estimate or our own estimate either,” Voth said.

“They still came down 300,000 acres from April so now we’re at an eight percent drop from last year, but we had kind of ball-parked that it was going to be more like 10 percent.”

Some analysts including Voth were expecting a jump in oat and barley acres, and StatsCan’s June numbers seemed to validate those projections,

Barley acres (up an estimated 14 percent over 2018) and oat acres (up 18.1 percent) reflect strong market demand for those crops and low production costs, relative to other crops.

“Oats, up (300,000 acres from April estimates) doesn’t surprise me when you look at where old-crop oat prices have been,” Voth said.

“When you’re talking about $4-plus oat prices, you’re going to get more traction….

“Same thing with barley. I think barley prices hit the highest level in years last week. When you’re over $6 for feed barley, there’s obviously going to be a lot of interest in growing barley.”

It remains to be seen how many acres of barley and oats will be taken out of grain production and used for green feed.

Brennan Turner, chief executive officer at FarmLead, an online grain marketing platform, said StatsCan’s estimate of about 21 million acres of canola, a reduction of roughly eight percent from 2018, represents a year-over-year drop of nearly two million acres.

But according to Turner, the StatsCan number is still more than the 20.57 million acres the market expected.

“I think the market was kind of surprised that canola acres didn’t drop by as much as people were expecting,” Turner said.

“That said … the question to ask ourselves is what, out of those 21 million canola acres, will actually be harvested this fall, given the dry start to the growing season.”

StatsCan numbers aside, drought conditions in May and early June could have a significant impact on overall canola production.

Below-average yields and a higher proportion of acres abandoned due to poor establishment could be reflected in StatsCan’s December production report.

Turner said a significant reduction in winter wheat acres, particularly in Ontario and Quebec, could have a positive impact on winter wheat markets going forward.

On a year-over-year basis, winter wheat acres are down nearly 30 percent in Ontario and close to 50 percent in Quebec, he said.

“Between those two provinces alone, we’re talking about something like 325,000 or 330,000 (acres) of winter wheat that was here last year but isn’t here this year,” Turner said.

A significant increase in oat acres — up 300,000 acres from April estimates and nearly 18 percent higher than 2018 plantings — is likely to have a negative impact on new crop prices, he added.

“Now that most of the Prairies have gotten rain, that oats crop is probably going to advance pretty nicely, although granted, there’s obviously a lot of things that can happen between now and when the combines roll,” Turner said.

“But with this many more oat acres … it potentially means a little more bearish price scenario.”

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