Farm Credit Canada expects canola, lentils and spring wheat to be the principal field crops that experience the biggest price increases in the second half of 2020.
The average canola cash price is forecast to rise to $467 per tonne in the last half of the year, up from $430 per tonne in the first half.
“We’re still fairly bullish on canola,” said Craig Klemmer, principal agricultural economist with FCC.
That is despite the expectation that 2020 canola production will be up one percent over last year as a decrease in seeded acres is offset by higher yields.
European Union demand for the crop is expected to remain strong despite stiff competition from Ukraine and Australia.
Red lentil prices are forecast to rise to $481 per tonne, up from $447 per tonne in the first half of 2020.
That is a commodity that outperformed FCC’s price forecast for the first half of the year by a wide margin due to unexpectedly strong demand out of India.
Canada benefitted from India’s decision to drop the import duty on lentils to 10 percent from 30 percent from June 1 through Aug. 31.
“We remain hopeful that we continue to see exports flowing into the Indian market and that would continue to support pricing levels,” said Klemmer.
Spring wheat prices underperformed compared to FCC’s expectations during the first half of 2020.
The agricultural lender expects a strong second half of the year with prices rising to $243 per tonne, up from a disappointing $229 per tonne in the first half.
“We’re looking for it to rebound a little bit, increasing kind of in line with what we had originally forecasted,” said Klemmer.
FCC sees strong demand for the commodity and some price premiums for spring wheat.
Bruce Burnett, analyst with MarketsFarm, has no bone to pick with FCC’s outlook.
“It’s probably a good stab at where prices are going,” he said.
Export demand for canola, lentils and spring wheat has been “really good” of late.
“We did tighten our supply/demand balance sheets significantly in this crop year. That has kind of helped out with pricing,” said Burnett.
“From my perspective, demand will remain strong, certainly through the first half of this marketing year.”
However, he believes spring wheat may struggle to reach the price levels that FCC is forecasting.
The FCC price outlook for corn and feed barley calls for a slight downturn in prices in the last half of the year.
Klemmer said that is largely due to the expectation of a 10 percent increase in United States corn production in 2020 and highly uncertain corn ethanol demand in the U.S. marketplace.
FCC is also forecasting an increase in Canadian feed barley supply.
The good news is there is also a large supply of cattle in Western Canada due to a backlog of animals needing to be processed. And there has been strong export demand for feed barley this year.
FCC anticipates a slight decline in durum prices due to expectations of a good North American harvest. Prices will fall to $266 per tonne from $274 per tonne in the first half of the year, which was well above FCC’s original forecast.
Yellow pea prices are also forecast to fall slightly to $257 per tonne from $265 per tonne.
Domestic demand for plant-based proteins is projected to remain strong due to disruptions in meat supply chains caused by COVID-19.
In general, prices for grains, oilseeds and pulses are expected to remain close to their five-year averages, which is remarkable given all the disruption caused by the global pandemic.
“It really is showing the resiliency of the industry,” said Klemmer.
The Canadian dollar has gained significant ground against the U.S. dollar since reaching a low of 69 cents U.S. in March.
“We expect it to stay below (75 cents U.S.) on average for the rest of the year,” said Klemmer.
That along with low interest rates should support profit margins for Canada’s grain, oilseed and pulse operations for the remainder of 2020.