The plight of the prairie crop has begun scaring markets – and that’s good for prices.
“This crop is much lower than I thought it would be and lower than I think anyone else expected,” said Kansas State University market analyst Bill Tierney.
Saskatchewan Agriculture’s Aug. 5 crop size prediction caught many by surprise, finding far less crop in farmers’ fields than it had just a few weeks ago.
Saskatchewan Agriculture is now predicting a provincial grain crop of less than 20 million tonnes. Wheat is expected to have average yields of 22.7 bushels per acre, compared to trend yields of 29 bu. per acre.
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The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
The Canadian Wheat Board has also reduced its estimate of prairie wheat and durum production by three million tonnes.
Wheat markets have begun reacting to reports of prairie crop damage, but Tierney said they will probably react more strongly after digesting the news.
Right now, Saskatchewan Agriculture is predicting a crop abandonment rate of only one percent, but Tierney said farmers almost always increase their abandonment rate as crops deteriorate.
Abandonment occurs when farmers turn-in or leave a crop unharvested and when they harvest grain for livestock feed. With pastures drying up and bovine spongiform encephalopathy making farmers cautious, many will want to keep some crop on the farm, Tierney said.
When those extra losses are factored in, traders will get excited, Tierney said.
“I don’t think people have connected the dots yet.”
Benson Quinn-GMS analyst Ken Ball said large winter wheat crops in Manitoba and Ontario will mitigate the low prairie spring wheat production, but they will not make up for all the losses, which is something the markets have started to figure out.
“U.S. traders are watching the Canadian crop like a hawk this year, just like they were last year,” Ball said.
“We’re getting lots of calls from American traders trying to fish for information about the size of the losses.”
Losses on the Prairies will be limited by the fact that many crops are ready to harvest and will not suffer much more yield loss.
Wheat markets will now be looking to Australia to see the fate of that country’s crop.
