There aren’t any no-brainer crop picks for producers with a little spare acreage this spring.
That’s the universal view of advisers contacted by The Western Producer.
“There’s nothing to me that’s all thatobvious on either the winner or the loser side,” said Charlie Pearson of Alberta Agriculture.
Provincial agriculture departments, grain companies and private analysts have released their annual crop return calculating programs, but analysts say they reveal no big differences among returns for the major crops that would make it easy for producers to decide.
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Even among niche specialty crops, promising looking ones like lentils could lose their edge if too many producers latch onto them.
Still, analysts were willing to share their views on what crops they would bet on as the likely winners and losers of 2009-10.
John Duvenaud, Wild Oats
Duvenaud thinks most crops have about the same risk-reward profile, but King Wheat is the most likely big acreage crop to have a good year for producers.
“Hard red spring wheat is going to be the sleeper crop for 2009,” he said. “We have lots here (in Canada), of course, but on a global basis there’s not that much around. That’s the one I’d go with.”
He also thinks green lentils could do unexpectedly well because farmers are backing away from it.
“You don’t carry green lentils over anyway, but we have a very small carry. Almost none. And half the crop is going to be reds. Greens might be the ones to be producing. It might be fairly tight.”
It’s tougher to pick a crop to avoid.
“There’s nothing that really stands out as being a terrible crop. They’re all pretty mediocre compared to a year ago, but relatively, you got me. I’ve been farming for 20 years and what I’ve finally evolved into is that I’ve got my rotation. I do my rotation and I let the chips fall where they may, marketing-wise.”
Charlie Pearson, Alberta Agriculture
Pearson thinks crop-to-crop comparisons show no large acreage crops are clear winners. Some farmers appear to favour canola, but the market outlook for the big acreage oilseeds is going to be dominated by what U.S. farmers choose to plant this spring.
“Watch U.S. soybean acres,” he said.
“Right now the focus is on South American weather (which appears to be reducing soybean future supplies), but there’s still lots of carryover. Expect soybeans (acres in the U.S.) to gain at the expense of corn. That’ll put continued pressure on soybeans.”
Soybean oil appears to be stronger than soybeans, however, and that’s a good sign for canola, which is mainly an oil crop.
Some small acreage crops could bring nice returns this year, but that’s their Achilles heel. If farmers crowd into mustard and lentils too heavily, their prices could sink.
“They’re looking really optimistic looking ahead, but Canada’s a major part of world trade (for those crops) and if we shift a lot of acres ourselves, what we do can have a big impact on the market.”
Pearson’s prime recommendation is for growers to lock in profitable prices for whatever they grow early on, rather than attempt to play the market this year.
He advises producers to look at the cost side of their business – seed, fertilizer, fuel – and calculate what price they need for a decent return.
“If they want to capture an upside, they can look at other strategies, like (replacing their sold crop) with call options.
“Recognize that there is a lot of uncertainty this year. When you’re locking in inputs, if you’re (also) locking in grain prices at least you’re paying for the inputs. If you want a wild card, look at the other tools that are available – calls or whatever.”
Errol Anderson, Pro Market Communications
Anderson thinks canola might get carried higher on two factors few people are now expecting, and that have little to do with underlying supply and demand: speculative money and inflation.
“I’m sniffing a real increase in inflation (later in 2009-10). I know right now we’re getting deflation, but a lot of government money is getting dumped into the economy, and it’s going to surface in the markets, and I think food is going to be a target. Soybeans will be a target (for speculative money expecting a crop price rally). And canola futures could flare up and the basis levels will widen out. Soybeans will catch the attention of the commodity funds.”
He thinks spring wheat has a good shot at high prices this year, but the wrinkle is that farmers need to produce the top grades or they will miss the opportunity.
“If you’ve got the high quality wheat, the world’s going to run short again. But it’s a tough call on the degree because of the way the weather affects the grades.”
He also thinks a long-shot gamble that could pay off is oats, which has been the market laggard this winter.
“There are a lot of oats out there right now, and a lot of analysts are bearish, but the miller is caught like Harper is with the Liberals, and they know it. The last thing they need is for Canadian acres to drop. They’re trying to buy the oats as cheap as possible, but in all honesty, next year, if Canadian acres are down and the U.S. can’t supply their own mills, look out. It’s a real sleeper.”
He also thinks peas could be the winner among the small acreage crops due to producer avoidance and steady demand.
“A lot of growers will switch from yellow peas into lentils because of price. But India is going to be a steady, steady, steady buyer of our yellows for years ahead and I really think those edible peas, both the greens and the yellows, have got a pretty decent future.”
If there’s one crop to avoid this spring, it appears to be feed barley.
“There is so much feed wheat in the world. It’s going to last a while.”
Darren Frank, Farmlink
Frank thinks there’s little to choose between this spring in terms of better and worse outlooks, but malting barley appears to offer the most opportunity. However, growing the crop is always a gamble.
“It’s one of the leaders, as long as you get selected. If you don’t get selected, you’re in the feed market, and that doesn’t look positive. Losses in the livestock sector are likely to suppress demand and there are decent supplies all around the world.”
He thinks corn should do well, but producers may have to hold it until later in the crop year as stocks get worked down. Large stocks are also suppressing durum prices, but producers will watch the Canadian Wheat Board’s first 2009-10 Pool Return Outlook to see if there are enticing premiums.
Canola doesn’t look great because of expectations for increased oilseed production on both sides of the border.
“It depends on soybeans. If the U.S. farmer swings too much to the soybeans, it’ll keep pressure on our canola market, especially if we’re above 16 million acres (of canola).”
Mike Krueger, The Money Farm
Krueger said if he had to guess, he would expect to see northern tier U.S. farmers plant less canola, wheat and corn, increase barley and definitely boost soybeans. Also, if wet conditions slow seeding, sunflower acres could be pushed higher.
However, he said farmers likely haven’t fixed their seeding plans yet.
“I get the sense that there’s a huge amount of uncertainty. I’ve spoken to probably 500 farmers at farm meetings in the past few weeks and I’ve gotten the sense that they don’t know what they’re going to plant.”
Joe Victor, Allendale Inc.
Victor said farmers just south of the U.S.- Canada border are balancing market outlooks and deciding how many acres to plant of crops that compete directly with Canadian crops.
“What the (U.S.) farmers are telling us is that they like spring wheat, they also like soybeans, but if they had to choose one thing, they’re most interested in the contracts from the edible bean buyers.”
Midwest U.S. farmers have been shifting between the big crops.
“Out of the three main crops (soybeans, corn and wheat) it is wheat that is the disfavoured child right now.”
That feeling has most affected winter wheat acreage, but farmers feel more positive about spring wheat. American farmers have been shifting planned acreage from corn to soybeans since early January, but right now the soybean-corn futures price ratio for new crop is about 2.2 to one, which suggests the two crops are in balance.
“That’s very much a neutral number.”
However, if the U.S. Department of Agriculture increases its forecast of year end corn stocks, farmers could shift into soybeans, which would be good for future corn prices.
“Near term, we’re bearish on corn. But longer term, through pollination and harvest, we feel that soybeans becoming the favoured child this spring over corn means we’ll start to see a tighter basis and potential for a mid-summer rally, and cash strength for corn when we get to the fall harvest. It’ll be the opposite for soybeans.”
