The global price outlook for major crops looks bearish, but several factors unique to Canada present a more upbeat forecast for prairie farmers, according to a CWB analyst.
Those factors are a weak Canadian dollar and tightening stocks of Canadian crops, Bruce Burnett, CWB’s crop and weather specialist, said at a CWB session during Crop Production Week.
He thinks malting barley and pulse prices could rise in the new crop year.
Canola prices could also rise, or at least move to the top end of the usual price range relationship with soybeans instead of the low end.
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Durum will likely be off the highs seen earlier this crop year but should remain attractive.
Wheat futures are unlikely to improve much but could go higher if a weather problem develops in a major growing region.
The heavy lifting for canola and wheat will likely be done by basis levels in Canada, he said. They will likely improve as the local supply tightens, meaning cash prices, particularly for quality grain, could edge higher.
Burnett thinks that in the near term, the Chicago crop futures markets could test the harvest lows that were set in late September. That market is currently focused on the large supplies of corn, soybeans and wheat in the United States and elsewhere, the rising U.S. dollar and the impending harvest of record corn and soybean crops in South America
However, the effect of the decline in Chicago market will be felt less here because the Canadian dollar is significantly weaker than it was in the fall.
Also, the supply and demand situation in Canada for most crops is getting tighter.
He thinks 2014-15 ending wheat stocks could fall to a little more than five million tonnes, down almost three million tonnes from the previous year and considered fairly tight.
Durum year-end stocks could fall to a million tonnes or even less, depending on exports. Little of it will be of good quality. Supply could fall again at the end of 2015-16.
Burnett is significantly more bullish on canola stocks than other analysts, saying they could fall to a million tonnes or less at the end of this year. Year-end stocks in 2015-16 could be 600,000 tonnes, which would be a tight situation last seen in 2012-13.
Burnett thinks western Canadian seeded acreage of all crops this spring could be up two million acres because of fewer problems with saturated or flooded fields, but a return to average yields could mean the harvested crop might not be a lot larger than last year.
And as already noted, stocks should continue to fall, putting an end to the negative effects of the record 2013 crop and transportation backlogs of the winter of 2013-14.
He said Canadian durum acreage will likely increase 18 percent. It might have increased more, but he thinks the lack of quality seed and trepidation among farmers after last year’s poor quality harvest will limit the upside.
Reviewing global weather, Burnett thinks South American crops are starting to mature to a point that a record crop is guaranteed.
However, because of the shifting relationship between corn and soybeans, the 2015 U.S. soybean acreage is unlikely to rise as high as was feared a few months ago.
On wheat, he said Canadian farmers shouldn’t put much weight on reports of the last few weeks about cold weather hurting the U.S. winter wheat crop.
Reports of damage to the Russian winter wheat crop are true, however, and CWB thinks that crop will be 10 million tonnes smaller than last year. The wheat futures market though has taken this into account and even got too excited before Christmas about Russian wheat export controls.
The potential for another wheat rally depends on spring weather in the Black Sea region.
darce.mcmillan@producer.com
