Canola looks like a profitable crop for 2004, but prairie farmers are not planning to seed huge acreages of the oilseed this spring, a Statistics Canada survey has found.
The April 23 report, based on a survey of farmers’ seeding intentions, shows prairie farmers plan to increase canola acreage to 12.6 million acres, which is above the five-year average of 11.2 million acres. The report forecasts declines in spring wheat, durum and barley.
While some market observers have forecast that prairie farmers would seed up to 15 million acres of canola, Brenda Tjaden Lepp of Mercantile Consulting Venture in Winnipeg was not surprised by the report.
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“It’s not the most profitable crop option out there,” she said.
For Manitoba farmers, the most profitable crops appear to be soybeans, dry edible beans and sunflowers, said Tjaden Lepp, who has analyzed likely returns based on current market prices.
And the Canadian Wheat Board’s spring wheat fixed price contract also offers a crop that is attracting producers away from canola.
“It looks better than canola in some areas,” said Tjaden Lepp.
Ken Ball of Benson Quinn-GMS said he was not surprised by the canola estimate. While the barley and oat numbers were slightly under trade expectations, analysts have been dropping their canola expectations recently, he noted.
Canola market analyst Nolita Clyde said the canola acreage number was slightly lower than she expected and she was surprised by the provincial acreage breakdown. Alberta is forecast to increase canola acres, but the province is dry and farmers don’t like to seed canola into dry soils, she said.
Tony Tryhuk of RBC Investments said he won’t be surprised if canola acreage ends up at the report’s estimate, but was surprised to see it already forecasting the relatively small acreage.
“I like the number as a final number, but I don’t necessarily like it as a starting number,” said Tryhuk.
Crushers and exporters will fall short of supply if weather problems reduce the acreage or yield.
“I wouldn’t want to see it decline much from here,” said Tryhuk.
Ball said talk of canola area increasing to 15 million acres “was just fly-by-night stuff.”
Canola’s price strength has forced buyers of other crops to bid up prices to “buy” acres away from the oilseed.
Recently, sunflower prices have climbed and the price of other small acreage crops are following.
“With all the excitement in soybeans and the run-up in canola and different things on the feed grains side, it’s really muddied the waters,” said Tjaden Lepp.
Farmers are in the fortunate position of choosing among several good options.
“You can’t go wrong,” she said.
“This year nothing shows a negative option. It’s been a long time since we saw that situation in the spring.”
Tryhuk said new-crop canola futures prices are attractive now, but they are unlikely to last if an average crop is produced.
“It’s extremely unusual to see new-crop futures at $400 this time of the year,” said Tryhuk.
“If we get a 7.5 or eight million tonne crop, it’s hard to believe the futures would be staying up at $8 per bushel.”
Ball said few farmers have been taking advantage of new-crop futures because many are worried about dry growing conditions.
That lack of selling is supporting canola prices.
Spring rains would probably cause more land to be seeded to canola.
“If we came in Monday morning and saw that a solid system of precipitation for the Prairies on the forecast, we’d see a pretty massive selling of new-crop canola,” said Ball.
For now, buyers aren’t worried about dry western soils.
“It’s not a big deal now,” said Tryhuk.
“There is still time to get timely rains.”
