Statistics Canada says prairie farmers plan to plant a lot fewer acres of canola this spring.
Some analysts and producer representatives say they can’t blame them.
“I don’t know how the industry can have these costs and expect people to be able to afford to grow the crop,” said Roy Button, manager of the Saskatchewan Canola Development Commission.
“You’ve got to get yields 25 percent above the Saskatchewan average to break even.”
Nolita Clyde of Ag Commodity Research in Winnipeg said farmers are unlikely to embrace a crop that offers them little this year.
Read Also
USDA’s August corn yield estimates are bearish
The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
“It’s a pretty ugly outlook and farmers might be asking themselves, ‘can I afford to grow this,’ ” said Clyde.
Statistics Canada, in its March survey of farmers’ seeding intentions released April 21, said prairie farmers plan to seed about one million fewer acres of canola this spring than last year, when farmers seeded more than 13 million acres.
It also expects spring wheat acres to fall by half a million acres.
Making up the difference will be big surges in flax and oat acres, as farmers embrace the only crops that paid good returns this winter. The agency estimates flax acreage will climb by 400,000 acres to 2.2 million this year. It expects a 17 percent increase in oats area this year, to 5.2 million acres from 4.4 million last year.
Analysts warn that sizable increases in either crop, whose prices soared in the past year because of low yields, not low acreage, could drastically reduce their prices come fall.
Cash-strapped and gloomy farmers will also increase summerfallow acres by 8.1 percent, the survey showed.
Durum acres will also jump, from 5.5 million acres last year to 5.8 million this year, which is slightly above the long-term average of 5.7 million acres.
Button said farmers are getting fed up with growing canola in much of Saskatchewan, where droughts and frost have severely damaged most of the past five crops. Last year Saskatchewan canola crops averaged only 22-23 bushels per acre.
For farmers who have seen their equity evaporate after drought and frost, justifying $6 per pound seed with pricey nitrogen fertilizer and expensive diesel is getting harder to do.
Button thinks many farmers will try to plant hybrid canola saved seed to reduce input costs.
Other farmers will simply move out of canola. Canola acreage is holding up better than it should, Button said, because other options are uninviting as well.
“If wheat had been 50 cents to a dollar higher, canola acres would have really dropped,” said Button. “It’s a huge investment cost with the crop, and you just can’t take that kind of risk.
“You could lose the farm in one year if you don’t get a crop.”
Clyde said the canola market seemed to shrug off the Statistics Canada report, with no obvious surge in prices in reaction to the acreage predictions. This was partly due to market incredulity that farmers would really expand summerfallow acreage by eight percent.
“The feeling is that some of that will flow back into canola,” said Clyde.
But canola traders also see huge stockpiles of canola left at the end of this crop year and little chance of shortages in the next 12 months.
There will probably be a 1.5 million tonne carryout at the end of the 2004-05 crop year and, “I expect a 1.7 million tonne ending stocks number for ’05-’06 with low yields. With higher yields, 2.4 million tonnes is more likely.
“It’s pretty ugly, no matter how you cut it.”
Not only is canola unlikely to be short, but even if a disaster reduced stocks of canola, the ocean of excess soybeans drowning oilseed markets would continue to wash over prices.
Clyde said the canola market is more likely to get worse than better. Years of poor yields in Saskatchewan have disguised the province’s potential production if good conditions reappear. Since the introduction of genetically modified canola varieties Saskatchewan’s average yield has not noticeably increased, but good weather could give the improved varieties what they need to run free.
Clyde said farmers’ negative view is unlikely to be shaken any time soon.
“Ugly is ugly,” said Clyde.
“Unless there’s a major crop disaster somewhere, it’s an ugly picture.”
