Introduction
The saying that farmers grow specialty crops while they’re waiting for the price of wheat to go up hasn’t quite died. The circumstances that still make it true, however, certainly have.
For the first time in too many years, farmers can seriously consider a whole range of crops that could be in-the-money in 1994.
To help you decide which crops will get your nod this year, Colleen Munro, the Producer’s Farm Management Editor, talked to some of the people who know the grain business inside out.
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Canola
[Ray Bradbury is senior export grain trader with XCAN Grain Pool Ltd in Winnipeg.]
Q The Statistics Canada Feb. 2 report came out with 3.2 million tonnes of visible stocks. Is that too much for the market to handle?
Bradbury: No. Definitely not. Some traders are reporting negative carryouts to 400,000 tonnes. I personally think the carryout could be under 100,000 tonnes if we could physically get there. The exports are all on the books.
We’re looking to export around 800,000 tonnes to Europe this crop year. Exports to Mexico are projected around 420,000 tonnes. U.S. demand has been steady. The only questionable number seems to be imports by Japan. They got off to a slow start because they bought European seed in August but by the end of December they had taken 630,000 tonnes.
Q What does that mean for production and acreage for this crop year?
Bradbury: I think farmers are looking at producing a bigger crop. We’ll have new farmers again this year. Whether or not we can get to 12-14 million acres on the high side is a question.
If we do produce a 13-million-acre crop, which should give us production of around 650,000 tonnes, we can definitely consume it. We’ve seen it in the current crop year; we should do the same next year.
Q Have we hit the high price on canola?
Bradbury: Personally, I don’t think so. I don’t know if we can get to $500 (per tonne) but I think we can go after it and see whether we can’t hit a new contract high again.
Q What would be the factors that could send us to a new contract high?
Bradbury: I think just the tightness, we haven’t done enough price rationing in the current crop with the amount of canola that has moved out and the sales that are on the books. You can see carryouts of under 100,000 tonnes when you combine that with the lack of high quality seed at the end of the crop year, we have to do something to stop the consumption.
Q And the easiest way to do that is to run the price up.
Bradbury: That’s right. I think we can take out $470-$480 per tonne basis the June contract. We won’t stay up there, but that’s where we have to get to ration demand.
[Marvin Hildebrand is a grains market analyst with the Canadian Wheat Board in Winnipeg, Man.]
Q What are the prospects for durum this year?
hildebrand: In the West, there’s a wide consensus that durum area will be higher. The largest year-on-year increase in durum area in the last 15 years has been about 25 percent. That may not be the ceiling this year. We’ve seen extraordinary price premiums develop over the past year to hard red spring wheat. We may in fact see an area response more than 25 percent.
Q How much acreage did we seed to durum last year?
hildebrand: We seeded 3.615 million acres and harvest 3.56. We could see a really sharp increase in durum.
Q What kind of price is the 1994-95 durum pool going to pull in?
hildebrand: One of the things we need to keep in mind is we have drawn (durum) stocks down substantially. Not only in Canada but in the U.S. and Europe, all of the major exporters. Even with higher production in all of those areas next year, there are still some indicators that suggest durum prices will remain at a fairly healthy premium to spring wheat next year.
[Cal Kelly is a farmer and grains market analyst specializing in the special crops from Regina, Sask. ]
Lentils
Q Will we see a million acres of lentils again in the spring of 1994?
kelly: No. The trade and most analysts are predicting a decrease. The question is how much? Earlier on most people were thinking in that 10 or 15 percent cutback for around three-quarters of a million acres. I personally think the number is still high. We might see 500,000 to 600,000 acres.
Q Why do you think that acreage is going to drop by 40 or 50 percent compared to last year?
kelly: Two reasons. First of all, and I might get some debate on this, but the difficulty that so many growers had the last two years getting lentils to come in at a decent grade. I think the newer growers are going to be abandoning the crop or reducing acreage for certain. You had a lot of new growers that were planting 500 up to 1,000 acres apiece.
Second of all, there are opportunites in other crops, particularly durum wheat on the western side of the province, spring wheat elsewhere, canola — all these.
Q Will demand for the coming crop year match that kind of production?
kelly: We still will have plenty of lentils if we have a normal growing season. The normal demand in Canada would be 200,000 metric tonnes, and for the premium product exported for food, slightly under 200,000 tonnes.
We may have some difficulty regaining a couple of premium quality markets particularly the high-quality, high-priced markets along the Mediterranean, Spain, Italy. They demand a high quality product and they haven’t been happy the past two years.
Q What do those factors suggest to you as far as price goes?
kelly: I’d say steady. Contract prices have moved up a little bit recently reflecting the fact that producers have been slow in signing up and companies haven’t been able to get the commitment they were expecting. You can lock in Laird lentil now for 16 cents an acre for fall delivery, which is a pretty decent price. Estons are 15 cents.
Price is going to be very sensitive to weather. If we have either drought or excessive moisture we could have good upside potential. But if we have normal conditions with a reasonably-sized good quality crop, I would see market being a little bit softer. If we have a really good crop, the only thing that would keep the lentil market from going down is I think growers are not going to be eager sellers this year.
Peas
Q Let’s talk about peas now. Same sort of story as lentils the past two or three years, a huge increase in acres but demand has kept up pretty well. Where do you see things going in 1994?
Kelly: We’ve seen lentil acres triple and peas have quadrupled in the last three years. We’re fortunate that demand has kept pace.
Q Where’s that demand been coming from?
kelly: It’s basically been feed pea demand coming from the European Community. We’ve sold more from September to end of December than we did all of last year. That has happened because of a number of factors: Europe didn’t have the kind of crop they were hoping for and with lower amounts of soybean meal and high prices, that’s opened the door for peas.
Q Is Europe going to be a buyer again in 1994?
kelly: That’s the big question. Some buyers are putting sales on the books right now. The question is at what price? I would suspect that we’ll see a bit of reduction in price because of the anticipation of increased production of peas and a recovery in things like soybean meal and tapioca.
Q So that translates to what kind of a price?
kelly: You can still get prices in that $4 to $4.25 range per bushel for 1994. We’re still seeing sales booked in that range.
Q How about food peas?
kelly: The feed market is 80-90 percent of what the demand is, but we still have a food component for the higher grades … the 1 and 2 CWs into countries like India, Colombia, the Middle East. We need to have premium quality to hold that market share. We probably need to grow more yellow peas than we have in the past couple of years: the standard Express, Century-type pea. That’s the one that’s the most sought-after in the current crop year and probably will be next year.
Q Do those peas fetch a price premium?
kelly: You’re probably talking a premium of 25 cents a bu. for food grade. I would see that premium shrinking if we have a large surplus of (food) peas.
Q Is forward contracting an option for growers that are looking at peas?
kelly: It’s safe to guess that pea acreage will increase, probably between 1.5 and two million acres perhaps. That’s going to be another half a million tonnes to sell. It’s doubtful if Europe will absorb all that, especially with increased competition from Australia. They’ve had a good crop: record acreage, record yields, good quality.
There is some downside to this market, perhaps more so than the other specialty crops. That would tend to favor some amount of contracting or forward selling a portion of your crop.
Mustard
Q Let’s switch to mustardseed. It’s an older specialty crop, grown lots of places on the Prairies, what’s the outlook for this year?
kelly: I’d say pretty decent. One of the things to keep in mind here is Canada is a major player in the world market. We probably have 80 percent of the world trade and Saskatchewan has 80-90 percent of the Canadian production. And the whole oilseed complex looks good. Traditional growing areas have some options.
We’ve seen contracts move up partly to stay competitive with canola. They started out this winter at 11.5 and then 12 and now 13 cents. I think that’s a reflection growers are in no hurry to sign contracts. Any of the end users that want to book some tonnage now have to bid up to get people to sign.
Q What are we looking at as far as mustard acreage goes? We did 470,000 acres in Western Canada last year.
kelly: I’d just be taking a wild guess but I’d say that number is probably going to be down marginally. The carryover number of 78,000 tonnes is probably a little high for the end of this year. I see this market holding firm and it probably has some upside.
[Larry Ruud is grains market analyst with Alberta Agriculture in Edmonton, Alta.]
Q Let’s talk about feed wheat first. What’s the outlook for cleaning up what we’ve got left over for feed wheat and how’s that going to impact on next year’s crop?
ruud: Coming into the crop year we were sitting on close to six million tonnes of feed wheat and then got nailed with roughly another six million tonnes. Good strong domestic usage here, as well as strong export movement by the wheat board, will likely clear up the feed wheat problem.
I would say we’re going to end up with a carryover of about two million tonnes. The vast majority is being used by the feedlots and of course by the hog industry and the supply management end.
Q Is two million tonnes a burdensome carryover going into the new crop year?
ruud:: I don’t see it as a burden. Prior to the last couple of years, it could have been. But with all the feed wheat we’ve been saddled with, the feedlots in particular have become more comfortable feeding it, so it’s not viewed as a product that isn’t desirable.
Q If we do get a more normal grade distribution where will feed wheat prices go next year?
ruud: In terms of pricing, typically feed wheat would command a five to 10 percent premium over barley. I’m looking for western barley futures to move to somewhere around $110 per tonne, maybe $115 on the November contract. If that’s the case, southern Alberta feed wheat would possibly be up to $120 per tonne.
Q You mentioned burdensome barley stocks. How’s that going to work into the equation this coming crop year?
ruud: It’s definitely going to keep a lid on any significant price gains. This year I’m forecasting a carryover of five million tonnes, some people are down around 4.7 — depending on the split between feed wheat and barley usage. If it’s not in the barley it’s going to be in the feed wheat.
In 1994-95 I’m looking for smaller acres in barley; so likely smaller production. Barley acres could possibly drop by 600,000 acres. It really depends on the split that people use between their spring wheat and barley acreage.
Q Are farmers thinking seriously about oats this year?
ruud: Oats has been a crop of significant interest. We’ve been significant suppliers to the U.S. the last two years. I’m forecasting exports of about 800,000 tonnes and we’re on track to do that.
Q And the oats acreage?
ruud: I’d be surprised if we had any significant increases in oat acreage this year, about 3.4 million harvested acreage and planted acreage of 4.3 million, remembering there’s a lot of acreage that goes into green feed and silage. We’ve had significant increases over the last two years so it would be surprising to see another big boost this year.
I think $1.50 for number 3 grade is a good target to do some deferred delivery contracting at. We’re going to have a fair bit of carryover this year.
