If American farmers plant as many acres of soybeans and corn as they say they’re going to, market analysts say Canadian farmers should be crossing their fingers for weather scares.
A U.S. Department of Agriculture report released March 31 shows farmers want to plant 68.8 million acres of soybeans, up 7.2 percent from last year, and the biggest acreage since 1980.
Corn acres may rise 2.4 percent from last year to 81.4 million acres, the largest area in 12 years.
The big increases are due in part to a change to U.S. government farm programs that until this year set limits on what farmers could grow.
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“I guess (the report) is the best example of the new world that we’re living in right now,” said Charlie Pearson, an analyst with Growers’ Marketing Services.
“Previously, we didn’t see a lot of shifting around in acreage or additional acreage in the U.S. because farm programs would prevent it.”
Statistics Canada releases its first look at seeding intentions April 30.
Because the United States is such a large player in world grain markets, Canadian prices tend to follow its lead.
Pearson said a large supply of soybeans will continue to fuel the fast-paced crush in the United States, where soybean meal is driving the oilseed market.
Soybean oil supplies will continue to build as a byproduct, forcing down the price of canola oil.
Too much hype
“To me, oil is a dog. That’s why canola cannot get hyped up into this,” said Greg Kostal, an analyst with Continental Grain.
“The highs in new crop (oilseeds) are in, and we will have to see some adverse weather problems down the road to fuel things higher.”
U.S. farmers are also planning to grow more flax.
“New-crop flax (price) is going to be one heck of a struggle to go higher, particularly as it’s a favored crop for a later planting season, if we’re to get into that,” said Kostal.
Pearson is least optimistic about the future for feed grain prices. Barley prices will likely follow a drop in corn prices because of the large supply that’s expected.
U.S. farmers plan to seed fewer acres of wheat, durum and barley.
“To me, that probably makes wheat one of the wild cards as we head into ’97-’98,” Pearson said.
“The worst in (cereal) prices will be behind us after the summer,” said Kostal. “We should see higher prices afterwards in the barley, the wheat.”
Kostal also said fewer acres of spring wheat and durum may ease pressure on the U.S. government to use subsidies on the crops, which would hurt Canadian prices.
Pearson said the report may lead Canadian farmers to price part of their new crop, either through deferred delivery contracts at elevators or by selling futures as a hedge.
“Look at new-crop prices and recognize the fact that there’s more ways than up that the market can go,” Pearson said.
Kostal said farmers should watch for weather scares and small rallies to make sales, especially for oilseeds.
The analysts noted what goes into U.S. fields could differ significantly from what farmers are planning.
“A person hates to admit it, but it’s really a poker game here now,” said Pearson.
“But as of today, to justify those higher prices, you do need that weather problem.”
