Exports to drop as crop shrinks

Lyle Kabatoff loads canola at the Odelein family farm near Quill Lake, Sask., that was destined for Cargill’s crushing plant at Clavet, Sask. There is concern that this year’s drought-reduced crop will mainly be used domestically, leaving foreign customers short of supply. | William DeKay photo

Canada’s crop exports are forecast to plummet 39 percent this year, leaving importers scrambling for product from alternative suppliers.

Total exports of grains, oilseeds, pulses and special crops are forecast at 36 million tonnes, down from 59 million tonnes last year, according to Agriculture Canada.

That would be the smallest export program since 2006-07 when Canada shipped out 35.9 million tonnes.

Production of all crops is expected to fall by 27 million tonnes due to drought.

That is in line with the satellite-based yield and production forecast for a 25 million tonne decline issued by Statistics Canada four days after the Ag Canada outlook.

Saskatchewan farm groups are calling on members of the Western Grain Elevator Association to eliminate administration fees and reduce penalties for the 2021-22 growing season.

“Many farmers’ yields across the Prairies will be well below their crop insurance coverage and they will be unable to deliver on even modest grain contracts,” the groups stated in a joint news release.

Farmers are not the only ones fretting about the short crop.

Jim Everson, president of the Canola Council of Canada, said exports are likely going to take it on the chin this year. That has to be making importers anxious.

Agriculture Canada is forecasting seven million tonnes of canola exports, down from 10.9 million tonnes last year.

Everson said Japan, the United States, China and Mexico will take the lion’s share of Canada’s vastly reduced export program.

“They will continue to be the key markets for canola in an environment where we don’t have the kind of supplies we’ve had in previous years,” he said.

Other customers will seek alternative suppliers or will be forced to substitute competing oilseeds.

Everson believes domestic crush should fare much better than the export side of the business.

Canola oil prices are sky-high due to robust demand from the recovering restaurant sector and the biofuel industry. That means attractive crush margins.

“We would expect processing to be robust through next year,” he said.

The U.S. Department of Agriculture forecasts 9.5 million tonnes of Canadian canola crush, down from 10.4 million tonnes last year. Agriculture Canada is less optimistic, forecasting eight million tonnes.

Dorab Mistry, director of Godrej International, said the canola situation could be far worse than the yield and production numbers indicate because he has heard from his Canadian industry contacts that oil content is also dismal.

“That is really a worry,” he said during a presentation at a conference organized by the U.S. Soybean Export Council.

“The lack of precipitation and high temperatures have crimped the oil content of canola seed this year.”

Agriculture Canada pegged wheat, durum and barley exports at 17.2 million tonnes, which would be about half of last year’s program for those three crops.

Daniel Ramage, director of market access and trade policy with Cereals Canada, warned that the jury is still out on how big the crop will be.

“It is still early in the harvest,” he said.

Ramage noted that the USDA is forecasting 24 million tonnes of Canadian all-wheat production, while the International Grains Council is using 24.5 million tonnes.

Those estimates are well above Statistics Canada’s 22.95 million tonnes and Agriculture Canada’s 20.2 million tonnes.

The trade has mixed views about the Agriculture Canada number.

“Some people in the trade are more optimistic. Some think that it is close to reality. There is a range of opinions,” he said.

Customers have plenty of alternatives for sourcing wheat but there are problems elsewhere around the world as well.

SovEcon is now forecasting 33.9 million tonnes of Russian exports, down from 38.5 million tonnes last year. Kazakhstan is also dealing with a short crop. And U.S. spring wheat yields are forecast to be down 37 percent.

Canada’s pea exports are expected to fall to 2.45 million tonnes, down from 3.65 million tonnes last year. Lentil shipments are forecast at two million tonnes, down from 2.4 million tonnes.

Mac Ross, director of market access and trade policy with Pulse Canada, said Agriculture Canada’s and Statistics Canada’s production estimates are generally lower than many analysts were forecasting.

But he has no doubt that exports will be way down compared to last year.

That could be a big problem for overseas buyers because Canada is a major player in pulse markets.

For instance, Canada has a 95 percent share of China’s pea import business. China may be forced to grant access to competitors like Russia and Ukraine.

Meanwhile, red lentil prices continue to rise in markets like India and Turkey, which both have short crops. India recently slashed its import tariff on lentils.

Those markets may have to turn to Australia but Australia is forecast to harvest 588,000 tonnes of lentils, down seven percent from last year. Private forecasters think it will be larger than that.

The one potential upside to moving a smaller crop is that there should be fewer logistical headaches for shippers.

That is in an ideal world. But today’s transportation system is far from ideal due to a container crisis that is holding many shippers of pulses and special crops hostage, said Ross.

“That more than anything has been the biggest thorn in our side,” he said.

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