Wednesday September 30 2020

Agriline

Agriweek


Agriweek Canadian agribusiness authority since 1967

USDA SEES BIG '20-21 CROPS AND CARRYOVER

Probably the most noteworthy thing about last week's monthly USDA supply-demand report, which gave its first forecasts for 2020-21, was the non-reaction from the commodity futures markets. It was as if the trade so accurately anticipated the official numbers that the market had already adjusted to what was basically a continuing bearish supply-demand scenario. Chicago futures on May 12 for both old- and new-crop months mostly moved less than a nickel a bushel and few over a dime. For the 2020-21 projections USDA used acreage from the planting intentions survey in March, which reflected a return to more usual crop areas after abnormally low 2019 acreages. Corn and soybean area last year was reduced by 8% from historic levels because wet weather prevented planting. The difference was 15 million acres and USDA expects it to all come back this spring with very high yields. USDA projected the 2020-21 corn harvest to be 17% larger than last year at a record 16 billion bushels, but only 8% more than use. The wheat crop is to be 1.866 billion, 3% smaller than in 2019 and 10% less than disappearance, which is expected to be 2.5% less than in the current year. Soybean production is forecast to increase 16% over 2019 against an 11% increase in total use, but after adjusting 2019-20 carry-in 2020-21 ending stocks are to drop a huge 30%. The report made very optimistic projections for consumption of US crops. All-wheat production of 1.866 billion bushels will meet demand of 2.075 billion, reducing carryover to 909 million from 978 a year earlier and 1.080 billion two years earlier, however stocks are still a very high 44% of use. The season-average farm-gate wheat price is unchanged from 2019-20 at $4.60 a bushel. Corn area harvested in 2020 is expected to be 10% higher at 89.6 million acres and average yield to rise 6% to 178.5 for a 17% increase in production. With a 7% increase in total use, carryover will increase to 3.32 billion, the highest in 33 years and the fourth-highest ever. Even to get that USDA had to use very aggressive estimates for demand. It expects US corn exports to increase by 21% in the new crop year to 2.15 billion bushels, after its original 2019-20 figure was missed by a mile. It predicted a rebound in corn use for ethanol to 5.20 billion bushels from 4.95 in the current year. For this to happen motor fuel consumption in the US would have to return to record pre-virus rates starting this fall, and the Trump administration's ethanol policy would have to be much more friendly. While every sign points to smaller US livestock herds, USDA expects feed use to increase 6%. With higher acreage and yields the soybean crop will be the second-largest in history at 4.125 billion, but carryover is forecast to drop to 405 million from 580 million bushels. This tolerable carryover after a 16% production increase depends on a 22% rise in exports to 2.050 billion. This is impossible without record buying of US soybeans by China, which would have to meet the highest expectations in the Phase 1 trade agreement. The average soybean price forecast for 2020-21 was dropped to $8.20 a bushel from $8,50 in the present year. (05/18/2020)

AGRICULTURE GETS TABLE SCRAPS FROM TRUDEAU

The Trudeau government is so disdainful of agriculture, or else so ignorant of its nature and state, that it thinks $252 million is a fair amount to offset the damage done to farming and food processing by the Wuhan virus epidemic. Even more money, the prime minister said, could come later “if needed”. Trudeau has vacuously repeated over and over that Ottawa is “focused on maintaining the food supply chain”, but $252 million is an insult to everyone in it. The amount is less than piddling compared to the sums shovelled out to just about everybody else in Canada. It is less than 10% of the $2.6 billion the Canadian Federation of Agriculture asked for, and even less than that if agricultural assistance matched that given other sectors. Agriculture generates 8% of GDP but is receiving barely 2% of the $109 billion that the government has allocated in economic support for those harmed by the coronavirus. It is less than half of the $500 million (4.7%) earmarked for entertainment, sports and arts, or $307 million (2.9%) for aboriginal businesses and financial institutions, or $350 million (3.3%) available to welfare charities and like organizations. Of the total, $125 million will be put into the AgriRecovery scheme, a vague, loose and seldom used part of the so-called 'business risk management suite'. Cattle and hog industries are to get $50 million each to help feed and keep animals longer which cannot be sold due to packing slowdowns. Unsold hogs are accumulating at about 35,000 a week and cattle over 10,000. The other $25 million is for unspecified purposes. Another $77 million will be available to help food processors buy personal protection equipment for workers, adapt to new health protocols and “increase domestic processing capacity”. It might buy some masks, but it is laughable to present that $77 million can make any measurable contribution to food processing capacity or efficiency. There is $50 million to buy 'surplus' food, items intended for restaurant and food service trade, for donation to food banks and other welfare agencies. AgriRecovery is cost-shared 60/40 with the provinces. If the provinces do not put in their share the amount becomes $75 million, not even a token. Trudeau also announced that the government-guaranteed line of credit of the Canadian Dairy Commission will be increased by $200 million. The CDC buys and temporarily holds off the market surplus dairy products as part of a price support scheme but there has been no talk that it is not already adequately funded. (05/11/2020)

LIVESTOCK SECTOR ON THE EDGE OF A CLIFF

The second shoe dropped on April 20 when Cargill shut down its High River beef plant completely for an indeterminate time. A week before the slaughter rate was cut by more than half to 15,000 a week. Over 300 of 3,700 employees tested positive for the Wuhan virus and not enough workers were coming in to keep running even at the reduced rate. The JBS plant at Brooks continued to operate although it also had positive cases. For the time being all pork plants in Canada were working. It is about to be determined whether enough cattle and hogs can be processed with the coronavirus and measures to control its spread to prevent a simultaneous back-up of livestock and a retail meat shortage. JBS, Cargill and all other packers and processors are doing everything possible to prevent extended shutdowns and keep the meat supply chain moving. All known sanitation and worker protective measures have now been taken at all meat facilities. Nothing more can be done until the virus completely recedes. Employees of JBS, Cargill, Olymel, Maple Leaf and smaller companies are getting wage top-ups of up to $4 an hour, after earlier receiving bonuses to encourage attendance at work. However a shortage of workers persists and despite record unemployment in Alberta the companies are having trouble replacing absentee workers. This is a worst-case turn of events for the western Canadian beef industry and it has unfolded in less than a month. What happens next depends on how long it takes for the coronavirus to be contained. Cargill at High River, which was idle late last week, accounts for 35% of all Canadian slaughter. Even if JBS keeps going, 6,000 to 8,000 cattle a day will have to be held back until everybody returns to full capacity. All packing and food processing plants are vulnerable to virus incidents and worker shortages. The main eastern beef packer is Cargill at Guelph. Manitoba has two of the biggest pork plants in Canada and Alberta has Olymel at Red Deer. Any of them (or for that matter all of them) could be closed if there is a virus hot spot. We are two plants away from the shutdown of 80 to 90% of beef processing in Canada. Packing capacity in Ontario is already tight because of the closure of the Regency Rydell plant in Toronto late last year. Exports to the US of cattle and hogs that Canadian plants can't handle is not an option because American packers have as bad or worse coronavirus issues. Decisions whether to close or keep food processing plants running are no longer entirely up to the companies. Local and provincial health authorities and the CFIA are also in the act. It could be worse: if the Alberta NDP party, now the least consequential political entity in Canada, were still in power it said it would order all packing plants in the province closed immediately to protect worker health. (04/27/2020)

RUMORS OF DEATH OF CANOLA HIGHLY EXAGGERATED

A few weeks ago the once-great, now-flimsy Financial Post ran a superficial, error-riddled, logic-challenged article on its front page to the effect that canola has seen its best days. Trade troubles with China, bad weather, a plunge in prices (from $700 to $455) and high costs have doomed the crop. The article was widely quoted and reprinted, another measure of the slow collapse in the quality of mass-market news and information today. The only part of the article that was not off the wall was the part about China. As western farmers start to think 2020 cropping plans they face the same issues as in every other recent year and most will come to the same conclusions. The chronic, built-in challenge in western agriculture is the low per-acre value of the crops that grow there. Canola continues to be the highest-grossing option. Western farmers will continue to seed as much of it as sensible crop rotations allow, or in some years more than sensible. The crop economy will continue to heavily depend on it as it has for 30 years. Averaged over recent years, gross revenue from canola in the better-yielding parts of the prairies on farms using up-to-date management practices has been roughly $500 an acre compared to $300 to $375 for cereals and peas. Production costs for canola are the highest of any crop, but after direct expenses a typical margin for canola at the prevailing yield has been about $210 per acre compared to $120 to $160 for other mainline crops. Just a 10% increase in canola yield raises it to $260 or more. On 10,000 acres canola can be worth $1 million a year more. Canola has the overwhelming advantage that it responds far better to intensive management than any other western crop. It also tolerates adverse weather, especially excess moisture during the harvest period better than any cereal. Canola area in Canada has exceeded 20 million acres every year for the last 10 years. The 10-year low was 20.16 million in 2013 and the high was 22.91 million in 2017. In 2018 acreage dropped 2%, with another 7% in 2019. Area was reduced last spring because of seriously dry spring seedbed conditions, not uncompetitive economics. Though spring weather will, as usual, have a lot to do with it, the chances that canola area will increase in 2020 are far higher than that it will decrease. (01/27/2020)

CROP PRODUCTION APPEARS OVERESTIMATED

Statistics Canada's final crop production report for 2019 on December 6 did not resemble anything that could be drawn from weather, country observations, provincial crop reports or the fact that 2 to 3 million acres of canola and other crops will spend the winter in the fields. In the worst growing season in memory, with a late spring, early season drought, a ten-week harvest with constant rain and several snowfalls, StatsCan put western production of the main crops at 70.41 million tonnes, 1% above 69.65 last year on almost unchanged seeded area. Average yield of six of the top 10 western crops was reported higher than in 2018 and in most cases higher than the September satellite-based report The prior year also had its difficulties but was not nearly as problematic as 2019. Some final yields with 2018 and the first 2019 (September) report in brackets: spring wheat 51.4 (51.7, 50.0); durum 38.9 (34.8, 34.1); barley 70.8 (65.0, 66.4); canola 40.0 (39.8, 39.4); peas 36.0 (37.2, 39.1). Yield records for most western crops were scored in 2016. The current year's yields with 2016 in brackets: spring wheat 51.4 bushels per acre (52.0); durum 38.9 (48.8); barley 70.8 (73.4); canola 40.0 (43.1); peas 36.8 (42.7). The report projected all wheat production slightly above 2018 results with spring wheat up 7.2% after an 8.5% increase in seeded area. In Alberta, where the provincial crop report said 10% of wheat was not harvested, Statistics Canada indicated an increase in spring and durum wheat to 9.80 million tonnes from 9.58 from a 6.9% larger seeded area. Western durum area was 21% lower at 4.89 million acres but production was reported just 13.5% smaller with average yield increased to 38.9 bushels per acre from 34.8 in 2018 and 35.3 in 2017. Durum areas of southern Saskatchewan experienced the most severe drought during the first half of the 2019 growing season. November estimates placed the canola crop at 18.65 million tonnes, the lowest since 2015 and 8.3% smaller than 20.34 million in 2018. Seeded acreage declined 8.1% but average yield was reported at the third-highest on record at 40.0 bushels per acre, compared to 39.8 in 2018 and 41.0 in 2017. The Saskatchewan canola crop was estimated at 10.13 million tonnes, down 7.3% from the prior year on a 6.5% drop in seeded area. The barley harvest was projected at 24% larger on a 14% increase in seeded area. The barley-growing parts of Alberta and Saskatchewan had the largest proportion of unharvested area in the west. The oat crop was put at 4.16 million tonnes, 21% over 2018 while seeded area increased just 18%. (12/16/2019)

FARM CASH INCOME HEADS LOWER IN 2019

There is no way to wish away what has been happening in the farm economy this year. Crop prices eroded more or less steadily as 2019 unfolded, in most cases by more than the increases in quantities sold by farmers from the bumper 2018 harvest. Only a handful of crops did not see substantial declines averaged over the first three quarters of the year and there is nothing more promising in sight for the fourth. Livestock prices have been very volatile, especially hogs, and marketings have been similar. Cattle prices and marketings were also close to year-earlier, and the supply-managed sector was steady. The only income component likely to rise is government program payments, only because of massive crop insurance payments in the west. Putting it all together on a Rae & Jerry's napkin, it looks like farm cash receipts for 2019 will have trouble topping $59 billion, around 5.5% below 2018, which was basically unchanged from 2017 but technically the all-time record. Disregarding inflation and the dollar exchange rate, gross farm cash income has been on a very slow upward trend for five years. It was $58.29 billion in 2014, $60.02 in 2015, $60.62 in 2016, $62.20 in 2017 and $62.24 billion in 2018. Farm cash receipts for the first quarter of 2019 were reported by Statistics Canada in May, at $15.93 billion, a 3% increase over the 2018 period. Farm gate revenue from crop and livestock sales and government payments was slightly higher nationally and in the west. All the year-to-year change in the 2019 calendar year will have occurred after April 1. About 24% of the year's farm cash income is received in the first quarter. The rough calculations, which are intended as worst-case, suggest that cash income from crops will drop by 6 to 8% for all of 2019. Besides lower reference prices, the poorer quality of the 2019 harvest will be reflected in farmers' returns, and there will also be an impact from the delayed harvest. Cash income from livestock sales could decline by 3% largely because of lower hog prices, which have been affected by the trade troubles with China experienced by both Canada and the US. Government program payments will increase perhaps by up to 40% as crop and hail insurance compensation rises. Crop insurance payments will easily set a record because of large losses, more area insured and higher insured values. The majority of crop insurance compensation for 2019 losses will be received in the 2020 calendar year, notably in the first quarter. The major farm expenses were little changed between 2018 and 2019, so that virtually all the reduction in cash revenue will show up in net income. Net cash income the difference between cash expenses and cash revenue, may be cut in half from $11.61 billion reported for 2018. After accounting for depreciation and change in inventory value realized net income will probably be a negative number. (10/14/2019)

2018-19 CANOLA CARRYOVER SETS A RECORD

The crop year in western Canada ends July 31 and the harvest does not generally hit its stride until six weeks later. The optimum carryover of crops from one year to the next is enough to fill domestic and export needs during that period and perhaps a small cushion against harvest delays or production shortfalls. July 31 grain stocks reported by Statistics Canada on September 6 mostly corresponded with these criteria except for one: the largest canola carryover ever. Canola stocks were 3.87 million tonnes, a 29% increase over a year earlier. It was 800,000 tonnes above the previous record at the end of the 2013-14 crop year and 83% above the five-year average of 2.11 million. Canola on farms was reported at 2.60 million, up 60% from 1.63 million at the end of 2017-18; almost all of the increase in carryover was on farms. Oddly, farm stocks compared to a year earlier varied widely by province: 18% higher in Saskatchewan, 55% higher in Alberta and more than double in Manitoba. The million-tonne increase in carryover exactly equals the decline in sales to China during 2018-19. For once, Statistics Canada's production and stocks figures match the Grain Commission's disappearance records. The canola harvest for 2018 was officially 20.34 million tonnes, which combined with carry-in of 2.50 million gave a 2018-19 supply of 22.84 million tonnes. The Canadian Grain Commission reported 2018-19 exports at 9.66 million tonnes and domestic use of 9.28 million, which with 3.87 million of carryover adds up to 22.81 million. July 31 stocks of almost all other crops were lower. Carryover of all wheat of 6.18 million tonnes was down 300,000 from a year earlier and 14% below the five-year average. Durum carryover was 200,000 tonnes higher at 1.62 million and non-durum a million tonnes smaller. All-wheat stocks on farms were 40% lower at 1.94 million tonnes. Commercial stocks were 30% higher reflecting brisk exports. On-farm wheat stocks were 60% lower than a year earlier in Saskatchewan, 15% lower in Alberta and 59% lower in Manitoba. Year-end barley carryover was the smallest of modern times at 893,000 tonnes, 28% less than a year earlier. Farm stocks were 39% lower at 636,000 tonnes. High prices in the domestic feed market encouraged selling out. Barley exports in 2018-19, 70% of which were to China, were 12% higher and the largest since 2007-08. Carryover of peas was 40% lower at 388,000 tonnes with farm stocks 49% lower at a bare 193,000. Commercial stocks were 27% lower than a year earlier at 195,000 tonnes. Stocks were depleted after a smaller 2018 crop, also by soaring exports to China. Stocks of lentils were 654,000 tonnes, down 25% from a year earlier with on-farm stocks 30% lower at 510,000 tonnes. (09/16/2019)

TRUMP-CHINA TRADE WAR UNABATED

“China is dying to make a deal with me. But whether or not I'll do it - it's up to me, it's not up to them. I think China is willing to give up a lot, but that doesn't mean I'm willing to accept it.”

That was Trump on July 30 as the latest round of tariff negotiations was beginning between high American and Chinese officials in Shanghai. The talks would last barely a day, ending without any evidence of progress or even the usual official joint statement, though negotiators will meet again in Washington in September. Trump-watchers long ago realized that what he says is not a guide to how things really are. But the talks, which were not expected to find a breakthrough, were one of the last chances at normalization of trade between the US and China, and by extension calming the chaotic world trade environment that Trump has created. In days leading up to the talks China offered numerous concessions including proposed large purchases of soybeans, wheat, corn and cotton, waiving duties for non-government purchasers. China holds an estimated 49% of total world wheat stocks, 66% of corn, 20% of soybeans and 41% of cotton. It does not need additional imports at this time but was willing to accept them to advance a tariff settlement. After last week's session the offers were put on hold. Without such a settlement, whether the Trump administration realizes it or not, Chinese imports of US agricultural commodities will collapse. Agricultural goods are the only products that the US can sell to China competitively. But Trump's demands and the generally hostile atmosphere is causing China to aggressively develop other sources and minimize its import needs. Chinese soybean imports from all sources fell in June to 6.51 million tonnes from 7.36 million in May and 8.70 million in June 2018. For the first six months of 2019 imports were 15% lower than a year earlier at 38.27 million vs 44.88. It imported just 980,000 tonnes of US soybeans in May, 13% of the total, and 615,000 in June. For the first half of 2019 imports from the US were 5.9 million tonnes, the lowest for the period in 15 years. The other import that China needs urgently is pork, as the African swine fever epidemic continues, but the US so far is not a favored supplier and duties totalling 62% remain. Total pork imports in 2019 to May 31 were 20% higher at 658,236 tonnes but 23% lower from the US.The big winner is Brazil: in the first six months of 2019, its pork exports to China rose 24.5%. Canada would be the natural beneficiary from US-China trade tension were it not for the breakdown in diplomatic relations over the government's gross mishandling of the Hauwei Wanzhou affair. China continues to scale down agricultural imports from Canada as quickly as it finds alternatives. Monthly statistics for grain exports by destination during June released last week showed Canadian canola shipments for the month dropping further to 66,000 tonnes from 112,000 in May. Shipments were 542,000 tonnes in May 2018 and 395,000 in June 2018. Wheat shipments during June were 31,000 tonnes as China needs hard high-protein milling wheat to blend with domestic stocks. Barley shipments for the month were 64,000 vs 58,000 tonnes but pea exports dropped to 71,000 from 105,000. (08/05/2019)

MAY GRAIN EXPORTS SHOW A TREND

Exports-by-destination figures for May were released last week and they confirmed that China is methodically reducing purchases of agricultural imports from Canada, one commodity at a time as it finds replacement sources. During the month 112,000 tonnes of canola were cleared for China, apparently representing business booked before the ban was imposed. In May 2018 shipments to China were 542,000 tonnes. Wheat shipments in last May were similar to recent months at 325,000 tonnes vs 94,000 a year ago, but barley loadings dropped to 127,000 tonnes from 159,000, flax to 18,000 from 28,000 and peas to 70,000 from 280,000. No soybeans were shipped compared to 39,000 in May 2018. During May total canola exports from Canada declined 12% to 818,000 tonnes, shipments to China fell 79% and clearances to buyers other than China increased 78% to 698,000 from 391,000 in May 2018. No canola shipments were recorded to any country that has not been a regular buyer except India, which took 21,000 tonnes. Export buyers that increased purchases in May included Japan at 243,000 tonnes (205,000 a year ago), Mexico 123,000 (112,000) and the US at 43,000 (29,000). Buyers in May 2019 that did not take any seed in May 2018 were Bangladesh at 51,000, United Arab Emirates at 65,000, France 42,000, Germany 64,000 and Pakistan 46,000. For the crop year to May 31 shipments to China were 3.07 million tonnes (3.63 a year earlier), Japan 1.84 million (1.85), Mexico 983,000 (1.21 million), USA 326,000 (377,000), Bangladesh 149,000 (22,000), UAE 393,000 (571,000), Pakistan 557,000 (612,000), France 278,000 (372,000) and Germany 86,000 (43,000). (07/08/2019)

US FACES A CROP DISASTER

The news was nothing but bad for US corn and soybean crops last week. Many farmers have stopped planting because of the lateness of the date, as will be revealed in the next USDA weekly crop report June 24. Weather forecasts continued to be dominated by general rain throughout the corn belt up to the last days of June. The heaviest amounts were predicted for the eastern corn states, including high-output states such as Illinois, Indiana, Ohio and Michigan. Even if this is the last of the spring rains, by the end of that period, the first week of July, it will be entirely too late for any further corn or soybean planting anywhere in the US. The US agriculture department reported corn planting reached 92% as of June 16, from 83% the prior week. Average is 100%. Seven of the top 18 states were still below 90% planted with Illinois at 88%, Indiana and Michigan 84%, Ohio 68% and South Dakota 78%. Cool, wet weather kept emergence down to 79% compared to 97% average. Less than 60% of corn emerged on time. Corn condition was 41% fair or poor vs 22% a year ago and 59% good or excellent vs 78%. According to the June 17 progress report, 7.2 million acres of corn remained to be planted, or 8% of planned acreage for 2019. Pre-season loss of acreage on this scale has never been seen before. Mainstream estimates are for final corn planted area are 86 million acres compared to intentions in March of 92.8 million. Average yield on 90% harvested as grain could be 165 bushels per acre compared to the first USDA estimate of 176. The crop could be as small as 12.8 billion bushels compared to the USDA May estimate of 13.7 billion. Including carry-in, 2019-20 corn supply could be below 15 billion bushels compared to the June estimate of 15.9 billion, and the May report's 17.2 billion and 16.6 billion in 2017-18. Between the two reports 1.86 billion bushels of American corn vanished and at least as much could disappear between June and the July reports. (06/25/2019)

TRUDEAU FIDDLES WHILE CANOLA SECTOR BURNS

When a house burns down the newspaper runs a short story and by the next day the incident is forgotten. The canola sector is a house on fire that keeps on burning. Nobody is putting out the fire. Actually it's not true the Trudeau government is not doing anything. It just is not doing anything useful. It is raising the limit on cash advances for canola to $1 million and extending the deadline by which farmers can sign up for the kooky AgriStability scheme (see next article). And oh yes, trade minister Carr to the rescue: he will lead a trade mission to Japan and South Korea to get them to buy more canola seed. He said “his presence” at other meetings will help market development. Japan has been using all the Canadian canola it needs for 30 years, often paying premium prices. South Korea does not import or process canola and buys only a small and steady amount of meal. Pure genius. China turned the screw again last week by delisting the Olymel pork plant at Red Deer and Drummond in Quebec as exporters, at a time when its import needs are record-high. Nobody in the government, and it turns out in the official opposition, is willing to connect the Huawei-Wanzhou debacle with the canola crisis. The line is that, yes, maybe the Chinese are paying us back for kidnapping one of their most important people, but we gotta do what's in the law, which says we must hold a person who has done no wrong in Canada because the US asked us to. Destruction of $4 or $5 billion of canola value is just collateral damage we have to swallow. By this time in November there may be a new government in Ottawa and a new prime minister. How would he handle it? Conservative leader Scheer held a press conference last week to offer four suggestions: appoint an ambassador to China, launch a complaint at the World Trade Organization, increase the ceiling on advance payments pull funding from the Asian Infrastructure Investment Bank. Scheer thinks Canada should “stand up for itself”. In the best of times a WTO filing would take several years, might not produce a clear decision in Canada's favor, and China could ignore any ruling against it. These are not the best of times at the WTO because the Trump administration has vetoed appointments to the panel of trade judges that decides such cases until it is almost out of business. It is incomprehensible that this is the Conservative party's best shot, and if it is, the time has come to despair. The Canola Council thought the WTO idea was “well founded”. As for the AIIB, to which Canada has promised $257 million over five years, Canada's money is a Tootsie Roll in the Chinese scale of doing things. (05/06/2019)

ACREAGE INTENTIONS SHOW BIG SHIFTS

Statistics Canada issued its annual intended acreage report on April 24, showing a very logical response by farmers to recent trends in crop prices, old-crop stocks and the catastrophic Chinese canola situation. Total seeded area will be unchanged from the prior two years but allocation among crops showed the largest changes in years. Farmers said they will plant 3% more wheat, 17% less durum, 6% less canola, 11% more barley, 12% more peas, 10% less lentils, 21% less soybeans and 17% more flax than in 2018. These are historically large year-to-year changes. All wheat intentions were reported at 25.7 million acres, up 4% from 2018. Big shifts are indicated among wheat types, with spring wheat acreage projected to increase 12% to 19.39 million acres, the highest in 18 years. Durum acreage is expected to be 19% lower at 5.02 million acres, the biggest one-year drop since 2010. Winter wheat area seeded last fall was put at 1.26 million acres, down from 1.34 million a year earlier. Canola area was projected at 21.10 million acres in the three prairie provinces and 21.31 nationally (including BC and Ontario), declines of 7% and 6.5% respectively and the lowest in three years. The five-year average is 21.72 million. Saskatchewan farmers plan to reduce area by 5% to 11.73 million acres, Alberta by 10.5% to 6.09 and Manitoba by 3% to 3.29 million. Canola area in Alberta would be the smallest since 2011. The canola figures reflect the anxiety that growers feel over the Chinese embargo and the two-month drop in prices. With high input costs, the highest-ever farm stocks and extreme market uncertainty, actual acreage may well be even lower and could be below 20 million. The StatsCan survey was conducted in March before the full gravity of the Chinese crisis was known. Intended area of barley and oats was increased, with barley up 10% to 6.82 million acres in the west, 25% higher than the recent low in 2017. Intended oats area of 3.36 million would be the largest since 2015. Corn acreage nationally was projected at 3.79 million acres, a new record and 5% over 2018; the previous high was 3.71 million in 2013. Corn intentions in Ontario were projected at a record 2.22 million acres, though actual area may be less if poor spring weather does not improve soon. Corn area in Manitoba was reported at 414,000 acres, down 2%. Soybean intentions nationally were given as 5.69 million, down 11% from last year's 6.3 million. Intended soybean area in western Canada is to fall 21% from last year and 41% from two years ago, with area in Saskatchewan expected to drop to just 240,000 acres from the high of 800,000 in 2017. The drop is due to disappointing yield results. Many growers who tried the crop have apparently found it to be agronomically unsuited. Acreage in Manitoba has probably settled at 1.6 to 1.8 million acres. Soybean acreage in Ontario is expected to drop 4% to 2.91 million acres, and by 8% in Quebec to 846,000, the lowest since 2013. Flax area is expected to be a million acres, a 17% gain over 2018 and similar to 1.04 million in 2017. (04/29/2019)

FUTURE OF USMCA AGREEMENT IN DOUBT

A combination of events, some not connected, has further reduced the already paper-thin chance that the US-Mexico-Canada trade agreement will be approved. It is now probable that it will not be ratified at all. To the already known obstacles, particularly the very low support in Congress, was added a new tweet-attack on Mexico by Trump with extremely ominous threats, a high risk that Mexico will not approve the agreement and talk of additional Mexican and Canadian duties on US exports including agricultural goods. Trump, obsessed with the crush of asylum seekers and illegal aliens attempting to enter the US from Mexico, threatened to seal the border completely, which would have stopped movement of goods in both directions. The threat was removed but replaced with an even worse ultimatum: unless Mexico stops the flow of would-be immigrants and illegal drugs, a 25% duty will be applied on motor vehicles from Mexico. Trump contends it is Mexico's duty to control the border, a physical and tactical impossibility. This is probably more Trump bombast, but it was taken at face value in Mexico. An automobile tariff would devastate the Mexican economy, violating both the USMCA and NAFTA agreements. Automotive products are Mexico's most important export. Obviously Mexico will not ratify the USMCA as long as duties on motor vehicles or other trade action are even remotely possible. The Mexican government also threatened duties on more US products as early as this month over steel and aluminum tariffs. Among products mentioned were alcoholic beverages, cheese, motor boats, types of steel not already subject to duties, pork legs and apples. The next complication was a hare-brained scheme from foreign minister Freeland's office, contemplating tariffs on several billion of additional US products including some agricultural imports to force the US to drop the steel and aluminum tariffs. Agricultural goods which may be targetted include apples, pork and ethanol. Canada has trade surpluses with the US in both pork and beef. The only effect of tariffs on ethanol would be to raise gasoline prices. It is certain that instead of causing Trump to back down on the metals tariffs the administration would retaliate, possibly by threatening to negate the NAFTA agreement. Removal of the tariffs is more likely to be delayed than hastened. The Trudeau government previously rejected a US offer to replace the 25% duty on steel and 10% on aluminum with import quotas. (04/15/2019)

CHINESE CANOLA BUYING PLUMMETS

Over the past year, about 90% of the time, the canola future traded between 110.5% and 113.5% of the soybean future for the same month. Whenever the ratio edges toward the upper or lower end it tends to return to the mean in fairly short order. It started the year at the bottom of this range, reached 111% in January and then fell sharply after mid-February, bottoming out, for now, at 102.3% in the week of March 7, as the outlook for exports became problematic. That is the lowest ratio in our records going back to 2011. The slide accelerated in early March, and especially after the Chinese ban on canola shipments from Richardson International became public. The prospect that Chinese buying could slow led to heavy liquidation of long positions in both nearby and new-crop months. Cash prices followed. As of last week cash bids in Saskatchewan were about $25 less than at the start of the year and around $60 lower than a year ago. As of December 31 western farmers reported having 14.5 million tonnes of canola on their farms. Since then they have delivered approximately 3 million, leaving 11.5 million yet to sell. Even if canola cash prices relative to soybeans do not drop further the loss in farm income and canola inventory value will be at least $300 million. That is the cost to the western farm economy of the gross mishandling of the Huawei case by the Trudeau government. The disruption in Chinese canola imports is entirely due to that government's fury over the arrest of the tech executive Wanzhou and there is no point in pretending otherwise. The Chinese government does not accept that there is, or was, nothing the Canadian government could have done or can do now to free Wanzhou. None of this bothers foreign minister Freeland, who made it clear again last week that the government will not intervene and never had any intention of intervening. It was not helpful that the US Senate foreign relations committee passed a motion last week congratulating Canada for arresting and prosecuting Wanzhou. It made Freeland positively glow. Some people in the export trade expect further pressure by China, possibly against other Canadian companies or other exports such as wheat and soybeans. China's foreign minister said last week it will take “all necessary measures” to “defend” its companies and citizens abroad. (03/18/2019)

AFRICAN SWINE FEVER THREATENS WORLD PORK

The Chinese government reported its 112th case of African swine fever last week. Officially a million pigs have been culled to control spread of the disease. China has about 433 million hogs, half the world's pig population, so a loss of a million would not be noticed. It seems to confirm that the disease is being grossly under-reported. The actual number of cases is estimated by non-government sources at 300 to 500 and pigs culled above 5 million. The disease is not a danger to humans, so pork from most culled hogs is going into the consumer food stream, where it temporarily increased the pork supply. However earlier herd reductions due to low prices have since reduced hog kill by more than the AFS-related increase. The government reported that the sow herd has been reduced by 15%.Pork production is now dropping and could be down as much as 20% for all of 2019. A pork shortage is rapidly developing. Retail prices have increased by 20% in six weeks and are contributing to consumer price inflation, which is politically sensitive. There is no way that China can avoid a large increase in pork imports, which may have begun already: last week China ordered 23,846 tonnes from the US against a duty totalling 62%. The extra 25% duty could be removed as part of a settlement of tariff issues with the US and the need for pork may help in reaching an agreement. World pork trade has been in reasonable balance, so a sizable increase in Chinese purchases should strongly support hog prices in exporting countries, including Canada. China is also not in a position either to do to Canadian pork what it has done to Canadian canola. (03/11/2019)

STATSCAN SAYS 2018 HARVEST MATCHED 2017

The striking thing about the final 2018 crop estimates released by Statistics Canada on December 6 is that production of major crops is almost unchanged from 2017. Nationally, the total harvest of the main crops was 91.25 million tonnes, less than 1% under 91.97 last year. On the prairies the harvest was 2% smaller, virtually the same as the change in seeded acreage, notwithstanding a dry and hot summer and a one-month interruption in mid-harvest because if constant rain. Total output of the main cereal, oilseed and pulse crops was 7% smaller than in 2017 in Manitoba, 1% larger in Saskatchewan and 5% smaller in Alberta. Impressions of the growing season while it unfolded would have suggested at least a 5 to 10% decline across the west and more than 10% in Saskatchewan. It appears the return of rainfall in late July headed off a big crop loss even at a late stage in crop development. The delay in harvest completion may have hurt crop quality but could not have greatly reduced yields. The November estimates for the prairies indicate a harvest of 69.58 million tonnes, compared to 65.35 million in the first of the 2018 reports based on the survey of farmers in August and 69.42 million in the second report based in satellite imaging in September. Average yields tell the same story. In Saskatchewan canola, peas and flax yielded better than in 2017. Average yield of all wheat on the prairies was 50.2 bushels per acre compared to 51.5 last year and canola dropped only to 40.4 from 42.2.

The wheat harvest was 31.77 million tonnes nationally, 6% larger than in 2017 and a five-year high. Harvested area was 2.2 million acres larger, more than offsetting the drop in average yield to 47.8 bushels per acre from 49.6. Harvested area was 14% higher in Saskatchewan and 6% higher in Alberta. Durum production was 5.75 million tonnes, 16% higher than in 2017 as seeded area increased 19%. Winter wheat production was 12% lower entirely because of a 46% drop in western Canada where acreage in the fall of 2016 was sharply reduced by adverse weather. The canola harvest was reported at 20.34 million tonnes vs 21.33 million in 2017, but was the second-largest in history after the prior year. The five-year average is 18.78 million. Canola yield in Saskatchewan increased 1% to 39.3 bushels despite dry conditions, probably aided by reduced insect and disease pressure, however yield in Alberta was 11% lower at 38.8 bushels.

The corn crop of 13.89 million tonnes was slightly smaller than 14.09 million in 2017 but was also surprisingly good considering the massive fusarium disease infestation in Ontario, which accounts for 63% of Canadian production. Ontario corn yield averaged 166.0 bushels per acre vs 167.0 in 2017. The barley crop was 8.38 million tonnes, 6% larger than in 2017 and above the five-year average of 7.56 million. The oat harvest dropped to 3.43 million tonnes from 3.73 million last year. Soybean production was reported at 7.27 million tonnes, down 6% from last year's 7.72. In Saskatchewan and Manitoba the drop was 34% to 1.81 million from 2.72 million tonnes. The Saskatchewan harvest of 232,000 tonnes was less than half the prior season's even though average yield rose. Pulse crop production was down because reduced acreage more than offset slightly higher yield. The lentil harvest of 2.09 million tonnes was 18% smaller and peas at 3.58 million tonnes were down 4%. (12/10/2018)

NINE-MONTH FARM CASH INCIOME HOLDS UP

Canadian farm cash income ijn the first nine months of 2018 held up remarkably. Statistics Canada last week reported farm cash receipts for the first nine months of 2018 at $45.26 billion, the first year-to-year drop since 2010. But the decline was only 2% and farm cash was the second- highest for the period on record. Cash income was down 4% in the first quarter, up 0.3% in the second and off 2% in the third. Cash from crop sales for the quarter totalled $25.37 billion, a 1% decline from $25,64 billion in 2017. Livestock-origin revenue was $18.43 billion vs $18.61 billion, down 1%. Government program payments were 17% lower than in the 2017 period at $1.46 billion, when large crop insurance payments were received. Cash income was down 6% from the 2017 quarter in Alberta, 4% in Saskatchewan and 1% in Quebec but rose 2% in Manitoba and Ontario. In crop receipts, cash revenue was slightly higher in most cases except for canola, durum wheat and pulse crops. Non-durum wheat, soybeans and corn generated more revenue. Farm-gate sales of canola dropped 8% from a record $7.29 billion in the first 2017 three quarters to $6.73 billion, though easily remaining Canada's most valuable crop, accounting for 26.5% of total crop receipts and 29% in western Canada. Part of the reason was the later harvest with negligible new-crop sales by farmers before September 30. Pulse crop receipts dropped 36% due to lower prices, with peas and lentils generating $1.13 billion vs $1.68 billion a year earlier. Cash receipts for corn and soybeans were 8% and 20% higher. Cash revenue from livestock sales decreased entirely because of an 11% decline in hog receipts to $3.11 billion from $3.49 billion in the three quarters. Hog revenue was sharply lower during the third quarter at $970 million. Cattle and calf receipts were little changed at $6.55 billion compared to $6.53 billion in the first nine months of 2017, as a 6% increase in numbers marketed offset a 3% drop in average prices. (12/03/2018)

CANADIAN WHEAT EXPORTS UP, USA DOWN

If Canadian wheat exports in the year to date were doing only as well as American exports, one of two things would be happening. Off-farm deliveries since August 1 would have totalled about 2.73 million tonnes instead of 4.04 million, down 24% from a year ago instead of 28% higher. Wheat growers wanting to sell off the combine would be in the same position as during the Canadian Wheat Board decades, when a typical delivery quota at this time of year was 3 bushels per acre. If grain companies had taken in a similar amount of wheat, commercial stocks would be around 5.37 million tonnes instead of 2.61 million and the entire system, from the country to export terminals, would be completely plugged. Export clearances of Canadian non-durum wheat to October 14 were 4.04 million tonnes, 36.5% higher than a year ago, when they were 6% higher than at the same date in 2016. Among major wheat exporters the only other country with a year-to-year gain even close to this is Russia. In markets such as we see now price is everything. American wheat is not very competitively priced. The International Grains Council in a weekly report put the export price of hard red winter wheat at Gulf ports at $238 a tonne compared to $235 for the similar type of wheat from Argentina. French soft winter wheat from Rouen was at $234 against $216 for US soft red winter wheat. Canadian export prices are not reported and it is impossible to make direct comparisons between known Canadian prices and American export prices, or even USDA prices which are based on mandatory disclosure by grain companies. However USDA reported hard red winter from the Gulf at $5.77 a bushel or $277 a tonne in Canadian funds. The cash price in Kansas was about $4.80 a bushel or the equivalent of $230 a tonne Canadian. Between the Kansas country elevator and the ship in Louisiana costs of about $47 a tonne were incurred, including handling fees and barge freight. Barge transport on the Mississippi is far cheaper than rail. The hard red spring wheat price in Saskatchewan was $251 a tonne last week, $6.83 a bushel Canadian or $5.22 in American dollars. North Dakota elevators were paying $5.16 a bushel for the same, compared to $4.08 for hard red winter, or $249 vs $196 a tonne Canadian. The cost of moving wheat from Saskatchewan to Vancouver also is not reported. However the spread between cash canola prices in Saskatchewan and the daily Vancouver cash price can be calculated and is about $40 a tonne. If the costs are similar for wheat the Vancouver export price for spring wheat should be about $290 a tonne. To sum up, the Canadian grain trade is paying fully US-competitive prices for wheat in the country and is able to offer buyers very attractive prices at export position, enough of an advantage to outsell American wheat by an almost embarrassing margin. (10/29/2018)

USDA RAISES PRODUCTION, CARRYOVER

Possibly the most important of the US agriculture department's month-ly crop supply-demand reports of the year was issued October 11, and while most figures were negative they were not as bad as the trade expected and post-report futures most rose. The new numbers at least do not justify further price declines on the basis of pure supply and demand. Average wheat yield was raised slightly, increasing the production estimate to 3.123 billion bushels from 3.112 a month earlier and carryover to 956 million from 935, but below 1.099 at the end of 2017-18 and 1.181 a year earlier. A small cut in soybean acreage offset a small increase in average yield to keep production unchanged at 4.69 billion bushels; carryover was raised only to 885 million bushels from 845 in September, though more than double carry-in of 438 million. Average corn yield was lowered to 180.7 bushels per acre from 181.3 last month, reducing the production estimate to 14.778 billion from 14.827 a month earlier. Projected corn carryover was increased to 1.813 billion from 1.774 in September, less than most trade ideas. USDA lowered its estimate of world wheat production from last month to 730.9 million tonnes from 733.0 million, a 4% drop from 758.7 in 2017-18. Projected wheat use was also lowered but global carryover at the end of 2018-19 was lowered to 260.1 million, 5.5% below 274.9 a year earlier. USDA estimated the world coarse grain crop at 1.343 billion tonnes vs 1.347 billion last month with use of 1.384 billion up 2.5% over 1.350 in the prior year. Carryover of 185.9 million will be 18% less than 227.2 million at the end of 2017-18. The global oilseed output estimate was 603.9 million tonnes vs 604.6 last month but 5% above 574.9 last year and a new record. Oilseed carryover of 123.8 million will be 10% higher than 112.1 million at the end of 2017-18. The report kept the previous month's forecast of Chinese soybean imports at 94 million tonnes. (10/15/2018)

WHO CANADA'S EXPORT CUSTOMERS ARE

Millers, processors, dealers and brokers in at least 64 countries imported Canadian crops in the 2017-18 crop year, according to the Canadian Grain Commission's compilation of exports by destination. Just eight countries took more than million tonnes each of all crops combined and just 14 took over 500,000 tonnes. Around 45 countries look less than 10,000 tonnes and a few less than 1,000. The top three markets, in order, were China, the US and Japan. China was the destination for 11.58 million tonnes of all grains and oilseeds, the US 4.66 million and Japan 4.00 million. China accounted for about 19% of total Canadian crop exports last crop year and the US 9%. Total exports of the seven major western grains were 50.46 million tonnes. Soybeans and corn came to 5.16 million and minor crops, including the western so-called special crops, added another 1.85 million. Approximately two-thirds of Canadian crop production is exported in a raw form. China was the top buyer of canola, barley, flax, peas and soybeans. It was also one of very few growth markets we have: 2017-18 shipments were 19% higher than 7.87 million tonnes in 2016-17. China bought 91% of 2017-18 barley exports, 67% of peas, 58% of flax, 44% of canola and 38% of soybeans. It has displaced western Europe as the main buyer of flax and India as the top purchaser of peas. China buys Canadian crops in huge quantities because Canada is either a competitive supplier (barley, soybeans) or nearly the only supplier (flax, canola, peas) of the quantities it requires. The US is a big buyer, including of crops of which its production is higher than Canada's, because it is next door and buying from Canada is little different than buying from another state. There would be little point in growing oats except for the 1.26 million tonnes (83% of exports) sold to the US; domestic use was 301,000 tonnes. America was also the second-largest destination for non-durum wheat, third for durum, fifth for canola, second for flax and fourth for peas. It was also the only export buyer of Canadian rye. There are some unexpected names of countries on the export list. The top buyer of Canadian milling wheat was Indonesia, fourth was Colombia and fifth was Peru. The UK is still a buyer of Canadian milling wheat with 335,000 tonnes last year. Netherlands took 482,000 tonnes of various crops, much of which was trans-shipped to other destinations through the gigantic port of Rotterdam. The bulk of exports of wheat and some other crops is to small accounts which are serviced by local agents or international brokers. These accounts are hard to find but are loyal, habitual buyers with little leverage and few suppliers competing aggressively for their business. Also notable habitual customers include canola importers: China, Japan, Mexico, Pakistan and United Arab Emirates have been steady buyers for decades. (09/17/2018)

EARLY-AUGUST HEAT WAVE HARMS CROPS

It has been a problematic growing season in western Canada from the start. A dry fall and a winter of below average snowfall was followed by a very dry spring, which was followed by an unusually hot summer. Rain has been extremely scattered and sporadic, especially in the south half of the western grain belt. Subsoil moisture which had been plentiful during the summer of 2017 was depleted and was not recharged in the fall. Crop conditions have been extremely uneven since seeding. Until the last days of July rainfall was just enough to sustain the hope of average yields, or better in the central and northern prairies. A few districts in northeast Saskatchewan and the Peace River area actually had above-normal rain for a time. Conditions became steadily drier after seeding and southern Alberta and Saskatchewan had just 25% to 35% of normal rain during July. Southern Manitoba and the interlake received 65% or less of normal precipitation in June and as little as 20% during July. Then the heat wave set in. August 1 was the start of a 10-day spell of persistent near-record temperatures and literally no rain. Daytime highs were 40C for consecutive days, often with high winds and very low humidity. Overnight lows generally did not get below the mid-20s. By August 10 topsoil moisture in Saskatchewan averaged 60% short or very short and worsened thereafter. Hay and pasture land was 68% short or very short of moisture. Southern Manitoba and the south half of Alberta except the eastern fringe had even poorer moisture situations. Lack of precipitation and much above average temperatures degraded yield potential and crop quality in all areas. In northern and central Saskatchewan and Alberta moisture was more ample but crops were later. The heat wave caught early crops such as peas, lentils, winter wheat and barley in ripening stages with harvesting already starting, hastening maturity but not causing severe loss. In later fields, which were in reproductive stages of development when yields are determined, were damaged. The heat caused premature ripening of crops, which always reduces yield and quality parameters such as test weight. Protein content in wheat is often increased by late-season heat and drought, but oil content in canola is generally reduced. The amount of loss will not be evident until harvest, but could be extremely serious. The occasional very late canola field was still in bloom and the blossoms literally burned off. About half of cereals were flowering in early August and the heat probably shut down pollination in many places before it began. Hot, dry weather with no rain should have made for ideal harvest conditions, except that on many days it was literally too hot to harvest. Farmers parked their combines in the afternoons because of extreme fire risk and the high temperature of grain going into storage. Overnight lows were not low enough to cool grain by aeration. Straight-cutting will have increased as many fields quickly became too dry to swath without shatter loss. (08/20/2018)

ANOTHER RECORD YEAR FOR CANADIAN EXPORTS

Canadian exports of western and eastern grains, oilseeds and pulse crops set a new record during the 2017-18 crop year ended July 31, at 41.9 million tonnes, up slightly from the previous high of 41.6 million in 2016-17. The five-year average has been about 39.1 million. Exports of the main western gains, oilseeds and peas were 36.26 million, slightly ahead of the prior two crop years even after the loss of the India market for peas and lentils. The total matched the previous high set in 2014-15. The five-year average for exports defined in this way is 35.74 million. Non-durum wheat exports rose strongly to 16.23 million, 11% above the previous season's and the highest in three years, into what was probably the most competitive wheat market in history. The five-year average was 16.06 million. Durum shipments reached 3.99 million tonnes, 7% below 4.29 million in the prior year and the lowest in six years, after the recent record set in 2016-17. Barley exports rose to 1.90 million tonnes, a six-year high and 41% higher than the prior year's almost entirely on higher malt and feed movement to China. Oats exports appear to have reached a record at 1.58 million tonnes, all to the US; if not for the American market oats would probably be considered a special crop. Canola shipments of 10.24 million tonnes were just short of the record 10.88 million in the prior year. Exports of peas were 2.07 million tonnes, down from 3.35 because of the suspension of most sales to India. However exports were near the five-year average of 2.34 million. Exports of eastern corn increased 55% to 1.39 million tonnes from 901,000; the average is 909,000. Soybean exports were similar to the prior year's at 3.77 million tonnes of which almost half were from the western Canadian crop. Exports reported by the Canadian Grain Commission do not include direct sales by farmers of canola, wheat and other crops into the US, or containerized shipments of pulses and special crops, which in some cases are now the majority of movement. Off-farm deliveries of western grains of 50.46 million tonnes were 4% lower than in the prior cop year, for unclear reasons. According to the March 31 stocks survey, farmers held 3 to 4 million more tonnes on farms than a year ago. Off-farm sales of non-durum wheat to licenses elevators were about 84% of the prior year's harvest compared to 88% for the 2016-17 crop year, and were also proportionately lower for peas and canola, though higher for durum, barley and flax. Statistics Canada will issue its July 31 grain stocks report with a survey of farm stocks on September 6. (08/13/2018)

CANADIAN SEEDED ACREAGE REPORT FOR 2018

The annual Statistics Canada seeded acreage report on June 29 showed some significant changes from the agency's pre-seeding intentions report in March and actual 2017 acreage, as farmers responded to price movements and spring weather conditions. Compared to intentions reported in March, wheat area was lower and canola higher. Total area devoted to the major crops was similar to intentions and actual 2017 figures. Canola area was 22.74 million acres, up 1.36 million from March intentions and just 160,000 under the 2017 record of 22.99 million. This represents a substantial shift, motivated by strong canola prices compared to the alternatives. In Saskatchewan canola area was 8% above March intentions but 3% under 2017, in Manitoba 8% higher than both and in Alberta 2.5% above intentions but 2% below last year. In Manitoba and Saskatchewan some soybean acreage appears to have been switched back to canola. All-wheat area of 24.71 million acres was below March intentions but 10% above the 2017 figure of 22.39 million. Spring wheat area nationally was 17.30 million acres, 9% higher than 15.80 in 2017 but 5% below March intentions. Durum area was reported 7% above the March report and an unexpected 19% higher than the prior year at 6.19 million, the second-highest on record, exceeded only by 6.53 million acres in 2000. About 39% of all spring-seeded wheat in Saskatchewan is durum this year. Winter wheat area was 1.23 million, 21% below 2017 with declines in all provinces. Winter wheat area in western Canada dropped to 335,000 acres from 535,000 in 2017 because of adverse fall seeding conditions. Very strong feed barley prices in western Canada did not attract a big gain in 2018 acreage, which would also have been expected based on relative input costs. Acreage on the prairies was 6.14 million, a 12% increase from 2017 but far below traditional acreage. A decade ago barley area was between 9 and 11 million acres. Oats were seeded on 2.53 million acres in western Canada, little changed in several years. Area of the main pulse crops in western Canada dropped 9% to 7.84 million acres from 8.66 last year, also 7% below March intentions. Peas were reported at 3.60 million, slightly less than 3.77 million acres of lentils. Chickpea area increased to 469,000 acres, almost triple 2017 area of 160,000 and pre-season intentions or 346,000. Canaryseed area was reported at 212,000 acres vs 255,000 last year and 223,000 intended. Pulse crop area appears inexplicably high considering current cash prices and the market outlook, and also big farm-stored stocks. Flax acreage was cut to just 885,000 acres from 1.04 million last year and 989,000 intended in the March survey. A surprise came in soybean area, which was 13% lower nationally at 6.32 million acres. Most of the drop was in Manitoba and Saskatchewan, suggesting the soybean boom in western Canada may have topped out last year. Soybean area in western Canada was reported at 2.29 million vs intentions of 2.46 and the 2017 record of 3.09 million. Many growers appear to have had disappointing agronomic or gross revenue experiences which discouraged plantings despite lower input costs than canola. There was a 7% increase in Quebec but Ontario acreage was basically unchanged. (07/09/2018)

USDA SUPPLY-DEMAND REPORT USES OBSOLETE YIELDS

The USDA monthly supply-demand report issued on June 12 was not too meaningful because it did not adjust for the dramatically improved outlook for US yields and production, especially corn and soybeans. Acreage and yield figures were not changed from May and were not survey-based. The report was based on an average soybean yield of 48.5 bushels per acre and corn at 174. The June 10 crop condition ratings imply soybean yield of 51.6 bushels with a range of 45.0 to 52.6. A corn yield of 181 bushels is indicated with a range of 166 to 195. The July report, due on the 12th, will adjust only acreage figures according to surveys of farmers. The August report will be the first to show survey-based yields and it will blow the lid off the June numbers if crop conditions do not deteriorate. A soybean yield of 51.6 would give a harvest of 4.536 billion and corn at 181 would be 14.601. All else being equal, carryover would be increased by 256 million bushels or 62% for soybeans and 564 million or 36% for corn. This is a very bearish preview of new-crop prices in the late summer. (07/02/20-18)

THE LIBERATION OF ONTARIO

The best thing about the Ontario election of June 7 was that it did not return an NDP government. The worst thing is that the new premier is minimally qualified with experience only in bush-league Toronto city politics and a problematic personal history. In between, for Ontario agriculture, is the welcome fact that for the first time in 15 years there is decent representation in the government for agricultural and rural Ontario. The new premier has a choice of several farmers for agriculture minister, including Ernie Hardeman who was the minister in the Harris government in the 1990s, and at least three other popular MPPs who are practicing farmers. Of 124 seats in the legislature, the Conservatives won 76, but 51 are first-time members with no legislature experience. Ford promised categorically to eliminate the cap and trade tax on fuel which currently costs Ontario farmers $85 million a year. That would involve dismantling the system and then resisting the federal policy of imposing a carbon tax on province that do not levy their own. The previous Liberal government did not exempt farm fuel from the carbon tax as most other agricultural provinces have. As matters unfold and an election is held in Alberta next year, there will be four-province bloc opposed to the federal carbon tax plan and the resolve to confront the Trudeau government. In opposition, the Conservative party criticized the previous government's draconian restrictions on neonicotinoid seed treatments and now has the power to easily rescind the regulations. Ford also promised to increase funding for the Risk Management Program, a fee-based scheme which makes up part of a reduction in margin from crops and livestock due to fluctuations in market prices or production costs, by $50 million a year. Payments are based on available funding. The new government will have to confront the staggering deficit left by the previous incompetents. It also promised to cut taxes, and doing both is impossible without slashing spending. No matter what the government does it will be at war with teachers', nurses' and civil service unions, whose wings badly need to be clipped.

CANADIAN FARM CASH INCOME STAYS STRONG

If not for grain rail service shortfalls over the winter and India's cut-off of Canadian pea and lentil imports farm cash income would have set another record for the three months ended March 31. Statistics Canada reported first-quarter farm cash receipts last week at $15.40 billion nationally, down 5% from $16.25 billion in the 2017 period. On the prairies farm cash income was 7.3% lower with crop sales down 7.2%. Off-farm sales of all crops in western Canada were hampered by elevator congestion throughout the winter quarter. Pea and lentil deliveries into the cash market were especially reduced because of the export slowdown. Cash revenue on the prairies from crop sales was down $532 million from the 2017 quarter to $6.86 billion, accounting for most of the $824-million difference in the total for the region. The remainder was accounted for by lower government payments, particularly crop insurance benefits, which were unusually high in the 2017 quarter. It was the first year-to-year decline in January-March cash receipts for the since 2014. Farm cash income was lower in all agriculturally-prominent provinces, including 2% drops in Manitoba and Ontario, 11% in Saskatchewan and 6% in Alberta. Farm gate cash sales of crops totalled $8.79 billion in the quarter, down 6% or $573 million from the 2017 period. Sizable declines were reported in canola, peas and lentils, though wheat, soybean and barley sales rose. Physical marketings of canola were down 12% while prices averaged 1% higher. Receipts from sales of peas were 59% lower and lentils 50% lower because of the Indian tariff. Off-farm deliveries of peas were 52% lower and prices 15% lower. Lentil marketings and prices were down 17% and 40%. Dollar revenue from wheat sales was 3% higher, barley 30% higher and soybeans 13% higher. Quarterly livestock receipts of $6.16 billion nationally were basically unchanged. (06/04/2018)

MARCH 31 GRAIN STOCKS INCREASED

Statistics Canada reported western farm stocks of 10 major grains as of March 31 at 28.86 million tonnes, 5% above 27.53 million on the 2017 date. All wheat on farms in the west was 11.89 million vs 12.05. Durum stocks were 15% lower at 2.75 million. Wheat stocks in Saskatchewan were down 6%, Alberta up 5%, Manitoba unchanged. Canola on farms was reported at 7.50 million tonnes vs 6.35 year-ago. Total canola stocks including commercial were 9.07 million , up 14% and highest for the date since 2014. Farm stocks of canola were 15% above year-ago in Saskatchewan, up 23% in Alberta and up 15% in Manitoba. Combined farm and commercial barley stocks were off 26% compared to a year go at 3.4 million. Lentil stocks were 35% higher at 1.5 million and peas up 13% to 1.9 million due to reduced exports, which in the crop year to March 31 were down 41% for peas at 1.8 million tonnes and down 50% for lentils at 1.0. Commercial stocks of the 7 main grains (excluding corn and soybeans) were 6.05 mmt vs 6.15 a year ago. Quarterly disappearance between December 31 and March 31: wheat ex durum 5.956 million tonnes (4.980 year-ago); durum 2.709 (2.009); canola 4.829 (5.450); barley 2.669 (1.092); peas 900,000 (1.01 million); lentils 469,000 (584,000). (05/11/2018)

USDA PREDICTS SMALLER CARRYOVER FOR 2018-19

The US agriculture department's monthly supply-demand report for May issued last week gave its first tentative estimates for the 2018-19 crop year, generally predicting a slightly better balance between production and use, especially for soybeans. The 2018-19 wheat harvest was put at 1.821 billion bushels, unexpectedly up 5% from the current season. Average wheat yield was projected at 46.8 bushels per acre vs 46.3 last year, with winter wheat yields lower. A huge 34% gain was projected in spring wheat and durum production, though the report did not provide detail for wheat by class. US wheat use in the new crop year is expected to be 3% higher at 2.072 billion, reducing carryover to 955 million bushels from 1.070 billion at the end of the current year. US wheat exports were expected to be 925 million bushels vs 910 for the current season and imports at 135 million bushels vs 155 in the current year. Soybean production was forecast at 4.280 billion bushels vs 4.392 in 2017 with yield at 48.5 compared to last year's 49.1. Soybean exports were put at 2.290 billion, up 225 million from 2017-18. Soybean carryover was projected to drop to 415 million bushels from 530 million at the end of the current year, but above 302 million for 2016-17. The 2018 corn crop is projected at 14.040 billion bushels, down from 14.604 last year with average yield of 174.0 bushels per acre vs 176.6. Corn use is expected to be 14.590 billion vs supply of 16.272 billion for carryover of 1.682 billion, 23% less than for 2017-18. US corn exports were forecast at 2.100 billion bushels, down 125 million, partly offset by a 50-million increase in ethanol use to a record 5.625 billion. USDA estimates for world wheat production for 2018-19 in were 689.1 million tonnes mt vs 711.0 for the current year. Wheat use was put at 755.6 million vs 713.9 last year. Global carryover was estimated at 238.3 million, down from 241.3 last year. USDA estimated the world coarse grain crop at 971 million tonnes, up from 932 last year with use of 1.049 billion vs 1.026 billion and carryover at 140.5 million, down from 164.7. USDA projected world oilseed production at 593.7 million tonnes vs the prior year's 572 and carryover at the end of 2018-19 of 100.0 vs 107.0 million last year.(05/14/2018)

SEEDING INTENTIONS SHOW DROP IN CANOLA, JUMP IN WHEAT

Statistics Canada's seeding intentions on April 27 was full of surprises, especially to those disposed to pre-guessing the contents of government reports. Instead of the new record for canola acreage in western Canada that was confidently predicted, the farmers surveyed said they will reduce canola area by 7%. Instead of reducing wheat area, they plan to increase it by 14% to a four-year high. Instead of slashing pea and lentil area because the Indian market has all but disappeared, they will be reducing it just 7% with more lentils in western Canada than peas. The intentions are unexpected, but the historically-large acreage changes do not show that farmers don't know what they are doing They are responding to conditions that are not too visible from your average Winnipeg office. The dryness especially in southern Saskatchewan and Manitoba is under-appreciated (see later story). To growers in these areas this does not look like the year for high-input crops. An acre of canola costs around $270 to grow, including $60 and up for seed and $40 or $50 for chemicals. An acre of wheat can be put in for about $180, oats or flax for $150 and peas for $140, or less if no land is rented. Crop insurance compensation is proportionate but so are the premiums. The report projected canola acreage at 21.38 million, a 7% decline from the 2017 record of 23.0 million. Before the report an increase to a new record between 23.7 and 24.3 million acres was predicted, on nothing more than conjecture. Canola area as reported is still the third highest ever. It is also still stretching rotations; 32% of crop land in western Canada will be in canola meaning the same land grows the crop every three years. The record remains at 22.23 million acres in 2012. Most of this year's decline is in Saskatchewan, where canola area was put at 11.39 million acres, 10.5% less than in 2017. Intentions in Alberta were reported at 6.65 million, down 4%, while acreage in Manitoba is unchanged. The survey found seeding intentions for all wheat nationally at 25.26 million acres, increases of 13% and 9% over 22.39 million in 2017 and 23.69 million in 2016, and the largest all-wheat area since 2013 when 26.03 million acres were seeded. Spring wheat area was placed at 18.24 million acres, 15% above 2017 and also the highest since 2013. Farmers said they will seed 5.78 million acres to durum wheat in the west, an 11% decline from 5.21 million last year but 7% below 6.10 million in 2016. Winter wheat area was reduced by 9% to 1.24 million acres from 1.37 million in 2017 by poor fall conditions in western Canada, where winter wheat area fell 37% to 335,000 acres from 535,000. Barley acreage is expected to increase 5% to 6.05 million acres, from the record low of 5.77 million in 2017. A larger increase could have been expected from high prices and short supplies, especially in Alberta, although growers there do plan an increase to 2.98 from 2.85 million acres. Farmers intended to seed 3.14 million acres to oats, 2% less than in the prior year. Oat area will be down 110,000 acres in Saskatchewan but up 55,000 in Manitoba to 575,000 acres, the highest since 2009. (05/07/2018)

WEATHER OUTLOOK IMPROVES BUT SEASON ALREADY DELAYED

Persistently cold weather during April with temperatures about 10C below normal has already delayed the start of field work across western Canada. In early years seed is often in the ground in southern districts by April 15. The year the earliest that seeding can begin is between May 5 to 10 in the south and after May 20 in the north. However there has been a favorable change in precipitation patterns, following a dry fall and winter and alarmingly dry prospects for the 2018 growing season. The prairie region received more snow in the last few weeks than through the whole of the winter. Areas that needed it most appear to have received substantial amounts. Since early March around a foot accumulated in southern and central Saskatchewan where there had been no snow cover. A Pacific disturbance during the week of April 10 brought heavy snow to southern Alberta and southwest Saskatchewan; in extreme southern Alberta it coincided with a sudden thaw that caused flooding in the Taber and Lethbridge districts. Agriculture Canada's drought map as of March 31 showed four areas of moderate drought, the most serious being in southern and eastern Saskatchewan roughly south and east of Regina to the US border and east into southwestern Manitoba. Another problem area is in eastern Alberta centred around Edmonton, and a third in the eastern Peace River bloc is also dry. Southern Manitoba including the Red River valley has had little snow, however excess spring moisture is often a problem because of table-flat terrain. However the size of dry areas and severity are much reduced. The monthly map does not show improvement that occurred during the first half of April. The droughty tendency may or may not have disappeared but things look infinitely better than in the fall. About 60% of prairie crop area now has reasonably adequate topsoil moisture for seeding. Extended forecasts from Environment Canada, which agree fairly well with predictions of private forecasters, do not indicate a strong deviation from normal precipitation for the April-June period but there is a decided bias to cooler than normal weather for all of western Canada. Shorter-term forecasts predicted a warming trend during the second half April, which appears to have begun last week. (04/23/2018)




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