Thursday September 29 2016



Agriweek Canadian agribusiness authority since 1967


An economic impact study by the federal Office of the Chief Economist into the Trans Pacific Partnership, ordered by the Trudeau government shortly after last year's election, was released last week. Concluding that TPP benefits dwarf its drawbacks, it is a repudiation of just about everything Trudeau and the Liberal party had to say about the accord during the 2015 election campaign and since. The key benefit to Canada: guaranteed preferential market access to seven countries with which Canada does not currently have trade agreements. The TPP would place Canada at an advantage relative to countries that do not have free trade agreements with this group and ensure a level playing field with respect to other TPP competitors in these markets. Since Canada already has trade agreements with the US and Mexico (NAFTA) and Chile and Peru, the big potential for increased exports is in Japan, Malaysia, Singapore and Vietnam. Canada has generally lower tariff protection compared to most other TPP countries. All else being equal, liberalization under the TPP should provide a net advantage for Canada. The agreement would provide tariff savings to Canadian exports to the seven new partner countries estimated at $428 million per year, mainly from Japan, Vietnam, and Australia. When fully in effect, the TPP would permanently raise the GDP of Canada by 0.13% or $4.3 billion a year. Canadian exports to the new FTA countries would increase by $2.2 billion (all figures in US dollars). The most significant new export opportunities would be in Japan, where Canadian exports would increase by $1.1 billion a year, primarily pork, beef, and wood products. As is already obvious, major benefits of TPP membership would accrue to crop and livestock agriculture, while new competition would be confined to supply-managed dairy. Canadian agricultural exports to the US could also increase even though there are no new market access commitment from the US. Canadian dairy imports from TPP countries are estimated at $350 million annually after factoring in a likely reduction in imports presently coming from outside the TPP area. The majority of additional dairy product imports from TPP countries would go into value-added processing. Any loss in Canadian dairy production would be offset by gains elsewhere. The net effect of lower consumer prices from cheaper imported dairy products and losses in the dairy sector would be a wash. The study said that not joining TPP would put Canada at a disadvantaged relative to exporter members of the TPP, which happen to be our toughest competition. Existing agricultural exports would be threatened or lost in Japan; the study estimates that beef exports would drop by two-thirds and pork by 13%. Canada's preferences under NAFTA in the US and Mexico would be reduced whether or not Canada is a TPP member. Walking away from the TPP would lead to a loss of $5.3 billion in annual GDP. (09/16/2016)


If the stupidity, incompetence, irresponsibility and ideological perversions of Alberta's NDP government were not already well known, it would be well nigh unbelievable that it is planning to raise the provincial minimum wage to $15 an hour within two years. Under the disastrous circumstances it is the expected thing. The hardest-pressed employers in Canada will soon be forced to pay the highest minimum wage, the radical-left's magic $15 an hour. Between 2015 and 2018 the lowest-paid will have to be paid 47% more for the same work. Alberta already has the second-highest minimum of any province. The NDP will soon learn that employers will not simply pay up, shut up and continue as if nothing happened. Minimum wage laws challenge ability, skill and resourcefulness of managements of businesses of all types and sizes in the same way that any other obstacle to viability and growth does. There are numerous solutions to the threat of higher labor costs without higher labor productivity. The most obvious is to make sure that if pay must be raised, the lowest-performing workers need to be weeded out and replaced with ones capable of earning their more expensive keep. Employment in the bottom class can only fall. Marginal lines of business depending on low-skilled help will be abandoned. Retail businesses will reduce hours of operation. More workers will be hired on a temporary basis, easier to discharge. Low-level employees will be laid off sooner, more often and for longer periods. Higher-performing workers will see fewer and smaller raises because some of their effort will go to subsidize the lowest least performing tier. To the extent that minimum-wage labor costs cannot be controlled, higher costs can come only out of higher prices for goods and services or the earnings of the business. Some businesses will be out of business before the statutory minimum reaches $15. These are inescapable, inevitable end results: fewer employment opportunities for those who need them most, economic slippage and reduced competitiveness of Alberta business. The lowest-performing workers will face the reality that if they can't earn $30,000 a year they earn nothing. People will be forced out of the province to places where entry-level work is easier to find. Some day, at some convention, the NDP nobodys running Alberta into the ground will heartily congratulate themselves. (09/16/2016)


Statistics Canada reported July 31 grain and oilseed carryover on September 7, showing the lowest farm stocks of the seven major grains plus lentils since 2012. Farm inventory of all main crops was lower than a year earlier except for barley, oats and flax. The last time total year-end stocks were in these ranges was in 2011-12 and 2012-13. July 31 commercial stocks were also lower, the result of more effective inventory control by grain companies. Commercial wheat and barley stocks were among the lowest of modern times, especially compared to the Canadian Wheat Board era, when Board-owned stocks often spiked towards the end of the crop year as it attempted desperately to dress up its crop-year performance. The total of major crops in storage was 10.08 million tonnes, 20% less than a year earlier and 43% less than on July 31 2014. Farm-held inventory was 19% lower. Combined farm and commercial wheat inventory was 5.17 million tonnes, down 27% from a year earlier and down 51% from the 2014 date. Total wheat stocks were 21% of the previous year's production compared to 29% a year earlier and 40% on July 31 2014. The Canadian wheat stocks-to-use ratio was 17.5% at the end of 2015-16 compared to 47.5% in the US. Wheat stocks on farms were 25% less than a year earlier and 63% smaller than two years ago. Alberta farms had only 495,000 tonnes of all wheat on July 31 and Saskatchewan 1.5 million. Farm and commercial stocks of durum were slightly higher than at the end of 2014-15 but 39% under the 2013-14 level. Canola inventory totalled 2.02 million tonnes, 21% under a year earlier with decreases at both farm and commercial levels. Farm stocks were reported as 26% lower and commercial stocks 16% lower. The canola stocks-to-use ratio at July 31 was 10.9% compared to 8.2% for US soybeans. Farm-held canola stocks of 915,000 tonnes were 26% lower than 1.23 million a year earlier. However, Statistics Canada increased the official size of the 2015 canola harvest to 18.38 million tonnes from 17.23 million reported last December, or by 1.15 million tonnes. It does not make much difference now, but it is another instance of the gross unreliability of information it obtains from the farmer surveys. Barley and oat stocks were higher, especially on farms, where 89% of barley and 69% of oats were stored. Combined barley inventory was 19% larger and oats 38% larger. (09/09/2016)


When it comes to distorting and generally screwing up on agricultural issue reporting, especially when involving western Canada, nobody beats the Toronto Globe & Mail. In a recent centrefold feature about the Chinese canola dockage matter, dominated by a life-sized picture of a canola plant and a square foot of white space, it advised readers that China is second only to the United States in purchasing Canadian canola (China bought 4.03 million tonnes in 2015-16 while the US was not in the top five) and that 25% of farm cash receipts in Canada are generated by canola, a statistic it attributed to the Canola Council (it was actually 13.5% in 2015). Not that much better was the normally more sensible Macleans magazine, where a recent article asked “Has Canada become too reliant on [canola] as a source of income?” It worried that if other importers adopt Chinese dockage standards, canola production may go into decline for lack of buyers. Better for the mass press to stick to what it knows: promoting the interests of the Liberal and NDP parties.


Statistics Canada's August preliminary crop production report does not have a history of high accuracy, especially in canola. The report in 2013, when records were set, put average canola yield at 33.7 bushels per acre, the Octiber report at 36.8 and the final release in December at 40.0. That was revised to 40.6 bushels after later grain inventory surveys showed production to have been even higher. In 2015, a more typical growing season, the canola yield estimate was 30.0 bushels per acre in August and 38.0 in December, a 27% error. Thus the 2016 yield estimate will be similarly increased probably closer to 40 bushels in the final report. Two other crop production reports are scheduled, to be issued for 2016, on September 20 and December 6. In its first 2016 assessment, the agency reported production of the seven traditional major grains plus lentils in western Canada at 63.05 million tonnes, 2% more than 61.92 million last year from a nearly identical seeded acreage. This was somewhat disappointing in light of conditions at the start of the growing season, but almost certainly will may be revised higher in future reports. In eastern Canada the first corn and soybean estimates could be on the high side because the unusual drought continued beyond the survey period and did its worst damage after mid-August. The national all-wheat crop was estimated at 30.48 million tonnes, a 10.5% gain over 2015 on a 4% smaller seeded area. It is only the second Canadian crop above 30 million tonnes, though 19% smaller than the 2013 record of 37.52 million. Average yield was reported at 48.9 bushels per acre, up 14% from last year's 42.8. The durum wheat harvest at 6.81 million tonnes is a record, topping the 2013 high of 6.50 million. Average durum yield of 41.6 bushels per acre was 85% of the non-durum spring wheat yield, whereas 70 to 75% is more usual historically. All-wheat production is projected to increase by 5% from 2015 in Saskatchewan, 15% in Alberta and 67% in Ontario, while declining by 3% in Manitoba. In the west barley production increased while oats declined, as barley yield rose 6.5% while oat acreage dropped 12%. The western canola crop was put at 16.97 million tonnes, short of 17.17 last year, whereas a sizable increase was expected. Yield was estimated at 38.0 bushels per acre, identical to that of 2015. Given the record of canola estimates, the final yield could be up to 39.9 bushels and production could be about 17.75 million tonnes. Even with a small carryover from 2015-16 and 2016-17 requirements of around 17 million, supply should be comfortable, with a normal relationship between canola and soybean prices. (08/29/2016)


As anyone could have predicted, no settlement was reached after meetings in Beijing during the week of August 10 between Canadian and Chinese officials concerning the Chinese decision to lower maximum dockage in canola seed imports to 1% from the world standard of 2.5%. The breakdown led to alarmist reports warning of the imminent loss of the multi-billion canola seed market in China. More talks were supposedly planned but no amount of talk will change this situation. The reduced limit goes into effect September 1. Chinese officials said canola cargoes already on the way would be accepted but new orders must observe the new limit. canadian export terminals are capable of cleaning canola to 1% dockage, and in fact producer deliveries often enter the system with dockage between 1.5 and 2%. Substantial additional cleaning capacity has been added at west coast terminals in recent years. Where double passes are required, the additional cost will be significant but not prohibitive. The extra expense will be resolved in some combination of higher prices to Chinese buyers and a wider basis between futures and cash to growers. The Chinese logic is impossible to follow in a scientific sense and of course is not meant to be followed. It is possible that blackleg can be transmitted through seed or dockage, though the evidence is not strong. The Chinese claim that while their own crops are infected, Canadian blackleg is of a more virulent type. If the fungus actually can be transferred through dockage such transfer would occur at all concentrations, at 1% as easily as at 2.5%. Furthermore, and this point has not been well made by anyone, the only way that blackleg spores in imported canola seed could get into Chinese rapeseed fields is if some seed, meant to be processed, is used as seed for planting. That would be a flagrant but not unimaginable abuse of intellectual property rights, since virtually all Canadian canola is of GMO varieties. Moreover if seed were so pirated it would presumably be cleaned to seed standards with virtually all dockage removed. Finally, if the blackleg threat is urgent, why would Chinese authorities allow the 2.5% limit to continue to apply between March (when the matter was first raised) and September? Of course disease has nothing to do with it and this is the latest example of how Chinese authorities freely use arbitrary and irrational import regulations to regulate import volumes. The Chinese regulatory environment is just free enough that the government cannot place embargoes or quotas on imports (which would also be illegal under the WTO). So they use an assortment of phony pretexts. (08/22/2016)


It would be a sign of serious malaise in the Canadian farm economy if it were literally true, as Statistics Canada reported last week, that off-farm income accounted for 49.2% of the total income of farm operators in 2014 and 48.2% in 2013. It would mean that farming as a vocation and a business alone is not able to provide a living wage for farmers and that they need to have work outside the farm to make ends meet. It is a gross misinterpretation arising from StatsCan's archaic, outdated definition of what a farm is. Included in the tally are the large majority of farms that are too small to be intended or expected to support family. Most farms in Canada are basically part-time sidelines to some other form of primary livelihood. Farms with under $100,000 in annual gross receipts should be in some other classification than commercial farms. Also much off-farm employment and income is by family members who don't do much around the farm. The five-year farm census was carried out earlier this year and results will start to be available around mid-2017. They will include extensive data by size of farm, which will show that the bigger the farm the more of its owners' income comes from farming. Most farm types in last week's report had lower total income in 2014 than 2013, but the drop was not large and farmers on average across all farm sizes had substantially higher family incomes (from farm and non-farm sources) than the general population. Total income of the average farm operator was $95,331, a 30% gain over $73,445 in 2010. In Alberta it was $108,743 in 2014, Saskatchewan $105,292, Manitoba $94,538 and Ontario $89,124. In 2014 the median income of all census families was $78,870. (08/22/2016)


The Canadian Grain Commission's final grain report for the 2015-16 crop year quantified a very good marketing season from all points of view. It was the third consecutive year of off-farm sales of western crops above 50 million tonnes. Including lentils, soybeans and special crops deliveries into the western grain handling system were 52.02 million tonnes, setting a new record, compared to 51.90 in 2014-15 and 50.62 million in 2013-14. (Actually they were slightly higher in all years because not all movement is reported to the Grain Commission). Exports of all crops under Commission jurisdiction also set a record of 40.39 million tonnes (although exports of the seven major western grains were second-highest). Total shipments were slightly above the previous high in 2013-14 of 40.12 million and 2% higher than 39.61 million in 2014-15. Shipments recorded by the Grain Commission of wheat, durum, oats, barley, canola, flax and peas (the traditional seven major crops) reached 35.55 million tonnes, less than 4% short of the record 37.11 million exported during 2014-15. Canola exports were a record by far at 10.19 million tonnes vs 8.90 million in 2014-15. Records were set for canola disappearance at 18.76 million tonnes, 15% above 16.30 in 2014-15. Use in the crop year was also 9% more than 2015 production as reported by Statistics Canada (which could be revised later). The five-year average for canola use is 15.05 million. Soybean and corn exports rose sharply, to 3.08 and 1.01 million tonnes respectively from 2.41 million and 271,000 tonnes in the prior year. Corn exports had dropped sharply in 2014-15 from a more usual 1.76 million in 2013-14. Domestic use of all crops was also the highest ever at 16.40 million tonnes compared to 15.63 and 13.78 million, because of booming canola crush. Year-end commercial stocks continued a declining trend that began with the termination of the Canadian Wheat Board monopoly four years ago. Commercial wheat stocks, including durum, were 2.35 million tonnes, a third less than a year earlier and the five-year average, which was 3.90 million. Low year-end inventory means that space is available for deliveries during the coming harvest, and also that grain companies continue to improve their inventory management practices. (08/08/2016)


The two major railways kept up more satisfactorily with demand for grain cars during the 2015-16 crop year than in any other recent season, considering that such demand was nearly record-high. Rail car unloads at ports were just 1.7% under the 2014-15 record. Total unloads were about 380,000 cars, 10% above the five-year average. For the crop year as a whole shippers ordered roughly 410,000 cars for movement to all destinations, of which the CNR supplied 98% and the CPR 97%. When routine over-ordering and cancellations are considered shippers received substantially all the cars they wanted. They also got them in a more timely way: for the crop year the CNR spotted 92% and the CPR 85% of cars in the week for which they were required. These ratios have been closer to 75% in previous recent years. For the 2015-16 crop year, 89% of car orders were filled in the week for which ordered, 8% were one week late and 1% two weeks late. Loaded cars were picked up within 24 hours of release by shippers 77% of the time by the CNR and 27% by the CPR, and within 48 hours by 94% and 49%. CPR pick-up service continued drastically inferior, with cars taken away later than 48 hours after loading 51% of the time, though still better overall than in the previous two years. (08/08/2016)


USDA confirmed on July 29 that 22 plants of an unregistered GMO wheat variety were found in a field in Washington state in early July. The plants survived burn-down by glyphosate in preparation for the next crop. The US Food & Drug Administration took control of all wheat on the subject farm and tested it but found no other GMO evidence. The incident was too similar to the first such discovery, of a dozen plants in a corner of a field in Oregon in 2013, to be anything but deliberate sabotage, either by a single individual or an anti-GMO group or organization. The trait found in Washington was not the same as in Oregon in 2013, but whether the Oregon and Washington incidents are connected or not, there is a high probability that sufficient seed is in the wrong hands to create more such incidents for some time to come. A handful of GMO wheat plants were also found in a University of Montana research plot in 2014 where they had not been grown in 15 years. In 2013 Japan, South Korea and other importers immediately blocked all incoming wheat cargoes and wheat prices briefly fell as a result. This time imports were embargoed only of US western white wheat for food uses and only until more thorough testing could be arranged; distribution of previously purchased US wheat was also stopped but there was no market impact. In the aftermath of the 2013 case a class action lawsuit was organized by percentage lawyers against Monsanto for allegedly not securing its dangerous GMO material properly and for causing wheat prices to decline. It was settled for $2.5 million to get rid of a nuisance. (08/08/2016)


The International Grains Council's monthly world market report for July again raised the 2016-17 world wheat production estimate, to 735 million tonnes from 729 last month (and 736 last year). Consumption was increased to 727 million from 720 but carryover at the end of 2016-17 will rise to 228 million tonnes from 226 (219 last year). Carryover by major exporters was put at 71 million vs 66 last year. Coarse grain production was estimated at 1.311 billion tonnes vs 1.297 last month and 1.264 last year with consumption of 1.302 vs 1.290 and 1.260. Carryover was put at 260 million tonnes vs 256 and 252 million respectively. World soybean production was put at 321 million tonnes vs 320 last month and 316 last year; consumption of 327 million will exceed production and but the carryover estimates was increased to 30 million tonnes from 28 million last month and 35 million last year. (08/01/2016)


The latest feedlot placement statistics for both the US and Canada indicate reduced holding back of heifers to enlarge the breeding herds. US placements of cattle and calves during June were up 3% from the 2015 month at 1.53 million, below what was expected but the highest for the month in three years and the fifth consecutive month of higher placements than a year earlier. On-feed numbers on July 1 were 10.36 million head, up 1.2%, instead of 1.6% predicted. At 6.87 million, steers and steer calves on feed were 1% fewer while the 3.49 million heifers on feed were 5% higher. Placements in western Canadian feedlots during June were 61,600, up 4% from a year earlier, with steer placements 51% lower but heifers 39% higher, another signal that retention of heifers for herd enlargement has stalled. On-feed numbers at July 1 were 752,500, similar to year-earlier and two years earlier but the number of lightweight animals was sharply lower. Fed cattle marketings during June were 128,500, also comparable. (07/31/2016)


The Churchill export terminal has reached the end of its long and rocky road, 85 years after it opened. Most employees were laid off and it was conceded that no grain will be shipped this year. Contrary to the impression from a blizzard of press stories, only the grain terminal is being closed and general freight and northern supply service will continue. The purported sale of the port and rail line to some northern native bands either was never real or fell through. There was the inevitable and immediate fallout, from politicians, the union, Friends of the Canadian Wheat Board and others. The 1,300-km rail line to Churchill has deteriorated badly despite around $100 million in government and Omnitrax money spent over 30 years on rehabilitating, maintaining and repairing it, and the aluminum hopper cars bought specifically for the route and quickly scrapped. The permafrost under the railbed appears to be breaking down, ostensibly due to climate change, and if so there is no feasible way to shore it up. Since it is highly unlikely that the elevator will ever re-open, there is little incentive to spend money on security and maintenance, which is especially costly in the sub-arctic climate. There is no asset value and Omnitrax will probably just walk away, leaving the Churchill elevator to join dozens of once-busy terminals around North America now derelict. (07/31/2016)


Across the western half of the prairie grain belt, April and May were so dry and warm that a re-run of the early-season drought of 2015 seemed at hand. By mid-July the entire prairie region had received 30 to 80% more rain than normal since then. Crop damage, especially low-lying field flooding, is significant and rising. Many areas have all the surplus moisture they can tolerate and any more rain will start to seriously reduce yield capacity. Unfortunately, more was predicted. Saskatchewan was worst-hit. The heaviest rain was across central and southern parts of the province with seven-day accumulations of 2 to 7 inches. During a heavy rainstorm in southeast Saskatchewan over five inches were recorded in four hours; in another instance 1.5 inches fell in less than an hour. Extreme rain with high winds literally blew off canola and lentil blossoms. Rainfall distribution is among the most erratic ever seen. The same general areas were hit repeatedly while others received only scattered showers and a few isolated districts were missed altogether. Another peculiar feature is the seeming regularity of rainfall. Southern Alberta had rain every day last week. In many areas rain and shower events occurred several times a week separated by only day or two, greatly complicating spraying for weeds and disease. High winds and hail also caused unusually high crop damage and hail claims are ahead of average. Insect infestations have not been a serious issue so far. The other anomaly is temperature. Highs in the 30s C were regularly recorded during May, but starting in early June daytime highs have been persistently below normal throughout the grain belt, often under 20C. Overnight lows fell to low single digits in southern Alberta on several nights since the beginning of July. Heat unit accumulation is too low to make best use of ample moisture, and as of last week a noticeable slowdown in crop development was noted. Pulse crops, including peas and lentils, which were seeded on a record-large area this year, are least tolerant of excess moisture, and the areas with the heaviest recent rains are in the brown-soil belt of Saskatchewan where pulse crop area is concentrated. Besides poor growth, surplus moisture promotes fungus diseases in all crops, pulses in particular. Fungicides suppress but do not actually control diseases. Many growers have sprayed promising crops three times. Root rot has also been reported in all crops. Canola and cereals can withstand excess water with less damage but no crop can survive field flooding for more than a few days. Crops in districts where rainfall has been more normal continue to show extraordinary yield potential. Cool temperatures are a handicap, but cool weather during the summer of 2013 did not prevent setting of numerous yield records. (07/16/2016)


The monthly USDA supply-demand report issued July 12 increased the US all-wheat production estimate was increased to 2.260 billion bushels from 2.080 in the June report, up slightly from 2.050 billion in 2015-16. Exports were projected at 925 million bushels from 900 last month and 19% above 777 last year. Wheat exports of this size would be a three-year high. But US carryover will be the highest in 28 years at 1.105 billion bushels, up from 1.050 last month and up 13% from 981 last year. USDA raised the soybean production estimate to 3.88 billion bushels from last month's 3.80 and 3.93 last year, with average yield 3% lower. Exports were projected at 1.93 billion vs 1.92 and 1.89. Carryover at the end of 2016-17 is expected to be 290 million bushels vs 260 last month and 350 last year. However that would put the ending stocks to use ratio at about 7%, similar to 2014-15 when prices were quite high. The corn production number was raised from 14.43 billion bushels in June to 14.54, a new record and up 7% from 13.60 last year. Average yield is projected only slightly lower but planted area is 7% higher at a record 94.1 million acres. Corn carryover was projected at 2.08 billion bushels vs 2.01 last month and 1.90 last year. Corn exports were expected to reach 2.05 billion bushels vs 1.95 in June and 1.90 last year. The Brazilian corn harvest was estimated at 70 million tonnes, 7.5 million less than a month ago; exports will be down 45% from 2014-15 to 18.5 million, opening the way for higher US exports. Corn use for ethanol is steady in the range of recent years. Chicago futures prices were mostly higher in sessions after the report's release, as most figures were near expectations. Soybeans rallied notwithstanding that the report had very few supportive features and some key supply-demand equations worsened. USDA lowered its projections for average farm prices for wheat and corn in 2016-17 and left them unchanged for soybeans. (07/15/2016)


Between March 31 when Statistics Canada surveyed grain stocks and July 3, western farmers delivered 4.46 million tonnes of non-durum wheat, 769,000 of durum, 4.80 million of canola, 86,000 of lentils, 200,000 of peas and 155,000 of flax. As of the 48th week of the crop year that should have left them with about 8.13 million tonnes of wheat except durum, 2.53 million of durum, 1.05 million of canola, 202,000 tonnes of lentils, 744,000 of peas and 505,000 of flax. Four weeks of delivery statistics remain before the end of the crop year and six to seven weeks before the first deliveries can be made off the combines. Practically all of these figures are inconsistent with recent farmer selling. Wheat and durum numbers seem very high in relation to fairly slack country movement, suggesting that many farmers were so deliberately slow to sell these crops in a period of low prices, in which case they were acting on very bad advice because the best prices of 2016 are behind them. Assuming March 31 figures were approximately correct, farmers still have 17% of 2015-crop non-durum and an astonishing 47% of durum in their bins. Other slow-selling crops were flax (54% still on farms) and peas (23%). On the other hand, unless Statistics Canada's stocks figures were wildly off, farmers appear nearly sold out of canola and lentils. According to the official production and stocks numbers, only a million tonnes of canola remain on farms, enough for three weeks' worth of sales at the average rate during the crop year to week 48. Growers do not appear to have enough seed to maintain weekly sales above about 175,000 tonnes. The average of the last five weeks, roughly since seeding finished, was about 360,000 tonnes a week. (07/16/2016)


According to the June 29 Statistics Canada report of seeded acreage, 72.42 million acres are in the major crops this year, a record by a slight margin. Summerfallow in western Canada dropped below 2 million acres, a new low. Area in the major crops on the prairies was a record 63.55 million acres, slightly higher than in 2015 but 4% above 2014, when wet spring conditions limited acreage in some districts. The cropping system is running flat out. Trends in the allocation of area to the main crops were as indicated in the seeding intentions survey in March, except that pulse and special crop area was even higher at an all-time record 10.59 million acres, 17% of total cropped area in western Canada. As recently as 2013 it was 6.33 million or 10%. Lentil area soared to 5.84 million acres, a 48% jump over last year and 14% more than March intentions. Lentils are now the fourth-largest Canadian crop by seeded area, more than the total of corn and soybeans and similar to durum wheat and barley. The other big pulse crop is peas, which also set a new acreage record of 4.27 million, up 16% from last year's 3.68 million. Pea area was exceeded by lentils for the second year. Canola area in western Canada hit the crop-rotation wall at 20.02 million acres, very little changed. Over the last five years canola acreage ranged only from 19.84 to 20.60 million, pretty much establishing that 20 million is the upper limit because of crop rotation considerations. Even so, at 31% of cropped land in the west, the average rotation is 3.2 years, well under the four years recommended for disease management. Canola is the most profitable crop in 2015-16 and seeded area would undoubtedly have been higher if it were possible. It follows that the only path to higher production is increasing yield. Flax area dropped to a five-year low of 925,000 acres, 44% lower under the recent high last year. Wheat area continued its long, slow decline. National all-wheat acreage was about a million acres lower than in the last two years at 23.24 million. The entire drop was in western Canada. Wheat was seeded on 32% of cropped land; 15 years ago it was 39%. Total wheat area is the lowest since 2011 when it was 21.56 million; the recent high in 2000 was 27.36 million. Spring wheat area of 15.44 million is the lowest since 15.12 million in 2007 but durum area is the highest since 2012, rising for a third year to 6.10 million acres, 28% of total wheat area compared to 25% last year and 21% in 2014. Winter wheat in western Canada was a three-year low but rose in eastern Canada to 1.19 million acres. Barley acreage of 6.38 million was 2% smaller than in 2015 but recovered from the record low of 5.88 million in 2014. Area in oats was also down, at 2.86 million acres, compared to 3.34 and 2.82 million in the last two years. Corn area in Manitoba increased 30% to 325,000 acres. Ontario corn area was similar to 2015 at 2.05 million acres. In Quebec it was 890,000, down 1%. Soybean acreage in Manitoba set a new high mark of 1.63 million acres. Soybean area dropped in Saskatchewan, suggesting that beans are not as well adapted as was believed. Soybean acreage in Ontario was 6% lower at 2.77 million and 3% higher in Quebec at 803,000 acres. Summerfallow area dropped to an all-time low of 1.99 million acres, from 2.56 million in 2015 and 4.60 million in 2014. Less than 20 years ago idled land routinely exceeded 10 million. Summerfallowing has been obsoleted by low-tillage cropping methods, adding as much land under crops as there is in all of Ontario. (06/30/2016)


Statistics Canada last week released its annual balance sheet of Canadian agriculture, as at last December 31, showing similar 6% gains in farm assets and equity during 2015. Nationally the value of farm assets increased by $33 billion in 2015 to $561 billion, while liabilities were up $8 billion to $87 billion; equity was up $26 billion to $474 billion. Although the smallest annual percentage increase since 2009, equity rose as farm assets again appreciated by significantly larger amounts than liabilities. Farm land values also continued to increase, with farm real estate (including buildings) estimated at $417 billion, an 8% gain during 2015 and a 20% increase since the end of 2013. Current assets (which include crop and livestock inventory for sale) fell 2% to $40 billion but were 2% higher than two years earlier. The value of crop inventory declined by $352 million because of lower quantities as well as lower prices. Marketing board quota, the least tangible of any farm or any other asset class, was valued at $32.4 billion, little changed from a year earlier, but representing an amazing 7% of total Canadian farm assets. In Ontario and Quebec quota was valued at $21.3 billion, 11% of total assets. Gains in asset values and equity were remarkably consistent among provinces with assets rising between 5 and 8% during the year and equity mostly by 4 to 8%. The prairie region showed a slightly higher equity-to-asset percentage of 86% compared to 82% in Ontario and Quebec. Ontario and Alberta were nearly tied with the highest provincial asset value; 46% of Canada's total farm assets were in these provinces. Farm asset value in Alberta was half again as large as in Saskatchewan. Asset and equity growth with comparatively stable farm income lowered the rate of return on assets and equity. Nationally, return on assets was 2.0% and on equity 2.3%, slightly better than in 2014 but below corresponding figures for earlier years, which were 3.8 to 3.9%. (06/26/2016)


The US agriculture department issued its latest monthly WASDE supply-demand report June 10, basically negative for new-crop wheat, bullish for soybeans and neutral for corn. The 2016 US wheat production forecast was raised 79 million bushels from May to 2.077 billion, compared to 2.052 for 2015-16. Average yield was projected at a record 48.6 bushels per acre. US wheat carryover was projected at 1.050 billion bushels vs 1.029 last month and 980 million last year. Wheat imports from Canada were put at 125 million bushels for 2016-17 vs 130 in May and 117 in 2015-16. The estimate of the 2016 corn crop was unchanged at a record 14.430 billion bushels. Corn exports were projected at 1.950 billion bushels vs 1.825 for 2015-16, reducing new-crop carryover to 2.008 billion bushels from 2.153 inn the May report but still a recent record and 17% above 1.708 at the end of 2015-16. Ethanol use is unchanged at 5.3 billion. The US soybean production estimates was unchanged from May at 3.80 billion bushels but 2016-17 carryover was cut to 260 million bushels from 305 last month and 370 for 2015-16, just above the recent low of 191 at the end of 2014-15. Soybean exports for 2016-17 were forecast at 1.900 billion bushels, up from 1.760 for 2015-16 and 1.843 billion in 2014-15. US domestic soybean crush was put at 1.915 billion, a three-year high. (06/10/2016)


In its world supply-demand projections, USDA raised the 2016-17 global wheat production estimate to 731 million tonnes from 727 last month, down from 734 last year, but raised expected consumption to 716 million from 712 (708 last year) for global carryover of 240 million tonnes vs 241 last month and 243 last year. World coarse grain output was raised to 1.303 billion tonnes from 1.299 billion last month and 4% above 1.255 in 2015-16. World consumption of 1.306 billion will exceed production, but only by 3 million tonnes. Global carryover will drop to 240 million tonnes in 2016-17 from 241 last month and 243 last year; carryover was 245 million tonnes at the end of 2014-15. World corn projections for 2016-17 were little changed but carryover was trimmed to 205 million tonnes from 207 last month. World soybean production for 2016-17 was unchanged at 234 million tonnes but carryover was dropped 2 million tonnes to 66 million. (06/10/2016)


Chicago grain and soy-complex future prices roared higher again in the week ended June 10 as the curious and unlikely but nevertheless very real spring rally continued. Between June 1 and June 8 spot-month soybean futures gained 9.2%, soybean oil rose 3.4%, soybean meal increased 5.4%, Minneapolis wheat was up 6.9%, Chicago wheat up 11.3%, KCBT wheat up 9.8% and corn up 6.4%. While some price strength is a normal seasonal pattern at this time of year, these gains came without commensurate changes in supply-demand fundamentals. US futures were supported by the steady erosion of the US dollar index, which dropped 1.87 cents or 2.3% in five sessions ended June 8. The Canadian dollar gained 2.20 cents or almost 3%, although canola futures still rose 2.7%. Exchange rate movements accounted for perhaps a quarter of the overall advance. The grain and oilseed action coincided with similarly impressive gains in non-grain commodities, including metals, energies, sugar and coffee. Over the past six or seven weeks commodity futures markets outperformed equities for the first time since 2007, through a period of comprehensive gains on North American and overseas stock markets. (06/10/2016)


Last March the Chinese government agreed to postpone a threatened ban on Canadian canola shipments containing more than 1.0% dockage until September 1 to allow for more research and discussions towards a more permanent resolution. The standard in world grain trade is 2.5%. China's food safety agency ASQIQ contended that blackleg spores in trash can introduce the fungal disease into rapeseed fields in China. Blackleg is endemic wherever canola and rapeseed are grown and it is present throughout Chinese rapeseed areas. It is not established that it can be spread in dockage. Even if it were, Canadian seed goes directly to crush plants. If canola meant for processing is being used as seed in China, it is in violation of intellectual property rights. The disease is controlled using resistant varieties. Fungicides at best reduce severity of infections but do not prevent them. It is now June, and canola export sales will soon be made to China for shipment after September 1. No one seems to know where matters stand. The Canadian Food Inspection Agency which is negotiating with ASQIQ has not indicated whether progress has been made or whether the September 1 deadline still applies. (06/07/2016)


About 2,000 Ontario and Quebec farmers staged a demonstration in Ottawa on June 2 to protest against duty-free imports of diafiltered milk, a milk-solids ingredient from the US, used in making cheese and yogurt. To stop them, the dairy lobby wants the Trudeau government to create regulations prohibiting cheese-making from anything except 100% Canadian milk. The supply management lobby is also pressing the government for an assurance that multi-billion compensation for the loss of tiny market shares promised by the former Harper government under the Canada-EU and TTP trade agreements, will be forthcoming. The Ottawa event followed by a day the widely-reported announcement from Maxime Bernier, Conservative MP and candidate for the party leadership, that his campaign will include a plan to eventually end the supply management system. Bernier represents a semi-rural Quebec riding with many dairy farmers. Until now all parties unanimously supported supply management in every vote and resolution in parliament. There is a long, maybe too long, road ahead for Bernier to become party leader, install supply management reform as a platform plank and win the 2019 election. However other parties will be in the position of defending a system which has made a very few dairy and poultry farmers very wealthy behind the monopoly wall, while badly hurting the poorest families which can least afford artificially-inflated prices for basic foods. If such a political debate actually unfolds, the supply management lobby will need more plausible arguments than that the system provides an assured supply of safe milk. It actually restricts supply and food safety derives from government regulation and inspection, not quotas. (06/03/2016)


The US agriculture department released its first supply-demand estimates for the 2016-17 crop year, projecting a smaller 2016 wheat harvest, larger corn and soybean crops and higher carryover. It put the 2016 wheat harvest at 1.998 billion bushels, down 3% as seeded area dropped to 49.6 million acres from last year's 54.6, but expected yield increased to 46.7 bushels per acre from 43.6. Spring wheat and durum production was forecast to drop 16% on smaller acreage and a return to trend-line yields. US wheat use was seen at 7% higher with exports rising to 875 million bushels from 780 in 2015-16, but wheat carryover was forecast to increase to 1.029 billion bushels, the highest since 1987-88 and nearly half of 2016-17 disappearance. The farm-gate average wheat price for 2016-17 was put at $3.70 to $4.50 per bushel, the lowest in 11 years, down from $4.90 in the previous year and $5.99 in 2014-15. The soybean harvest was projected at 3.800 billion bushels, down from 3.929 and 3.927 in the previous two years. Soybean supply including carry-in will be 4.23 billion bushels, up 2% from 2015-16. Carryover at the end of 2016-17 was predicted to drop to 305 million bushels from 400 million at the end of the present year, but a third higher than 191 million at the end of 2014-15. Soybean exports were projected at 1.885 billion, up from 1.740 last year. USDA expects soybean prices to average between $8.35 and $9.85 a bushel, vs $8.85 in 2015-16. Nevertheless, soybean futures rose by over 50 cents a bushel to the highest in 18 months. The 2016 corn crop was forecast at 14.43 billion bushels, a new record and 829 million bushels or 6% larger than in 2015. Average yield was placed at 168.0 bushels per acre vs 167.6 in 2015. Corn use was expected to be 14.12 billion, up 4%, but carryover will increase to 2.15 billion bushels from 1.80 at the end of 2015-16. It was 1.73 billion for 2014-15. The stocks-to-use ratio will rise to 15.2% from 13.3%. US corn exports were put at 1.90 billion bushels, a three-year high but just 10% higher than in 2015-16. The season-average farm price was projected at $3.05 to $3.65 per bushel compared to $3.60 for the present year. (05/15/2016)


On page 4 of the 62-page guide prepared by the Ontario government for applicants under the Growing Forward 2 program which offers financial assistance to food processors to improve their operations and expand their markets is a list of its objectives. They include accessing new markets and retaining existing ones, quality assurance, risk tolerance, labor productivity, efficient use of inputs and, of course, climate change. The program is funded jointly by the federal and provincial governments out of their agriculture budgets, which more than implies that it is intended for purposes that ultimately benefit agriculture. On the ground the program is operated by the provinces, which are assumed to be in the best position to deploy funding in the most effective way. In Ontario it is supposed to encourage innovation, competitiveness, market development and capacity building in the agri-food and agri-products sector. Since its establishment in 2014 the program has disbursed $38 million on roughly 750 projects. The latest was announced last week. Multinational liquor behemoth Bacardi will get $350,000 to improve its product labelling and use recycled cardboard for its rum and whisky cases. The money goes to the sole Bacardi operation in Canada, a bottling plant in Brampton. It is not a distillery or a processor facility. The announcement from the office of provincial agriculture minister Leal said the company is family owned, which is quite so. Bacardi is the largest privately-held spirits company in the world, headquartered in Bermuda with operations in 27 countries and annual sales of $5.5 billion. Its 200 brands also include Dewars scotch, Sapphire gin and Grey Goose vodka. The image of the GF2 program, as intended and understood, is to act as an incentive for presumably smaller Canadian companies to make productivity and business-expanding investments that they would not otherwise undertake due to financial constraints. None of this fits Bacardi. Not a cent of the $350k assists Canadian agriculture in any way. If Bacardi can get money out of this scheme anyone can. The deadline for applications under the program in Ontario is July 31. Companies which might be eligible should quickly investigate it and put in for a piece of the pie before this hapless, spectacularly incompetent minister hands out the rest of its cash to marijuana grow-ops. (05/15/2016)


Statistics Canada's March 31 grain stocks report, issued May 6, showed dramatically lower wheat, canola and pulse stocks compared to year earlier. Canola inventory of 7.49 million tonnes was 10% smaller than a year ago and just 43% of the 2015 harvest vs 51% year-ago. Farm stocks were down 13% after a 5% larger crop, lowest since the 2013 date. Off-farm deliveries or canola since March 31 were about 1.5 million tonnes, so about 6 million remains as of the 39th week of the crop year. Deliveries cannot be maintained at the year-to-date rate to the crop year end. All-wheat stocks at 13.79 million tonnes 24% lower than a year ago and 37% lower than two years ago, the lowest in eight years. Non-durum wheat at 11.22 million tonnes was 27% lower than a year ago and 37% less than two years ago. Durum stocks were similar to the 2015 date but 36% below those of March 31 2014. Wheat stocks on western farms were 28% lower than a year ago, however barley and oat stocks on farms were 13% and 1% higher. Pulse crop stocks dropped most, with lentils in all positions at 416,000 tonnes vs 1.16 million a year earlier and peas at 1.24 million vs 1.73 million. Lentil disappearance between December 31 and March 31 was 625,000 tonnes vs 494,000 year-earlier, and peas at 993,000 vs 546,000. Flax stocks rose 49% to 571,000 tonnes including 491,000 on farms, up 75%, highest in 6 years. In world sagging under overwhelming grain and oilseed surpluses, western grain stocks are the lowest since 2013 after the second-largest harvest in 2015. This is a terrific testament to the efficiency and effectiveness of the grain trade in moving huge supplies to export against extreme competition from other sellers, allowing growers to cash out their inventory in pretty much the most timely way ever seen. It has also managed record exports with 6% smaller commercial inventory, which reduces carrying costs and benefits the whole value chain. (05/06/2016)


The Trudeau government will proceed to ratification of the CETA (Comprehensive Economic & Trade Agreement) with the EU and the first order of business is mollifying the milk lobby. The government said it will meet shortly with dairy supply management representatives to talk about protection from competition from European cheese. Under the WTO agreement the EU has tariff-free access to 13,600 tonnes of the Canadian cheese market. CETA will allow the EU to ship an additional 17,700 tonnes or 39 million lbs annually without duty. Just before the election last October the Harper government, desperate for support in the southern Ontario dairyland, offered $4.3 billion over 15 years to make up for the loss of 5% of the Canadian cheese market and for any decline in milk quota value traceable to the agreement. This is now the starting point for the negotiations. All parties in parliament support the supply management system and the shrinking number of increasingly well-off producers whom it enriches. The dairy boards claim losses of $110 million to $150 million per year will be caused to dairy farmers by the extra half-kilogram per year per capita of EU cheese, equivalent to $6.21 to $8.49 per kg. The supply management sector will be seeking similar offsets if the Trans Pacific Partnership agreement ever comes into force. The Harper government offered a $2.4 billion, ten-year Income Guarantee Program to compensate dairy and poultry farmers for small increases in imports. The CETA-TPP total is roughly half a billion a year, a significant share of the economic benefit to the entire rest of the economy from improved access to European and Asian markets. (05/06/2016)


Lobbying by western grain, commodity and farm groups seems to have paid off: on April 22 the federal government announced that it will extend parts of the Fair Rail for Grain Farmers Act by one year from its scheduled expiry next July 31. The act is not being re-opened for amendments and the extension will be by a resolution in both houses of parliament. Transport minister Garneau said the automatic repeal was postponed while the government assesses the rail transportation system, in light of the Emerson review of the Canada Transportation Act. Three provisions of the act were specifically designated for extension: the railway interswitching distance, the level-of-service arbitration process for assessing monetary damages to a shipper for the failure of a railway to meet level-of-service obligations, and imposing minimum amounts of grain to be moved by the railways to export positions. The interswitching provision (which lengthens to 160 km from 30 km the distance over which a railway is required to haul cars of another railway to and from shipping points on its lines in the three prairie provinces) is the more important. Supporters of the expanded radius, which seem to be everyone but the railways, complained that the requirement should have been made permanent. It is extremely unlikely that a year is enough time for the government to deal with the Emerson report. The government has given itself until July 31 2017 to assess the Emerson recommendations, work out coherent policies, draft legislation and herd it through parliament. (04/30/2016)


The only thing more tiresome than claims that the demise of the single desk wheat marketing system has reduced western Canadian wheat quality is the delight that newspaper reporters take in spreading and embellishing them. So it was with recent comments attributed to a Canada Bread Co executive, who said the company had to spend an extra $1 million on gluten last year to add to flour that was too low for its needs. The implication was that problems began when the Wheat Board was disbanded. The Board never had the slightest control over wheat quality, even though it expropriated the entire western Canadian harvest. It had to sell whatever was produced, in the same way that all grain traders everywhere do. There is absolutely no connection between wheat marketing methods and wheat quality. The gluten strength issue of recent years is well known and fully explained. It has been addressed by the Canadian Grain Commission through changes in the wheat classification system. Gluten strength was temporarily lowered in 2013 and 2014 by growing season weather and a preference among farmers for new higher-yielding but lower-gluten varieties. Changes in classifications will divide wheat varieties now in the CWRS class into two classes, with a new Canada Northern Hard Red class for varieties that tend to have lower gluten readings and other quality characteristics. The new CNHR class will virtually duplicate the quality parameters of US Dark Northern Spring, including gluten. There have never been serious complaints about substandard gluten content in US spring wheat. The main business of Canada Bread is supplying supermarkets with the cheapest possible bread and baked goods in big-looking low-density loaves, so it probably has a particular interest in gluten. It is the responsibility of flour millers, not grain companies, to supply bakers with the type of flour they need. Canada Bread is big enough to insist on it. (04/30/2016)


AgriClear, the internet livestock marketing service subsidiary of the TMX Group which runs the Toronto Stock Exchange, on an internet website, offers facilities for listing cattle for sale and bids by buyers, the means to negotiate prices with back-and-forth offers and counter-offers for a flat $6 per head (there is no charge for listings). It guarantees payment to producers and delivery to buyers by collecting sales proceeds and remitting them to the seller, backed by a $10-million assurance find. Or at least it would if there were any transactions. AgriClear is a resounding flop. Launched in 2015, it has as sophisticated a system for posting lots for sale and buyer bids as multi-billion-dollar consumer sites such as eBay. But recently just 34 lots were listed for sale, either breeding or replacement animals. There were no listings from buyers or of slaughter cattle. TMX has spent a bundle to set up and promote the service in Canada and the western states from offices in Calgary and the US, personally approaching hundreds of potential users. The failure of this admittedly logical-sounding idea is partly due to the same issues that defeat 99% of attempts to start new futures markets and to set up internet website markets for grain: liquidity. Not buyers and not sellers will use services where the other is not represented. It also suggests a very limited interest in new ways of doing things in the cash cattle trade. Or else, no one wants to fix something that is not broken. Clearing and payment security is obviously not nearly as big a deal as the TMX thought. (04/30/2016)


Statistics Canada issued its annual acreage intentions report issued April 21, with mostly small but notable changes for 2016 compared to 2015, except for literally an explosion in pulse crop area in the west. The survey showed how strong the incentive is to seed all the land possible. Summerfallowing will be reduced to a new all-time low of just over 2 million acres, less than half the 2014 figure. Total seeded area in western Canada could be a record at 64.83 million acres, up from 64.02 last year and 62.21 in 2014. The report's main feature was a massive increase in pulse crops in western Canada, to a new record of 9.52 million acres this year, 23% above last year's 7.71 million and 15% of all cropped area in western Canada. Ten years ago it was under 8%. Lentil area was reported at 5.14 million acres, a record. The gain is 30% over 2014 and 28% above 2013. Area intended for peas was put at 4.28 million acres, a 16% increase. Canola acreage in western Canada was projected to drop 4% to 19.34 million acres, the lowest since 2011, attributed to high input costs, uncertain markets and persistent disease and insect issues experienced in recent years. National all-wheat area will be 1% smaller than last year at 23.85 million acres and 1.5% less than in 2014. Spring wheat area will be down a million acres, but a 5% gain is projected for durum. A 6% decline in corn area is indicated, but a 3% increase in soybeans. Corn acreage in Ontario is expected to drop 7% to a multi-year low, undoubtedly affected by provincial restrictions on neonicotinoid insecticides. Area in Manitoba is projected at 360,000 acres, up 44%. Soybean acreage will be a record million acres nationally, with increases in all provinces where it is a significant crop. The 6% gain in Ontario may be explained by the fact that neonic seed treatments are less essential in soybeans than corn. Soybean acreage in Manitoba is set to increase to a new high of 1.53 million acres, but in Saskatchewan is expected to drop from 270,000 acres to 245,000. Flax acreage will be down sharply to 1.12 million acres from 1.64 million last year. (04/21/2016)

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