Wednesday December 12 2018

Agriline

Agriweek


Agriweek Canadian agribusiness authority since 1967

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)

LOWER EXPECTATIONS MAY SAVE NAFTA

To the Trump administration optics are everything. It needs to show aggressive, decisive action on its election promises and subsequent policy decisions, and to demonstrate almost immediate success. Or at least claim success, freely exaggerating as necessary for maximum political value in its adherent base. That is the process playing out in the steel-and-aluminum duty declaration, the massive tariff assault on China and now in the NAFTA agreement. There was no definitive announcement following a two-day meeting of NAFTA ministers on the weekend of April 6. The eighth round of formal negotiations, to have lasted 10 days starting April 8 in Washington, was quietly cancelled, though meetings at the civil-servant and negotiator levels continued outside the formal negotiating framework. The deadline for an agreement in principle, set by Trump, remains May 1. However threats to cancel the agreement have disappeared and officials of all three countries declared that a renegotiated NAFTA is within reach. That reinforced ideas already floated that strategy has been changed by mutual consent. Over about the next four weeks whatever compromises can be made on major issues will be made. Items on which compromise is not possible will be left as they are. An agreement in principle could indeed be announced by May 1. Preparing the text would require revising only about a dozen chapters that changed. It could be ready to present to national legislatures for ratification by late June, meeting the requirement that the existing Congresses of the US and Mexico will deal with it, before their composition is changed by forthcoming elections. It would be enough for Trump to claim major gains for US trade, employment and the economy. Although only six of 30 NAFTA chapters have been fully may signed off, it appears that compromises have been made on the five arbitrary US demands. A consensus is said to be close on automotive origin rules, which are the most important part of the agreement and on which most effort has been directed. A formula has been proposed in which duty on motor vehicles entering the US from other NAFTA countries would be scaled to the wage rates prevailing in the factory where the vehicles were built, along with existing rules on the origin of car parts. High-wage origins would face no duty. The US demand for a clause under which NAFTA would expire every five years unless all three countries agree to extend it has reportedly been modified to provide for a mandatory formal review every five years. NAFTA already has a termination clause under which any member can withdraw on six months' notice. (04/16/2018)

CANADIAN FARM CASH AND NET INCOME IS STRONG

Agriculture Canada released its annual agricultural outlook, of which the most interesting part is always its farm income estimates for the previous year and projections for the current calendar year. It is prepared in consultation with Statistics Canada and provincial agriculture departments. As to be expected with such exercises the final results could be much different, especially for the present year. However this is what Canadian farm finance would look like if nothing too extraordinary happens with weather, markets, exchange rates and other variables. The report puts farm cash income nationally in 2017 at $61.84 billion, 2.5% higher than $60.32 billion in 2016 and a record. For 2018 another 1% gain is expected to $62.60 billion. Crop receipts for 2017 are thought to be 1% higher than the prior year's with another 1.5% gain expected in 2018. Cash revenue from livestock sales is estimated to have gained 3.9% in 2017 but will basically flatten out for 2018. Alberta was the top farm gross income province in 2017, followed by Saskatchewan and Ontario (see table, page 2). According to the estimates cash income increased by 3.8% in western Canada over 2016 but just 0.5% in the east. A 10-year history of farm cash income shows a remarkable pattern of increase through periods of changing farm prices, as well as a much faster growth rate in western Canada compared to the east. Crop-origin income rose much faster than livestock sources. Crop prices peaked in 2011 and 2012, but farm cash income in the west continued to rise except for a minor dip in 2016. The outlook report has some startling information about financial conditions at the individual farm level. It estimated gross sales of the average farm in Canada in 2017 at $460,000, with egg, greenhouse and potato farms at over $1 million and hog farms over $2 million. The average farm that was mainly in crops grossed an estimated $413,000 last year, up from $396,000 in 2016. Grain and oilseed farms had average expenses of $320,000 and net operating income of $116,000 last year. As a percentage of gross receipts, grain and oilseed farms had the highest margin of any farm type at 28%. For farms that were primarily cattle raisers the ratio was 8.5% and for hog farms 5.5%. The large scale of hog farms, which had average sales of $2.2 million, explains how they were able to stay viable. Supply-managed dairy farms had net operating income of 24% of sales but poultry and egg farms 15%. According to the estimates the average farm family in Canada in 2017 had an income of $147,000, but only $33,000 was derived from the farm operation and $114,000, presumably off-farm employment and investment income. Crop farming families had average income of $167,000 of which $54,000 was from the farm. Dairy farm families had average income of $151,000 with $98,000 from the farm. Average income of all Canadian households in 2017 was about $74,000. (04/09/2018)

THERE COULD BE HOPE FOR NAFTA YET, AFTER ALL

There has been a dramatic turn in the NAFTA negotiations if a story in the Toronto Globe & Mail last week is true. The paper, with its close ties to the Liberal party, may have inside information, reported that the Trump administration has dropped its demand for automotive content of 85% (from 62.5%) North American and 50% US for vehicles to be admitted into the US duty-free. The story was not officially confirmed and was not carried by other news sources, but it did appear to have some credence. US trade representative Lighthizer later told a congressional committee that NAFTA negotiations are converging. Auto content was the most problematic of the five main US conditions. Trump's public statements about NAFTA have been fixated on repatriating auto and other factory jobs from Mexico. A connection was seen with the appointment of Larry Kudlow as Trump's top economic advisor. Kudlow is best known as a popular TV financial and conservative political commentator but has been a staff economist at the Federal Reserve Bank, Bear Stearns and the Office of Management & Budget during the Reagan administration. He has strong pro-free-trade views and has been an outspoken supporter of NAFTA and the TPP agreement. It could be part of a crude Trump negotiating plan in which no concessions are given until late in the process to see how far Canada and Mexico will bend. Frequent bombastic threats to withdraw the US from the agreement could have been real, or another part of this script. That leaves the dispute settlement process, the five-year sunset clause, the Buy-America preferences in public works projects and Canadian dairy and poultry supply management as the make-or-break NAFTA issues. Canada and Mexico will obviously have to give something in return. The easiest reciprocal concession for Canada would be to forego equal access to US government-funded projects. The next round of talks, to last 10 days, is set to begin April 8 in Washington. (03/26/2018)

STRANGE THINGS ARE DONE IN THE LAND OF ONTARIO

With 34% of the Canadian population, 39% of GDP, public debt amounting to 44% of the total provincial debt and 46% of federal debt and the recipient of $2 billion a year in federal transfer payments, Ontario is everybody's business. It has been grossly misruled and abused for 16 years of Liberal governments and its debt is a danger to the credit stability of the whole country. An election will be held June 7 in which a three-legged dog should be able to defeat the Liberal premier Wynne. Unfortunately the provincial Conservative party, through the most chaotic process ever seen in Canadian provincial politics and possibly anywhere else, on the weekend of March 10 picked a leader who may be the latest in a long line who were unsuccessful in unseating an incompetent, corrupt, crooked and unpopular Liberal regime. They have not even been able to prevent it from getting majority after majority. Comparisons between Donald Trump and Doug Ford are automatic and widely made but irrelevant. The reality is that Ontario's voter dynamics do not assure that an incumbent premier with a 18% public approval rating will lose because her party wins. Ontario politics are split geographically in the familiar way. The Conservative party, no matter who its leader, has stable, overwhelming support in rural, small-town and suburban Ontario. But voting power is concentrated in the heavily left-wing urban ridings where Liberal and NDP support, especially among the low-information sub-middle classes is impregnable. Without a substantial migration of moderate-left voters to the Conservatives in the urban core of Toronto, a win is numerically more or less impossible. Seventeen new ridings were added in Liberal areas since the 2014 election. A pink-conservative leader might have had a chance. Ford is no moderate and the confused leadership selection process as much as the result divided the party itself as never before. An early poll showed Ford with a 48% disapproval rating to 36% approval. The most disastrous outcome in June seems entirely likely: a Liberal minority propped up by the NDP. Perhaps Ford can emulate Trump's surprise victory. If he can, things could get very interesting. Ford was adamant in promising to cancel Ontario's carbon tax and taking on the Trudeau government. He also has pro-business policy ideas that would mean unwinding much of what 16 years of hostile government left behind, with implications for deficits, waste, taxes, regulations, minimum wages and electricity costs. With representation from farm country, a Ford government would include many individuals qualified to be its first viable agriculture minister in over a decade. (03/12/2018)

THE US HARD RED WINTER WHEAT CROP FAILURE

The impact of near-record drought in the US hard red winter wheat states worsened last week, and as wheat starts regrowth the loss in yield potential is probably far worse than expected. USDA's weekly Drought Monitor placed an area in Oklahoma, Texas and southern Kansas covering 40% of the HRW wheat belt in the exceptional (D4) drought category and 80% severe with virtually no topsoil moisture. Strong winds and low humidity worsened powder-dryness of topsoil. The National Weather Service predicted literally zero rain for the region up to at least March 23. As of March 11 winter wheat in Kansas was rated 12% good or excellent and 53% poor or very poor, Oklahoma 7% and 72% and Texas 13% and 53%. These are among the poorest readings ever recorded. Soft red winter wheat in the southeast states is threatened by freezing temperatures this week. Hard red winter wheat seed planted last fall which did not germinate because of low soil moisture may germinate in the spring but will produce plants with no seed because vernalization will have been missed. Vernalization, necessary for the reproductive process, occurs when germinated seedlings are exposed to sub-freezing temperatures for a prolonged period. (03/12/2018)

WHAT CAN THE CNR SAY AFTER IT SAYS ITS SORRY?

Big, well-run, world-class companies do not apologize to their customers. They manage their firms in ways that make apologies unnecessary by giving their customers efficient and reliable service at reasonable rates. That is not the situation at Canadian National Railways, which has not been this shabbily managed since it was a crown corporation. Last week the CNR fired its president, raised its dividend and said it was sorry for the rotten service western grain shippers have been getting. Its share price was at a 52-week low. It said it is taking “immediate steps” to clear the backlog created by weeks of car supply shortfalls to a fraction of what shippers ordered. The railway now, suddenly, has a “sense of urgency” and is “fully focussed” on servicing its grain customers. “Starting today”, it said, there will be “no excuses”. It is offering incentives for employees to delay retirement and postpone vacations, offering their jobs back to recently-retired employees and putting managers on train crews. The CNR will also provide weekly tracking of grain shipments, which is no substitute for actually completing shipments, and a function already ably discharged by the Ag Transport Coalition and the Grain Monitor. As trite as it is to say to, it is too little too late. (03/12/2018)

FIRST USDA 2018-19 CROP PROJECTIONS

The 94th annual USDA Agricultural Outlook Forum was held February 22-23, at which the department issued the first projections for the new crop season calculated from economic trends and do not reflect whatever is already known about crop conditions, notably in wheat. It projected US wheat area for 2018 at 46.5 million acres, slightly above the 100-year low of 46.0 million last year. Average yield was put at 47.4 bushels per acre from 46.3 last year for production of 1.839 billion bushels vs 1.741 last year. Total use of 2.052 billion will be little changed from the current year but carryover should drop to 931 million bushels from 1.009 billion. Soybean area will also be similar to last year at 90.0 million acres. Average yield of 48.5 bushels may be below last year's 49.1 for a soybean harvest of 4.320 billion bushels, virtually unchanged from 4.392. Soybean exports could increase to 2.300 billion bushels from 2.100 with total use of 4.415 billion vs 4.188 in 2017-18, reducing carryover to 460 million bushels from 530 at the end of 2017-18. Corn area for 2018 was predicted at 90.0 million acres vs 90.2 last year but trend yield of 174.9 bushels would be below last year's 176.6. Corn production could drop to 14.390 billion bushels from 14.604. Despite a drop in exports to 1.900 from 2.050 billion, total use could be similar at the current year's 14.520 billion with a slight drop in carryover to 2.272 billion from 2.352. Corn use for ethanol in 2018-19 was estimated at 5.650 billion bushels vs 5.525 in the current year. USDA expects average farm-gate prices for 2018-19 of $4.70 a bushel for wheat (vs $4.60 in 2017-18), $9.25 for soybeans ($9.30) and $3.40 for corn ($3.30). (03/05/2018)

WESTERN GRAIN RAIL SERVICE BREAKS DOWN

The two railways together spotted only 49% of grain rail cars ordered for the 28th week of the crop year ended February 11, according to the weekly report of the Ag Transport Coalition. The already dismal performance of Canadian National deteriorated even further into an unprecedented service collapse. CN provided barely a third, 34%, of the cars ordered for the 28th week, for a fifth straight weekly decline in that key percentage. It was the eighth of the 28 weeks in the crop year so far that the CNR furnished less than 60% of cars ordered. Canadian Pacific did not much better, supplying 69%. It was the worst week of the crop year, and in fact the worst since the winter of 2013-14. At the end of the week shippers were short 3,656 cars, 40% more than just seven days earlier. The two railways filled only 83% of car orders for the Vancouver and Prince Rupert corridors, including cars that were late. Shipper demand rose during recent weeks but is running at only 7,625 a week compared to the average of 8,615 a week since the start of the crop year. The CNR has its own tally of grain traffic on its web site, cleverly organized to make it as hard as possible to understand what it says, The bottom line is that for week 28 the CNR acknowledges receiving orders for 4,888 cars and shipping 2,956 or 60%. It does not go into the timeliness of its service. It prefers to stress the amount of grain it has moved so far in the crop year compared to a year ago and two years ago, completely meaningless information. The site complains of how severe the weather has been this winter. Obviously it has been the same for the CPR. Canadian Pacific, which had been doing dramatically better than the CNR, also slipped. Its 69% fulfilment rate was 80% three weeks earlier. Until now there had been only three weeks during the current crop year that its performance was under 80%. At least the CPR did not ration any cars. Shipper orders from the CPR are running at just 3,400 a week. Not only are the railways not spotting cars on time. They are not picking up loaded cars on time either. The average 'dwell time' after cars are loaded and before they are taken was 61 hours for the CNR and 74 hours for CPR, compared to 42 and 62 for the same week a year earlier. Due to the railway bottleneck primary elevators on the prairies are nearly plugged. Last week the system had only 7% free space, with stocks of 3.489 million tonnes, an increase of 550,000 tonnes in five weeks. Off-farm deliveries declined to 849,000 tonnes from over a million tonnes in recent weeks. West-coast terminal receipts for the 28th week dropped to 387,000 tonnes from 479,000 in the previous week. (02/29/2018)

DECEMBER 31 GRAIN STOCKS ARE RECORD-HIGH

There are three takeaways from the Statistics Canada report issued last week of grain stocks as of December 31. Inventory of the main crops was record-large but not out of line with 2017 production, indicating that the Canadian grain trade is managing to sell crops for export into a fiercely price-competitive world market as fast as farmers want to sell them. Second, the record 57-million-tonne stock on farms is grain waiting to be converted to farm cash income, 3% more than a year earlier, offsetting some of the small average decline in prices compared to a year ago. Third, the figures show how much the Canadian grain industry has expanded just in the last decade. Total stocks of the same grains at the end of 2008 were just 35.44 million tonnes, although 2007 production was unusually low even by the standards of that time due to adverse weather in the west. Canola stocks that year were just 5.02 million tonnes. Canola stocks on December 31 2017 were record-large for the date, at 14.15 million tonnes, up from 13.38 million a year earlier and 13.51 on the 2015 date. On-farm stocks were 12.54 million, compared to 11.55 and 11.83 million. Farm stocks were 89% of total stocks compared to 86% a year earlier and also a record. Combined canola inventory was 66% of reported 2018 production vs 68% on December 1 2016 when the preceding crop was 8% smaller. All-wheat stocks were 2% smaller vs a 5% decline in the 2017 harvest, although total wheat supply for 2017-18 including carry-in was unchanged. Wheat stocks including durum were approximately 79% of production with durum at 97%, compared to 79% a year earlier. Durum inventory at 4.83 million tonnes was 21% lower than the record for the date a year earlier of 6.14 million. Combined stocks of oats were the highest for the date in eight years at 2.85 million tonnes, up 14% from a year earlier after a 17% larger 2016 harvest. Barley stocks at 6.06 million were 6% lower with 95% of barley inventory on farms. Soybean inventory was also record-high at 4.31 million, a big 29% gain over a year earlier with farm stocks 59% higher at 2.80 million. Soybean production was a record 7.72 million tonnes in 2017 and December 1 stocks were 56% of the previous year's harvest vs 51% a year earlier. On-farm soybean inventory in western Canada was 40% of the total compared to 31% a year earlier. Stocks of corn in eastern Canada were 12.20 million tonnes, 5% higher than a year earlier with farm stocks of 9.2 million 4% higher. Stocks of lentils, at 2.00 million tonnes of which 94% were on farms, were 16% higher than a year ago and 78% of the 2017 harvest. A year earlier farm and commercial inventory was 53% of the preceding harvest which was 27% larger. However stocks of peas were only 4% higher at 2.81 million tonnes, with stocks on farms 3% higher. December 31 pea inventory was 68% of production vs 54% a year earlier. These are further measures of the impact of the loss of the export market in India, but they still do not paint the whole picture because pulse crop exports to India have often been back-loaded into the second half of the crop year. (02/15/2018)

NAFTA NEGOTIATIONS AT A STALEMATE AFTER SIX ROUNDS

After six rounds of the NAFTA negotiations consensus has been reached on 10 of the 30 chapters, including energy and telecommunications. This represents about 40% of the agreement, however these are non-controversial subjects in which US demands are not extreme. However there has been no movement whatsoever by the US towards compromise on the three make-or-break serious issues that the Americans brought forth at the start of the process: US and North American content in automobiles, a five-year sunset provision and the dispute resolution procedure. From this standpoint the talks are at a stalemate. At the conclusion of the latest session in Montreal on January 29, the three ministers and other officials said progress was made but no one was able to describe exactly what it was or what it means to the chances of ultimate success. Everybody was talking about the 'work' that remains to be done, when in fact the whole business could be wrapped up in a day if there were an earnest interest in Washington to preserve the agreement. It was agreed that the talks are worth continuing, with the next session in Mexico City starting February 26 and lasting nine days, followed by an eighth round in Washington in March. There was never a risk that the negotiations would not continue after Montreal, so it was not news. The general manager of the negotiations is Lighthizer, who repeated that he is not satisfied with Canadian responses to the original set of American demands. He publicly criticized Canada for its “massive attack” on the entire body of US trade law in its across-the-board complaint last month to the World Trade Organization alleging US trade remedy procedures are not WTO-compliant. He did not link it directly to the NAFTA process but it cannot help but be part of the equation.

Last week Canadian foreign minister Freeland hinted that the WTO action could be withdrawn if the US ended its anti-dumping action against Canadian softwood lumber. If that was the intent, it is an even more naďve, crude and dangerous than it seemed, a clumsy, amateurish blackmail attempt at the worst possible time. Under US law the government cannot end a trade remedy action part-way through. Such actions are initiated by American companies and industries which claim import injury and can only they can withdraw them. The Montreal session underscored the strong support NAFTA has in the US among industries that benefit from it and legislators of Trump's own party. A delegation of American farmers from the ad-hoc Farmers for Free Trade was in Montreal for the talks, trying to send US negotiators the message that NAFTA must be preserved, since Canada and Mexico are America's top two agricultural export markets. Several Congressmen of both parties also attended in Montreal and got a briefing from senior negotiators. They were also on the side of preserving the agreement. (02/05/2018)

TRUDEAU GOVERNMENT LAUNCHES A TRADE TORPEDO

The Trudeau government's decision in December to attack US trade law at the World Trade Organization must rank with the most irresponsible and plain stupid trade strategy decisions of all time. There are worse things in Canada-US trade relations than the abrogation of NAFTA, and before this is over Canada may well suffer them. The Canadian government filed a complaint at the WTO attacking American trade practices used to address dumping of imports on the US market at unfairly low prices and imports which are underpriced because exporters receive subsidies from their governments. These procedures have been in place for many years and apply to all countries. The complaint alleges that the US applies duties at higher rates than allowed by the WTO, calculates duty rates improperly, illegally assesses penalties retroactively and limits or ignores evidence from third parties. It charges that the six-member US International Trade Commission is systematically biased against exporters and that its voting system is rigged. Over 120 examples from US trade actions are cited, not only against Canada but also the EU, China, India and Brazil. In fact about half of the examples cited involve China. Trump intensely dislikes the WTO because he perceives its rules to be restrictions on US lawmaking and incursions into domestic affairs. If the Canadian complaint were to succeed, impairing the ability of the US to use its anti-dumping tools would open the gates to low-ball imports from all WTO countries, specially China. There is no way that any administration would stand for such an outcome and this could conceivably start a chain of events leading to US withdrawal from the trade body, or at least its complete disengagement. If the Canadian action is dismissed or fails at any point, the damage is still already done. There are countless ways, far beyond lumber and newsprint, in which the administration with or without Congress can frustrate or block Canadian imports that have entered freely for decades. (01/22/2018)

CHINA COMES TO THE RESCUE OF AN OVERLOADED MALT MARKET

China has stepped up as the runaway top importer of Canadian malting barley because of the greatly reduced Australian barley harvest and associated quality issues. In fact in the crop year to date China is the only sizable buyer, taking 400,000 tonnes to October 31 compared to 158,000 tonnes in the year-earlier period. No other country, including Japan which traditionally has been a reliable customer for feed barley, has taken more than a fraction of China's volume. China is also the biggest single buyer in the crop year to date of Canadian canola, peas, flax and soybeans. The Canadian supply of malting-grade barley is the highest in four years because of a favorable growing and harvest season and quality is exceptional. If not for China, after domestic malt demand is satisfied the balance would be going into the feed trade. Domestic use recorded by the Canadian Grain Commission is down slightly in the crop year to date at 432,000 tonnes. (12/18/2017)

CROPS DEFY WESTERN DROUGHT, MAKE REMARKABLE YIELDS

From Statistics Canada's final 2017 crop production report issued December 6 it would be impossible to know that the south half of Alberta and Saskatchewan had the driest growing season of the last 20 years. Western farmers seeded 2% more land to the eight major crops and harvested just 1% less than in 2016, when production was the second-largest in history after 2013. Total production of eight major crops in western Canada was 69.46 million tonnes and for all of Canada 91.94 million, compared to 70.23 and 91.73 in 2016. The all-time high was 93.59 million tonnes in 2013. The canola crop was a record 21.31 million tonnes, with seeded area 13% higher and average yields only 5% lower. Yields of spring wheat and oats were virtually unchanged from 2016. Only the crops mainly grown in the south of the prairie grain belt, notably durum, flax and winter wheat, showed markedly poorer results. Manitoba farmers had higher yields of all crops except soybeans and corn and record total production. Statistics Canada again drastically underestimated canola yield and production in its earlier 2017 reports, which put the crop at 18.2 million tonnes in the July survey and 19.7 million in September. Canola yield and output exceeded all expectations by around 1.5 million tonnes, topping the previous record in 2016 by 9%. Seeded area in the west increased by 13% to a record 22.92 million acres while production rose 9%. National all-wheat production was estimated at 29.98 million tonnes, 5.5% less than in 2016 but 2.85 million tonnes or 10.5% above the September estimate. The spring wheat crop was put at 22.16 million tonnes, up from 20.45 million in 2016, but the durum harvest of 4.96 million was 36% smaller than in 2016 on a 16% decline in seeded area and a 28% drop in average yield. Durum acreage, yield and production were record-high in 2016. Winter wheat production in Ontario was 2.19 million tonnes, 9% smaller as average yield declined 5%. Eastern corn and soybean estimates were lowered from the September report. The national soybean number of 7.71 million tonnes was 7% less than 8.32 million in September and corn 14.10 million vs 14.31. However the soybean harvest is a record because of increases in Saskatchewan and Manitoba. The corn crop is the second-largest. Average yield estimates were reduced for both crops from the previous report's. The soybean yield of 39.1 bushels is 12% under 44.2 in 2016. Corn yield of 159.7 bushels was reduced from 160.9 in the previous report but was a bushel higher than the 2016 average of 158.7. The Quebec corn crop was 3.82 million tonnes after a 5.3% increase in acreage was offset by a 5% decline in average yield. In contrast to the prairie drought, moisture was excessive at times in Ontario and eastern Canada. (12/11/2017)

NINE-MONTH FARM CASH INCOME HOLDS UP WELL

Statistics Canada reported on November 25 that Canadian farmers took in $45.35 billion in farm-gate cash receipts during the first nine months of 2017, up 3.3% from the like period of 2016. It was a January-September record and the seventh straight year-to-year increase. All provinces except Ontario and the Atlantic region saw increases. The biggest gain was 7.5% in Manitoba with Saskatchewan up 3.6% and Alberta up 6.1%. Alberta was the top farm-cash province at $10.88 billion, followed by Saskatchewan at $10.43 billion and Ontario $9.08 billion. Revenue from crops nationally increased by 2.6% after a 6.8% jump from the 2016 period over 2015. It was the sixth increase in nine-month crop receipts of the last seven years. Increases were mostly attributed to canola and wheat, with declines in lentil, corn and soybean revenue. The farm-gate value of canola sales was 9.7% higher at $7.22 billion as prices increased 5.7% and marketings 3.8%. Canola was the top-grossing crop, accounting for 29% of all crop-based revenue nationally and 42% on the prairies. Canola sales were just 9.8% of crop receipts in 1989. Receipts from non-durum wheat increased 11.6% to $3.80 billion on an 8.5% gain in marketings and a 2.9% increase in prices. Cash revenue from lentils dropped 17.3% after a 30.6% drop in prices. Soybean receipts were 11.6% as marketings declined by 13.4%. Farm cash receipts from livestock sales increased 2.3% to $18.40 billion. Livestock revenue for the three quarters rose in seven of the last eight years, the exception being 2016 when there was a steep 6.0% drop. Livestock receipts were 4.5% higher in Ontario and 3.3% higher in Quebec. Cattle revenue dropped by 9.6% in Saskatchewan and 19.9% in Manitoba on lower cattle numbers but were 3.3% higher in Alberta. Sales of cattle and calves were down 2.8% as prices averaged 3.8% lower. Hog receipts for the period rose 7.6% as prices averaged 5.7% higher and marketings were 1.8% higher. (12/04/2017)

US EXPORTS LAG YEAR-AGO AND EXPECTATIONS

Combined sales and shipments of all US wheat for the marketing year including yet to be shipped are down 5% at 620 million bushels compared to 680 to the same date a year ago, soybeans down 15% at 1.205 billion compared to 1.413 and corn down 23% at 841 million. The US agriculture department in its latest supply-demand estimates predicted wheat exports for the entire 2017-18 crop year at 5.5% lower, corn 16% lower and soybeans 3.5% higher than the prior year's. Export sales and shipments of hard red spring wheat are down 15% at 172 million bushels compared to USDA's projection of a 17% decline. The US crop year for wheat ends on May 31, others August 31. Slow exports, especially of corn and soybeans, are depressing crop futures and cash prices, but not by enough to make American crops price-competitive against South American soybeans and Black Sea wheat and corn. Chicago futures respond most directly to monthly USDA estimates of year-end carryover. The department will have to soon start adjusting export estimates down and carryover estimates up. Either way, export performance in the season so far is not a good omen for prices into 2018. (11/27/2017)

FIFTH NAFTA NEGOTIATING ROUND ACCOMPLISHES NOTHING

The fifth of seven rounds of NAFTA talks took place in Mexico City last week without minister-level participation but with the expected result. US, Canadian and Mexican cabinet officials agreed not to attend so that negotiators could concentrate on technical details. They did manage to write a bit of text on digital trade, food safety measures, telecommunications and customs enforcement. However Canada and Mexico flatly rejected US positions on the four major points (minimum US and NAFTA automotive content, a five-year sunset clause, elimination of the dispute settlement mechanism, Canadian supply management). Canada and Mexico did attempt to compromise on the US demand that a new agreement is to automatically expire at the end of five years unless renewed; both countries would accept a five-year review without default termination. There is nowhere to go on these items unless the Trump administration backs right down. US Trade Representative Lighthizer said Canada and Mexico are not “seriously engaging” on US demands for a rebalanced agreement. For the Trump administration another step was used up, strengthening the idea that the talks are not getting anywhere and reinforcing the alleged case for terminating the agreement to protect US interests. While the talks were underway Trump again repeated in a media interview that the agreement would have to be cancelled in order for the US to get a better outcome. The US strategy seems to be to let the negotiations run out without visible progress and issue notice of withdrawal from NAFTA, perhaps panicking Canada and Mexico into accepting harsh US terms. (11/27/2017)

TRUDEAU A NO-SHOW AT CRITICAL TPP MEETING

For some hours on November 10 it was reported from Vietnam that the effort to resurrect the Trans Pacific Partnership agreement had been scuttled by the prime minister of Canada. The prime minister now-famously failed to show up at a meeting of heads of state of TPP countries, who were in Vietnam for an ASEAN meeting, where the decision was to have been formally confirmed. Just hours before, trade minister Champagne participated in an announcement by all 11 remaining members that the TPP would proceed without the US on the terms already agreed. It was not Canada's finest hour in trade or international affairs and it got worse. Trudeau cited a “scheduling conflict”, implying he had something more urgent to do in Vietnam than support a trade agreement of immense importance to Canadian agriculture and the export economy. This jerkish, churlish behavior reduced Canada's stature in the TPP group and beyond. The image projected was that of a charismatic but immature, inexperienced and incompetent leader who, not knowing what to do did nothing, without notice and without even elementary courtesy to TPP member leaders. Trudeau was quoted as saying the Canada “was in no hurry” to sign the new agreement, an insult to every other leader who considers the TPP to be urgent, then announced that Canada will require changes before it signs. The Japanese prime minister probably saved the agreement by calming infuriated TPP members, particularly Australia and New Zealand. Momentum has been lost and a clear path to a quick and almost effortless implementation of this agreement has been destroyed by Canada. The final statement from the Vietnam meeting said the 11 countries have agreed to the “core elements” of an agreement, but “more work remains”. The agreement will be renamed the 'Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP)'. The statement said that after “further technical work” a new text will be presented for signature: in other words a renegotiated TPP. Several areas of the agreement will be re-opened for negotiation, exactly what Japan and other countries tried to avoid. (11/20/2017)




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