Tuesday, January 11, 2011
Canadian Spring Acreage Tussle
Profarmer has recently returned back to these sunburt shores (or should I soggy shores) after spending the festive season in cold wintery Canada. As well as watching some live ice hockey I had the opportunity to visit some colleagues in Winnipeg. I was assured that I’ll be experiencing -30 temperatures but luckily for me the mercury only got down to -15! Like growers in Australia, the 2010 western Canadian marketing year could be summed up as wet. Record rainfall in their key April/May planting window especially in key producing areas of Manitoba, Saskatchewan and Alberta frustrated growers by not allowing them into paddocks due to the excessive wet. If the ideal planting window is missed it usually causes great concern, as the onset of cold wet weather in autumn comes in quick limiting harvest. However, looking forward to 2011 the word on everyone’s lips is what will be planted come April/May?
With the current canola price at very attractive levels (Winnipeg Nov futures up CAD$15.50 in today’s trading) the intended canola area is estimate between 19 – 20 million acres; this is a sharp rise considering only 16.5 million acres was planted last year. Our Profarmer Canada colleague estimated Canadian gross margins (calculated using current production costs against new crop prices) certainly backed this up at. With Canola at C$200 per acre, red lentils at $185, spring wheat at $165, with feed barley and peas at $150. If one must grow a cereal, which is a must given rotational considerations; wheat beats oats and feed barley. Peas are going to lose acres under this economic scenario and lentils may lose some given 2010 production problems and the fears it instilled in Canadian growers!
There is also the potential for spring wheat acreage to also increase by another 0.5 – 1 million acres, provided that prices remain firm. There is some who feel there will be more significant acreage increase in the mid to low quality non-CWRS varieties and go the route of local ethanol and feed plants. As has been well documented the Canadian spring wheat crop in 2010 was ravaged by wet weather. The result of this is only 10% of their total crop going into their number 1 grade (CWRS1) a further 28% into CWRS2, 38% CWRS3 and 24% as CWRS4, this is in stark contrast to the previous 4 years when CWRS1 was averaging 45%.
Although January is still very early to accurately forecast potential switch in acreage, the US futures market will be more of an indication over the next couple of months. What is certain that traders in Winnipeg all agreed that there would be tremendous pressure from soybeans and corn on eastern US spring wheat territory. In the further west regions of the US corn and soy are not significant options. Whilst out in the western Canada it is anticipated that there will be some slight competition from canola and pulses in the north, but the traditional wheat and durum areas in the west will likely remain.