Last week, FarmLink hosted the first annual Grain World Crop Tour. Six cars left from different locations in Manitoba, Saskatchewan, and Alberta making their way to Saskatoon, visiting fields to observe crop conditions and estimates along the way. Advisors, analysts, farmers and industry insiders met to present their findings, and talk about the grain markets in our country and around the world.
As much as science is involved in the estimations, there is no escaping the fact that there is a degree of judgment and qualitative analysis to factor in. Nonetheless, the information learned from two days of field visits across most of Western Canada is precious. Having multiple sets of eyes focus on the field at each stop allowed us to look deeper. In some cases, this included the field owner, or farmer, who was able to offer insight on how the fields look relative to past years, and the longer term average. The farmers also gave us their thoughts on conditions of the area in general.
What did we find? The results of the Grain World Crop Tour showed a higher yield expectation for Western Canada than what was projected before the tour. For the most part, production estimates scaled back in the weeks before the tour. After the tour, yields were increased. Our predictions were consistent with other anecdotal reports of a cautiously improving optimism about Prairie crops in general. We acknowledged that conditions were quite variable and that some pockets remain extremely dry. But, there is also a month or so of critical weather ahead of us, and still room for the crop to either improve or go backward.
Wheat increased by nearly four bushels per acre, putting it above last year and the five-year average. This increase projects a production total of 24.1 MMT, still modestly below last year, and within the range of what we have seen in the previous few seasons.
Canola followed a similar pattern, although this translates into a new record production total in the range of 22 MMT. Yields also increased for durum, peas, lentils, barley, and oats.
It is vital to consider that an increase in the expected supply is negative for prices. However, there are moving parts that affect prices on both a local and global level, and a bump in production doesn’t have the same effect for each crop. Wheat is perhaps the most ‘global’ of the major crops, with multiple key exporting countries. Higher wheat production in Canada may have some implications for spring wheat values specifically, but it hardly moves the needle within the broader world context. Also, wheat is being bolstered by production problems in Europe, the Black Sea region and Australia, meaning that the extra bushels grown on the Prairies are needed, and sets the stage for a big export season.
The effects of the canola estimate on the price outlook is a little more difficult to discern. The oilseed complex faces a higher-than-normal degree of uncertainty for this time of year. The trade dispute between the U.S. and China positions soybeans as ‘ground zero’ in the agriculture space. Ongoing trade disputes indirectly affect canola. Tensions could increase demand for Canadian canola as China tries to plug part of the gap that would otherwise get filled with U.S. soybeans. This is happening at a time when canola production expectations in Europe are declining. At the same time, the larger Canadian supply would require an unprecedented volume of exports to prevent stocks from growing, something that isn’t certain.
Pulses certainly don’t need the extra supply in an already sluggish price environment, although the primary influence on prices over the medium term remains Indian policy, and whether or not there is some hope of an opening of the world’s largest pulse market to imports.
Of course, this is only a summary of what we were able to learn on the tour and compile with market analysis. If you’re interested in hearing more, reach out to your local FarmLink advisor or get in touch with us at [email protected].
You can also hear from more global experts about market trends in grain, oilseed and pulse crops at the Grain World Conference, 2018. Join us in Winnipeg on November 13 and 14 to get a look ahead from industry innovators on the new technologies that will change the industry and how you do business. Visit Grain World Conference for more information.