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Situation report
March 2009
Spring seeding conditions
It remained dry in many parts of Alberta and Saskatchewan while soil moisture reserves were sufficient in most of Manitoba. Early reports showed the Ontario winter wheat crop to have survived the winter in good shape. By contrast, the southern United States was too dry, causing concerns for the condition of winter wheat. However, rains were forecast near month-end.
By early March, there were expectations of spring flooding in portions of the Red River Valley of Manitoba. Saturated soils, record snowfall and spring rains in North Dakota caused flood forecasts and prompted cities to declare states of emergency. Water moves north from North Dakota to Manitoba mainly in the Red River as snow melts. The Canadian Wheat Board implemented a program to assist affected Manitoba farmers to deliver their on-farm grain. The Province of Manitoba issued special permits to farmers to allow them to move grain and animals off their farms during the spring road ban period. While southern Manitoba communities shored up dikes around their towns after the 1997 ‘Flood of the Century’, much surrounding farmland was still expected to be covered in water. Flooding in southern Manitoba, North Dakota and Minnesota caused concerns about late planting of spring wheat and possible crop substitution.
US and world supply-demand
USDA estimates of 2008/2009 world wheat production rose to a record high while the projected feed use estimate fell. Ending stocks were forecast at 155.9 million metric tonnes, a six-year high. Australian production was increased 1.4 million tonnes as a result of higher-than-anticipated harvested areas and yields following the drought.
Global coarse grain 2008/2009 ending stocks were projected 8.45 million tonnes higher in March. The increase mainly reflected higher corn stocks in China because of expectations for lower industrial, including ethanol, use. By contrast, USDA reported some recent increased use of corn for ethanol in the United States as gasoline prices rose relative to those for ethanol.
Minor changes in components of the world oilseed balance sheet resulted in a 1.1 million tonne increase in the 2008/2009 ending stock projection to 62.68 million tonnes. This was up from 62.52 million in 2007/2008 but still below the 73.34 million tonnes registered at the end of 2006/2007. Soybean production was forecast down 43.0 million metric tonnes in Argentina while Brazilian production was unchanged.
EU to import GM canola
There had been a ban on shipments of genetically-modified canola to the European Union since the mid-90s. However, on March 10, 2009 the European Commission approved T45, a Bayer Liberty Link trait which cleared the way for canola imports to the European Union for all purposes. Although canola could be imported for food purposes, traders expect most shipments to be directed to biodiesel production.
Labour disputes
The threat of a dock and ship workers strike at Canada’s west coast was averted when a new collective agreement was ratified by members of several unions after mediation. A strike would have halted container shipments of pulses and special crops and had been causing concern in the industry.
Argentinean farmers and government officials met in an attempt to avert strikes launched by farmers when the government imposed an export tax in the midst of a drought. Farmers wanted the export tax on soybeans to be eliminated. The government later offered to share 30% of the tax collected with local governments but this was rejected and farmers went on a seven-day strike. Both grain and livestock movement was affected.
Government funding
There were many federal government funding announcements in an attempt to bolster the economy.
The federal government announced a $5.3 million investment in PURENet. This organization will be led by Pulse Canada and managed by the Saskatchewan Pulse Growers. PURENet will explore new health benefits of pulses to create new and value-added markets.
The federal government is also investing $15.5 million in the Canadian Triticale Biorefinery Initiative. The project will be led by Agriculture and Agri-Food Canada and Alberta Agriculture and Rural Development. Triticale is a hybrid of wheat and rye that can be used to produce an ethanol feedstock while its biomaterials can be used in manufacturing. The network’s objective is to generate rapid economic growth, increase revenue for farmers, bring high quality jobs to rural Canada and help position Canada as an international leader in triticale production research.
The government further announced a $9.6 million investment in the Natural Fibres for the Green Economy Network or NAFGEN. The project will investigate value-add opportunities for flaxseed and hemp to improve returns for farmers and boost the economy. This initiative will be led by Flax Canada 2015 Inc.
New biodiesel plant
The first biodiesel plant, Greenway Biodiesel, has been licensed in Winnipeg, Manitoba. The provincial government is expected to soon mandate biodiesel use. In the meantime, the plant is exporting its production to Minnesota.
Prices
US grain futures’ prices followed equity markets and crude oil prices this month rather than focusing strictly on technicals. In mid-month the US Federal Reserve announced plans to buy bonds and mortgage-backed securities and thus add new money into the US financial system in an effort to reduce borrowing costs. US financial markets retreated as the US dollar dropped and investors worried about possible inflationary pressure. US grain futures’ prices rose with the idea that a lower US dollar would make grain cheaper and encourage exports. Markets were choppy ahead of the March 31 US Department of Agriculture planting intentions report.
In Canada, markets firmed up on the weakened US dollar and a rise in the monthly Consumer Price Index. The Bank of Canada dropped its key interest rate again to 0.5 per cent on March 3, 2009. The Bank indicated that it was considering other measures to boost the economy now that the interest rate is close to zero.
Chicago wheat futures’ prices rose over the month but then dropped substantially toward month-end on forecasts for rain in the dry southern Plains. While worries about the dry soil conditions in the United States had supported prices, large world supplies moderated gains.
US corn futures’ prices slowly trended up over the month on higher crude oil prices, rising equity prices and concerns about seeded area but were dragged down slightly with wheat near month-end. Strong farmer selling limited gains.
Soybean futures’ prices rose significantly over the month. There was speculation that the farmers’ strike in Argentina could increase demand for US soybeans and make US carryout stocks tighter which supported prices. On March 19th, there were major price increases following the Federal Reserve’s announcement of increased credit availability. However, ideas that the seeded area would be higher this spring created a bearish influence.
After February’s decline, Chicago oat futures’ prices leveled off, offered support from neighboring markets.
The Canadian Wheat Board’s forecast wheat prices up $8 a metric tonne from the February Pool Return Outlook. By contrast, durum wheat values fell $3 a tonne while malting barley dropped $8. Feed wheat, feed barley and No. 5 durum prices were unchanged.
Canola futures’ prices were supported early in the month by a weak Canadian dollar and strong export sales. Spring road bans, good domestic and export business and speculative buying pushed prices even higher later in the month. However, forecasts for substantial seeded area this spring combined with higher soybean area in the United States were causing traders to speculate that canola prices might fall.
There are plans for three new crushing plants in Saskatchewan. Cargill is doubling its crush capacity in Clavet with the new plant expected to operate in the summer of 2009. Richardson and Louis Dreyfus both have plants under construction near Yorkton.
Large export shipments and strong demand from North American domestic packagers and processors supported yellow field peas throughout the month. Canadian origin field peas were substituted for US field peas by North American processors because of large premiums demanded for US products. Ongoing USDA PL-480 food aid demand supported US field pea markets. An announcement by the Indian government that it had extended duty-free market access for pulses for at least another year provided welcome news to the industry.
Feed pea markets remained little changed as a result of a seasonal slowdown in demand. Demand for primary feed ingredients was seen as strong through to the end of the marketing year. Major feed ingredient markets started to get caught up in the battle for acres in the United States. These two factors helped to support feed pea prices. However, larger stocks than needed by the human consumption markets have limited any upward potential.
The industry organization Pulse Canada started publishing a weekly feed pea benchmark to be used as a consistent pricing reference. The benchmark is an estimate of the feeding value of dry peas in Western Canada based on the value of competing feed ingredients in least cost feed formulations for swine. This is a method of improving the price discovery process for peas.
Sales to India, Argentina and Chile provided support for all classes of green lentils throughout the month. Red lentil markets were helped by tightening supplies in Canada.
International chickpea markets experienced moderate trading activity as Indian exporters continued to sell new crop supplies and Mexican exporters tried to sustain grower interest in the crop by maximizing returns of this year’s crop. Exports from India continued to put downward pressure on markets as the rabi season crops were harvested.
Confectionary sunflower markets were unchanged throughout the month because of high stocks in the United States while oil-type sunflower seed markets followed soybean futures’ prices. The vegetable oil markets were influenced by prospects of larger world production for the new crop year but a worse economic situation that could dampen consumer demand. As a result, oil-type sunflower seed prices experienced modest declines early in the month. A pre-seeding rally in soybean and corn futures’ prices helped to push sunflower market prices higher.
