Situation Report — April 2010

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Canadian seeding intentions

Statistics Canada surveyed 13,800 farmers for the area they intended to seed this spring. Data collection for the March Seeding Intentions Survey was carried out from March 24 to March 31, 2010. Prairie farmers anticipated increases in acreage planted to canola, up 4.7% from the record area planted in 2009. If realized, this would be the fourth consecutive annual increase in the prairies. Total acreage was projected to be 16.9 million acres.

The total area seeded to spring wheat in Canada was expected to increase 7.1% from 2009. Durum wheat area, however, was expected to drop by 34.9% to just under 3.7 million acres. Large world carry-in supplies and suppressed prices have kept durum wheat an unattractive cropping option leading up to spring planting. Saskatchewan, the largest durum growing area in Canada, was expected to plant only 3.2 million acres, a decrease of 32.3% from the previous year.

Farmers indicated that they planned to increase acres seeded to soybeans by 2.5% to 3.5 million acres. Ontario soybean acres will lead the way with 2.5 million acres planted to the crop while Quebec farmers planned to plant 598,000 acres. In Manitoba, soybean area is expected to rise 8.4% to a new high of 450,000 acres.

Lentil acres were expected to increase as a result of stronger estimated returns in comparison to other cropping options. Over 2.7 million acres of lentils were expected to be planted in Saskatchewan while Alberta saw 135,000 acres devoted to the crop.

Weaker prices throughout the winter encouraged producers to reduce acres committed to dry peas. In Saskatchewan, farmers expected to plant only 2.7 million acres, down 6.1% from 2009. Alberta farmers indicated that they planned to seed 800,000 acres of dry peas, unchanged from the year before. In contrast, Manitoba pea acreage was projected to increase 41.2% to 120,000 acres.

US and World Supply and Demand

The United States Department of Agriculture (USDA) released its latest world agricultural supply and demand estimates on April 9, 2010.

Global wheat supplies for 2009/2010 crop year remained unchanged as a small production increase was mostly offset by a decline in beginning stocks. Imports and exports were both raised slightly to reflect adjustments to the pace of sales and shipments for individual countries. Global wheat consumption increased 1.0 million metric tonnes for 2009/2010. Higher wheat feeding was expected for Russia, Ukraine and Egypt. Global ending stocks were estimated to be 1.0 million metric tonnes lower as a 1.4 million metric tonne reduction in US stocks and 0.5 million metric tonne reductions in both Russia and Ukraine outweighed increases for Australia and Canada.

Larger beginning stocks and production for corn, sorghum and barley resulted in an increase of 5.1 million metric tonnes to 2009/2010 global coarse grain supplies. The largest increases in opening stocks were for Thailand corn, Mexican sorghum and Argentinean barley. World corn production was raised 2.0 million metric tonnes. Favourable growing conditions in Brazil and South Africa raised expectations for higher production. Imports and exports for coarse grains for 2009/2010 were largely unchanged. A number of adjustments were made among key importing and exporting countries to reflect the pace of shipments to date but were mostly offsetting. Global ending stocks were projected to be 4.1 million metric tonnes higher as a result of higher corn stocks in the United States and Brazil.

For the 2009/2010 crop year, global oilseed production was estimated at 436.7 million metric tonnes, an increase of 1.4 million metric tonnes from the prior month. Higher soybean, peanut and cottonseed production more than offset lower rapeseed and sunflower seed production. Ending stocks were raised to 74.1 million metric tonnes, up 2.3 million metric tonnes. This was mostly a result of higher soybean stocks in Brazil and Argentina.

Canadian government invests in Saskatchewan mustard processor

The Government of Canada announced a $650,000 investment in Saskatchewan-based mustard processor Mustard Capital Inc. to expand markets for mustard growers. The repayable funding will be used to create a new milling facility that will use new and innovative technology. The new project is expected to require over 5,400 metric tonnes of mustard per year by full operation in five years and will provide an estimated $2.7 million in related economic benefits to the local agriculture community.

The funding will be provided through the Agri-Opportunities Program, which focuses on new innovative, agri-products, processes or services that are currently not commercially produced or available in Canada and that are ready to be introduced into the marketplace.

Canadian government to support pulse industry

The Government of Canada announced an $8.3 million investment to support the Canadian pulse industry. A total of $7 million in funding, through the Pulse Cluster, will be used by Pulse Canada to lead research by more than 100 scientists from industry, government and universities across Canada. Research will focus on ways to increase productivity and nutrition of pulse crops, improve the rotational benefits to other crops and grow markets through new ways of processing and using pulses.

An additional $1.3 million of funding, through the Agricultural Flexibility program, will allow Pulse Canada to develop access strategies for new utilization opportunities for pulses and ensure competitive access to world markets.

Canada announces agriculture trade deals with China

A Canadian trade mission to China, led by Agriculture and Agri-Food Canada (AAFC), resulted in a number of agreements between the two countries.

China agreed to remove import restrictions on Canadian dry peas based on joint research that showed there is no health risk associated with naturally occurring selenium in Canadian dry peas. Average selenium content in Canadian dry peas is 33 parts per million (ppm) compared to China’s limit of 30 ppm.

Pulse Canada and the Chinese Cereals and Oils Association signed a memorandum of agreement to increase the nutritional benefits of staple Chinese food by adding pulse ingredients. With the assistance of the Canadian International Grains Institute (CIGI), Pulse Canada will fund research into the processing of pulse flours and other ingredients in products that can be incorporated into Chinese staple foods. Funding will come from the $8.3 million in federal money recently allocated for pulse crop research.

A memorandum of understanding was signed between China and the Canadian Wheat Board (CWB) guaranteeing the opportunity to sell at least 500,000 metric tonnes of malting barley over three years.

Efforts to improve market access for Canadian canola, restricted over potential blackleg contamination, were also made. The Canola Council of Canada (CCC) announced that $1 million from the CCC’s Canola Market Access Plan will be used to identify ways to minimize the risk of the transfer of blackleg to Chinese crops and to look at ways to reduce blackleg infection in Canada. Another $500,000 will be spent on canola meal feeding trials on Chinese dairy farms.

Icelandic volcano not expected to affect crop production

Volcanologists and meteorologists did not expect the recent eruption of the volcano under Iceland’s Eyjafjallajokull glacier to impact crop production this year. The volcano did not shoot ash high enough into the air or expel enough sulphuric gas to cause abrupt climate change. The volcano’s northern location was also expected to lessen the impact on climate. Another volcano in Iceland, Katla, could pose a bigger risk to producers. Katla has historically erupted after the Eyjafjallajokull volcano and has been more explosive.

The eruption disrupted air travel across Europe, forcing the cancellation of thousands of flights into and out of Europe. Exporters around the world were forced to find alternative routes or markets, especially for perishable goods.

Major eruptions in the past have skewed climate patterns, causing crop failures. In 1991, Mount Pinatubo in the Philippines erupted, sending ash and gases high into the stratosphere. The debris was later linked to slightly cooler-than-usual temperatures worldwide. Sulfur dioxide gas expelled during the extended eruption of Hawaii’s Kilauea volcano, active since 1983, has been attributed to volcanic smog and acid rain that damages crops, according to the United States Geological Society.

Prices

The Canadian Wheat Board (CWB) released its April 2010 Pool Return Outlook (PRO) for the upcoming 2010/2011 crop year on April 22, 2010. Wheat values decreased $7 per tonne from last month for all grades and classes while durum wheat values were $2 to $7 per tonne lower. Malting barley and feed barley values remained unchanged.

Large global wheat stocks continue to constrain prices for the upcoming 2010/2011 marketing year. Projected world production in excess of demand also weighed on prices. Global ending stocks are forecasted to increase from 196 million metric tonnes to approximately 207 million metric tonnes.

Foreign exchange rates also had an impact on the PRO. The US dollar remained strong against the Euro, making European wheat more competitive, especially in the Asian and Latin American markets. The strong Canadian dollar also made Canadian wheat less competitive on the world market.

Winnipeg canola futures continued to trade in the sideways pattern set over the last three months. The strong Canadian dollar impacted domestic crush margins, slowing buying down somewhat. Fresh export business was also limited by the Canadian dollar. Drought concerns in Western Canada and lack of farmer selling provided support to the market throughout the month. Futures’ prices also followed movements in Malaysian palm oil and Chicago Board of Trade (CBOT) soybean markets. Upside potential to the canola market was limited by large global oilseed supplies and sentiments of a record large area to be planted to canola in Western Canada. The arrival of precipitation in some of the growing areas in Alberta and Saskatchewan late in the month added to the downward pressure on prices.

The CBOT soybean futures’ prices found support throughout the month from slow producer selling, good domestic and export demand and concerns over tight old crop US stocks. The lack of farmer selling in both the United States and South America, combined with logistical issues for Brazil exports, firmed cash basis levels. Rumours that China was buying additional soybeans from the United States or switching from South American origin attracted speculative buying. The uncertainty over how the planting and growing seasons would progress attracted seasonal buying. A weather premium was added into the market mid-month as favourable corn planting conditions lowered the risk of producers switching corn acres to soybeans. Futures’ prices also followed outside commodities, including crude oil and gold, moving up or down in relation. Gains were limited by good harvest conditions for record large crops in South America, strength in the US dollar, and ample world production and stock outlooks for the new crop year.

Abundant supplies, slow export demand, competition from feed wheat and favourable US planting weather pressured CBOT corn futures’ prices during April, limiting gains from supportive outside market influences. As April progressed and US planting moved into full gear in the US Midwest, traders became more defensive, further narrowing price movements. Record projected US corn plantings also weighed on prices as the month progressed.

International lentil markets were supported by ongoing demand from India and Algeria in April. While most commodity prices have decreased recently, lentils were able to maintain their prices. Lack of farmer selling provided some support as farmers were reluctant to make new sales at current prices. Buyers have also been absent from the market as they wait for cheaper new crop supplies. Dryness in Alberta and Saskatchewan created a bit of a weather market for lentils, adding to farmers’ reluctance to sell.

North American field pea markets softened as Western Canadian producers showed interest in moving supplies and end user demand remained modest. India extended duty free pulse imports until the end of September as well as its ban on exports of all types of pulses except Kabuli chickpeas. However, the markets showed very little impact from the announcement as most traders had already expected it.

Sunflower oil prices continued to decline throughout the month, trading at only a slight premium over soy oil and rapeseed oil. Increased crushing in the European Union, Russia and Ukraine led to amply world sunflower oil supplies. The 2009/2010 sunflower seed crop sizes were revised higher for Spain, Russia and Ukraine. The result was a smaller decline in world production than initially expected.