Market Insider

Still Early in the Game

Grain markets headed towards the end of April with long eyes – those looking at fields still covered in snow from earlier in the week and traders who are looking at the wet conditions as delay for bullish opportunities. Never to be out of the spotlight, U.S. President Donald Trump lobbed a bunch of trade challenges at Canada, arguing the dairy system in the Great White North has made it “very hard” for American dairy farmers, and then hitting U.S.-bound Canadian lumber with a 24% tariff. With the White House playing tough on Canadian exports to America, the Canadian Dollar has dropped below 74 cents USD again. The lower Canadian Loonie has helped cash values in Western Canada this week, putting everything up and in the green. All cash wheat prices have gotten better in the past week, thanks to a bunch of the aforementioned factors, but we’re skeptical on how much more upside there is. Cash canola prices have gained 2.5% for spot movement on average across Western Canada but not as much as on the new crop contracts as Statistics Canada is putting a bearish mood over the market.

More specifically, in Statistics Canada’s acreage estimate out on Friday, April 21st, it’s estimated that Canadian farmers will plant a record 22.4 million acres, which is a 10% climb (or 2 million acres more) from 2016 and 7.5% more than the 5-year average. Regionally-speaking, Alberta & Saskatchewan are owning all of the increase, putting in 870,000 and 1.175 million more acres respectively than they did in 2016 for 12.275 million in Saskatchewan and 6.82 million acres in Alberta. Conversely, Manitoba canola acres are actually down a bit year-over-year to 3.1 million but soybean and corn acres are up, notably up by 565,000 in beans to an astounding 2.2 million acres (food for thought: in 2012, Manitoba soybean acres were 800,000). Combine this with Saskatchewan’s similarly-significant hike to 730,000 acres of soybeans, and over 4 million acres of the oilseed getting planted between Quebec and Ontario, nearly 7 million acres of soybeans will get planted in Canada this spring.

On the wheat front, the bulls were a bit disappointed as total Canadian acreage was barely unchanged year-over-year at 23.3 million acres (albeit down 4.4% from the 5-year average). Basically the story in StatsCan’s wheat numbers is that there’s over 1 million acres of durum that are being taken out from last year 5.15 million acres in 2017, while spring wheat acreage is vaulting up by 1.26 million acres to 16.66 million acres total! The biggest surprise is in Alberta where spring wheat area is climbing 860,000 or 16% year-over-year to 6.2 million acres. Total Canadian oats acreage is up 20% from last year to 3.42 million (+13.6% from the 5-year average) while barley area is expected to fall by 8% to 5.88 million acres (-12% from 5-year average). Rounding out the report, Statscan says that almost 1.5 million less acres of lentils will get seeded this year with almost 4.4 million acres going in (which is actually 20% higher than the 5-year average of 3.65 million!) Similarly, pea acreage is expected to dip below 4 million again after last year’s record 4.24 million (this is still 5% above the 5-year average though).

Ultimately, this all comes back to the question of where are these acres coming from? More specifically, StatsCan that Canadian farmers are going to be planting an additional 2.4 million acres over what they did in 2016. In Quebec and Ontario, almost 675,000 more acres are getting seeded than 2016’s area. Heading west, 345,000 more acres are getting planted in Manitoba, just 70,000 more in Saskatchewan, but a dubious 1.125 million more acres are supposed to get seeded in Alberta! Overall, it continues to be early in the game for new crop which is why we expect to see more volatility on old crop cash prices versus new crop, and opportunities on the upside shouldn’t be ignored.

To growth,

Brennan Turner
President & CEO |