Canadian Grain Farmers react to market signals…

By Peter McMeekin

Canadian farmers are swinging to canola and barley at the expense of wheat, oats and pulses in the current winter/spring cropping cycle. That was the washup of the latest Statistics Canada principal field crop report, which was released early last week.

Statistics Canada said the total area seeded to field crops this year is projected to increase by 1.8 per cent to 26.893 million hectares based on favourable market conditions and historical trends. However, total production is forecast to decrease slightly, on the assumption of a return to trend yields from the record production of 2020-21.

This year’s four week survey period concluded on March 29, with Statistics Canada tabulating responses from more than 11,500 farmers regarding their planting intentions for the 2021/22 production year. Winter wheat has been in the ground for many months now and is emerging from its winter dormancy. However, the spring planting program is about to move into top gear amid dry soil moisture conditions in many areas and grain prices on fire. 

It has been widely reported over the last few months that the area planted to wheat was expected to be lower in the coming season than in the 2020/21 marketing year. And so it came to pass when the numbers were revealed, with the total wheat area forecast to fall by 6.9 per cent or 697,000 hectares, to 9.41 million hectares (Mha). This is the lowest wheat area in the last four seasons and comes in 3.7 per cent below the five-year average.

Spring wheat was the big mover, with the estimated area down by 8.8 per cent, or 642,000 hectares, to 6.61Mha. This is the smallest area planted to spring wheat in the last four years and is 4.7 per cent below the four-year average. The winter wheat area was down 11.2 per cent, but since it only makes up 5.2 per cent of total wheat plantings, it was an insignificant component of the decrease. The area planted to durum wheat was up slightly.

The results of the grower survey suggest everybody wants to grow barley. The area is projected to jump by 13.9 per cent, or 426,000 hectares, to 3.49 million hectares. This is the fourth consecutive annual increase, is 27 per cent above the five-year average and is the largest area seeded to barley since the 2009/2010 season.

Tight stocks have pushed domestic prices higher, making potential returns quite appealing for growers relative to spring planted alternatives. Strong demand from China has boosted export demand, and that is expected to continue throughout the 2021/22 marketing year after China nominated increased barley usage as a means of reducing the nation's reliance on corn. The Chinese tariff on Australian barley imports has also pushed demand to Canada.

Barley exports in the 2020/21 marketing year are expected to total 3.75 million metric tonne (MMT), and China dominates. According to the Canadian Grain Commission, 94.6 per cent of Canada's licensed barley exports in the August 2020 through March 2021 period were destined for China. The current forecast would be the highest executed barley exports since 3.9MMT was shipped in 2007/08 and 4.0MMT shipped in 1996/97.

The record low carry-in forecast of just 500,000 metric tonne nationally also reflects buoyant domestic stockfeed demand. Crop progress will be keenly scrutinised as the season progresses with a yield of 3.5 metric tonne per hectare (MT/has) required before stocks start to build, assuming 91.8 per cent of the planted area is harvested, and there is no change to domestic demand or exports in 2021/22. The long-term average barley yield is 3.73MT/ha.

According to the Statistics Canada survey, canola planting intentions for the world’s biggest canola producing nation came in at 8.71Mha. This is an increase of 3.6 per cent, or 300,000 hectares, over the area planted in 2020 and reverses a four year downward trend. However, it is still 0.9 per cent below the five-year average. 

And there is now an added incentive for the Canadian farmer to maximise their canola area, with prices soaring to their highest level in more than a decade in the five weeks since the planting survey concluded. This is a function of dwindling old crop stockpiles as crushers and exporters fight to secure old crop stocks. The carry out is forecast to drop to 1.2MMT by the end of the 2020/21 crop year on July 31, the lowest end of season number since 2013.

Around 90 per cent of Canada’s annual production is exported to global customers. Foremost among these importers is China who has accelerated imports of the Canadian produced oilseed despite blocking shipments from two of the country’s major exporters since 2019. Government export data reveals around 1.58MMT of canola was exported to China from licenced facilities in the first seven months of the 2020/21 marketing year, 22.5 per cent of total exports for the period.

According to survey responses, the area planted to oats is expected to fall by 6 per cent year-on-year to 1.46Mha, still 7.8 per cent higher than the five-year average. The Lentil area is forecast to be 0.3 per cent lower than 2020 at 1.83Mha, around 3.1 per cent below the five-year average. The big mover on the pulse front was dry peas, with plantings anticipated to decrease by 9.8 per cent to 1.54Mha compared to a year earlier, the smallest area in three years and 6.7 per cent below the five-year average. 

Significant precipitation is needed in south-eastern and south-central Saskatchewan, Northern Alberta, and Manitoba. Planting for most principal spring crops typically begins around mid-May. Still, many farmers in southern Alberta started in early April this year due to a lack of snow cover and above-average temperatures.

The dry conditions could prompt growers to make last-minute changes to their seeding plans, resulting in a reduction in plantings of small-seeded crops such as canola, with barley the potential beneficiary. The weather conditions over the next few months and the elevated price regime will no doubt influence the final seeded area.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.