No Crop Records This Year
Jim KnisleyFeatures Production Turkeys
Excessive rain in the Prairies and heat in the east will result in lower yields
It’s been a year for records – record heat, record rain and record hail.
One result of all these records is there will be no record crops.
It’s been a year for records – record heat, record rain and record hail. One result of all these records is there will be no record crops.
In Western Canada, rain (particularly in Saskatchewan) ensured millions of acres were not seeded and reduced projected wheat production by 20 to 30 per cent.
|Wheat demand will rise. Average yields are forecast to be below normal due to extreme wet conditions and cool temperatures across Western Canada, as well as drought in Russia.|
BMO Capital Markets Economics said in early August that farmers in the Prairie provinces may lose up to $3 billion as a result of this year’s heavy rains and flooding in Saskatchewan and Manitoba.
“For many, this is a very real crisis – to put it in perspective, we are getting in the range of the economic impact of the BSE crisis seven years ago, which cost farmers $5 billion,” said Douglas Porter, Deputy Chief Economist, BMO Capital Markets.
“Farmers in the affected region, on average, have seen almost 20 per cent of their crops unplanted,” he said.
In Eastern Canada, people may have suffered through seemingly endless bouts of stifling heat mixed with smothering humidity, but the corn seemed to like it.
In the United States, commodity markets have been on edge. Increased export demand, increased ethanol production, fewer corn acres and falling stockpiles have been moving markets. But the American economy continues to struggle and that seems to be capping demand expectations. The result has been a two steps forward, one step back kind of market.
One thing is clear: this isn’t 2008 revisited when panic ruled. Speculators attacked the Chicago markets in August, adding fuel to an already overheated wheat market, but many pocketed profits and left. Prices didn’t jump into the stratosphere as they had two years ago.
The United Nations’ Food and Agriculture Organization (FAO) has cut its global wheat production forecast for 2010 to 651 million tonnes, from 676 million tonnes reported in June.
However, the world wheat market remains far more balanced than in 2007-08, and fears of a new global food crisis are not justified at this point, the FAO said.
But a continuation of the Russian drought into next year has raised fears about next year’s winter wheat crop and the wheat supply in the 2010-11 crop year.
Agriculture and Agri-Food Canada (AAFC) sums up the situation in Canada saying: “Excess moisture has prevented many producers from completing their seeding and, as well, fields which had already been seeded have been damaged. Abandonment is expected to be significantly above normal and average yields are forecast to be below normal due to extreme wet conditions and cool temperatures across Western Canada. In Eastern Canada, abandonment and yields are forecast to be near normal.”
As a result: “Total production of grains and oilseeds in Canada is forecast to decrease by 13 per cent from 2009-10 to 57 million tonnes (Mt). Supply is also forecast to decrease significantly despite high carry-in stocks. Total exports are forecast to decrease due to lower exports of wheat (durum), canola and flaxseed. Total domestic use is forecast to decrease significantly as lower feed use more than offsets higher food and industrial use. Total carry-out stocks are expected to fall by 30 per cent, well-below the 10-year average. In general, grain prices are expected to decrease from 2009-10 but remain above historical averages. The main factors to watch in Canada are temperatures and precipitation, exchange rates and the condition of the world crops.”
For corn, AAFC says the area seeded is similar to last year but production is expected to increase by seven per cent due to higher yields.
|Prairie provinces may lose up to $3 billion as a result of this year’s heavy rains and flooding in Saskatchewan and Manitoba
While domestic supply is expected to increase, imports are also forecast to increase due to increased demand for ethanol, according to AAFC. Meanwhile, carry-out stocks are expected to decease by six per cent because of higher total domestic use. The average Chatham elevator price is forecast to increase slightly due to higher U.S. corn prices and good demand.
The area seeded to soybeans increased by eight per cent to a record high, as the crop continues to expand in Quebec and Manitoba. Abandonment is forecast by AAFC to be slightly higher than normal. Production is forecast to rise by seven per cent and supplies are forecast to rise by 10 per cent. Exports of soybeans, both food-grade and crush, are forecast to rise on strong demand from the United States, China and Europe. Domestic use is forecast to rise on a steady crush pace. Carry-out stocks are forecast to rise slightly. Soybean prices are forecast to decline due to lower U.S. prices and the near-par Canadian dollar.
Meanwhile, the USDA is forecasting lower global wheat supplies for 2010-11 with world production projected 15 million tonnes lower as smaller crops in former Soviet Union, Canada, the European Union (EU-27) and India more than offset higher production in the United States and China. Production for Canada is lowered four million tons by the USDA, as persistent June rains limited seeding in the Western Prairies.
The August USDA report says: “Production for Russia is lowered eight million tons, as continued extreme drought and record heat during July and early August have further reduced summer crop prospects. Kazakhstan production is lowered 2.5 million tons, reflecting the same adverse weather conditions as in Russia. Ukraine production is lowered three million tons, as heavy summer rains damaged maturing crops and hampered harvesting in western and southern growing areas. Harvest results also support indications that producers reduced input use in response to limits on available capital. EU-27 production is lowered 4.3 million tons, with yields reduced for northwestern Europe on untimely heat and dryness.”
As a result of all the production problems, “world wheat imports and exports are reduced sharply as tighter supplies and higher prices reduce projected global consumption,” the USDA said.
Global imports are expected to be 5.7 million tons lower, as higher prices reduce demand in a number of countries. Russia’s decision to ban wheat exports through December is a clear reflection of the drought’s impact. It also means a shift in trade patterns because Russia and other members of the former Soviet Union had become significant wheat exporters in recent years.
The USDA says Russian export prospects will also be limited by higher expected wheat feeding with drought-reduced forage and coarse grain crops, and because of policy goals aimed at increasing domestic meat production. Exports for Kazakhstan and Ukraine are lowered two million tons each with sharply lower production.
Higher exports from other countries will partly offset former Soviet Union (FSU-12) declines, according to the USDA. Exports are raised for the United States, China, Australia and Turkey. The 5.4-million-ton increase projected for U.S. exports is expected to offset the largest share of the decline from FSU-12.
To drive home the point that this isn’t 2008 revisited, the USDA says: “At 174.8 million tons, world (wheat) stocks are projected 49.9 million tons higher than in 2007-08, when prices soared to record levels.”
Meanwhile, the USDA raised projected U.S. feed grain supplies for 2010/11 with increased corn production expected. Corn production for 2010-11 is forecast 120 million bushels higher. The survey-based yield forecast of 165 bushels per acre is up 1.5 bushels from last month’s projection, and 0.3 bushels above last year’s record.
Exports for 2010-11 are projected to rise and strong demand from ethanol production is expected to eat into supplies.
“Despite higher production, ending stocks are projected down 61 million bushels at 1.3 billion, the lowest in four years. The season-average farm price is raised five cents on each end of the range to $3.50 to $4.10 per bushel. Similar price increases are projected for the other feed grains,” the USDA said.
Global coarse grain supplies for 2010-11 are projected 10.6 million tons lower, with reduced foreign production more than offsetting higher U.S. output. More than half of the reduction in foreign coarse grain production is for barley. Barley production is lowered three million tons for Russia as extended drought and extreme heat sharply reduce yield potential for spring barley. EU-27 barley production is lowered 1.5 million tons on untimely dryness and heat in northwest Europe, and excessive rains in eastern Europe. Barley production is lowered 1.5 million tons for Ukraine, 0.6 million tons for Algeria, and 0.5 million tons for Kazakhstan. Global corn production is lowered 0.8 million tons, with Russia and Ukraine each lowered 1.5 million tons and EU-27 lowered one million tons. These reductions more than offset higher production in the United States, according to the USDA.
American oilseed production for 2010-11 is projected at 103.3 million tons, up 2.6 million from last month. Soybean yields are forecast at 44.0 bushels per acre, 1.1 bushels above last month’s trend yield projection, and equal to last year’s record yield. The first survey-based forecast of U.S. soybean production is a record 3.4 billion bushels, 88 million above the July projection, and 74 million above last year’s crops. Projected soybean exports are raised 65 million bushels, to 1.435 billion. The sharp increase in exports reflects strong export sales, especially to China, stronger projected import demand for China, and reduced soybean stocks in South America at the beginning of the 2010-11 marketing year. China soybean imports are raised to 49.5 and 52 million tons, respectively, for 2009-10 and 2010-11. Soybean crush is raised five million bushels to 1.65 billion, reflecting a small increase in domestic soybean meal demand. Soybean ending stocks are projected at 360 million bushels, the USDA said.
Global oilseed production for 2010-11 is projected at 439.7 million tons, down one million from last month. Reductions for sunflower seed and rapeseed are mostly offset by higher U.S. soybean production.
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