Wednesday April 26 2017



Agriweek Canadian agribusiness authority since 1967


The Statistics Canada intended acreage report on April 21 showed as seldom before the extent to which cropping intentions were determined by agronomic and market experiences of the previous year. Canola acreage is set to post a new record of 22.39 million acres, 10% higher than in 2016 and 8% higher than in 2015. The previous record was 22.06 million in 2012. The average rotation is a record-tight 3.3 years, compared to 3.45 years in 2016 and the 4.0 years still considered ideal. The report showed a big leap in soybean area to new records in both eastern and western Canada. It is forecast to increase 13% nationally and a stunning 56% in western Canada. Saskatchewan farmers intending to triple their acreage to 730,000. Soybean area in Ontario and Quebec will increase 12%, though not at the expense of corn, which will increase 9%. Area in western Canada is projected at 2.93 million acres, a 76% gain over 2015. In 2016 soybean plantings in Saskatchewan declined to 240,000 acres. Total wheat area was put at 23.28 million acres nationally and 21.94 million in western Canada, almost unchanged from 2016, with an 8% increase in spring wheat an a 17% drop in durum. Spring wheat area recovered somewhat from the low 2016 figure but remained historically low; it has been less than canola for six years. As recently as 1999 spring wheat area was over 20 million. Acreage of oats, which dropped to a long-time low under 3 million acres in 2016, will increase to a more typical 3.42 million. However barley area of 5.88 million acres will be a recent record low, 8% under 2016 and 9% lower than in 2015. Pulse crop intentions were reduced substantially from the 2016 record with lentil acreage down 25% to 3.42 million and peas down 6% to 3.90 million, however both figures are the second-highest ever, both larger than in any year before 2016. The market outlook for peas and lentils remains clouded by the India fumigation issue, but growers are apparently assuming that it will all work out. (04/21/2-17)


The process of unwinding the Canadian supply management system for dairy has begun. Any chance that the belligerent attitude from the Trump administration was just a pre-negotiation bombardment faded last week when Trump categorically committed to opening up the Canadian market to the US dairy sector in the NAFTA negotiations. On a regular campaign-type visit to a Wisconsin cheese plant last week, he said that “in Canada some very unfair things have happened to our dairy farmers”. He said he would “demand an explanation” from prime minister Trudeau. Trump obviously has no conception of the issues, but his attitude and ;policy would be no different if he had. Trump's comments can be taken as the administration's policy and passage of a point of no return. Ironically, import restriction under supply management, in effect for nearly 60 years, is not the flash point. That is the controversy over ultra-filtered milk, a high (85%) protein dry concentrate which substitutes for whole milk in cheese, ice cream and other dairy foods. The product enters duty-free because it was developed after the list of regulated imports was prepared. Imports began in 2012 and in two years reached 14,000 tonnes, the equivalent 17.5 million litres of raw milk. Canadian marketing boards responded by creating a new Class VI for industrial milk for sale to Canadian processors at US-competitive prices on condition they take up ultra-filtered production. Domestic output of ultra-filtered milk is ramping up and US imports are declining. The US dairy industry sees this as a new and unfair trade barrier and contrary to Canadian undertakings in trade agreements. Three or four processors in Wisconsin and New York state account for almost all exports of this product and are affected and are reducing milk purchases from several dozen farmers, attracting much publicity. In normal times the US complaint about ultra-filtered milk would not stand a chance in any trade dispute forum because there are few or no provisions in trade agreements preventing a country from displacing imports with increased domestic production. But manipulation of prices through the value chain by the marketing board system introduces unique circumstances. In the coming NAFTA negotiations the American position will be that all dairy import restrictions must be removed. (04/21/2017)


For the first time in its 105-year history, there is no one at the top of the Canadian Grain Commission with any real-life experience in the grain trade. Jocelyn Beaudette, a career civil servant most recently in Agriculture Canada's farm income program, is the new chief operating officer succeeding the retiring Gordon Miles. The chief commissioner is Patti Miller, formerly of the Canola Council of Canada and prior to that also an Agriculture Canada employee. The assistant chief commissioner is Manitoba farmer Doug Chorney, and the commissioner is Alberta farmer and former Liberal politician Lonny McKague. (04/21/2017)


Farm land values in the US midwest and plains states are eroding as the interval of low crop and livestock prices shows no sign of snapping out of it. In the best cases, for highly productive land, prices have held their own, but second- and third-tier land has lost as much as 20% of its value over four years. There is no national land price survey in the US, so conclusions about the market come from many sources with different methodologies. In Canada, the government farm lender Farm Credit Canada conducts what amounts to an annual appraisal of a sample of farm properties and extrapolates them into a national price survey. According to the report for 2016 released recently, land values are still rising virtually everywhere in the country if at slower rates. The FCC compiles the annual farm land value report by conducting an appraisal of a fixed set of benchmark properties in each province with reference to comparable recent sales. The report was formerly issued twice a year. The evaluation uses percentage changes and does not give dollar-per-acre values. Sales information on comparable properties presumably is wholly or largely from loan applications, a comprehensive source since the FCC provides the majority of mortgage financing for land purchases. For all Canada the average increase in farm land prices was estimated at 7.9% compared to 10.1% in 2015. Land values in BC rose by an average of 5.2% last year (after 6.5% in 2015), Alberta 9.5% (11.6%), Saskatchewan 7.5% (9.4%), Manitoba 8.1% (12.4%), Ontario 4.4% (6.6%) and Quebec 7.7% (9.6%). In the Atlantic region increases ranged from 1.9% (New Brunswick) to 13.4% (PEI, the highest in Canada). No province showed a year-to-year decrease in 2016. According to the FCC survey, land prices have risen every year since 1993 in Alberta, since 2002 in Saskatchewan, since 1992 in Manitoba, 1988 in Ontario and 1986 in Quebec. (04/17/2017)


The Canadian Grain Commission, which is sitting on roughly $100 million in cash which it overcharged to users over the last five or so years, raised most fees for services according to its predetermined schedule as of April 1. Adjustments are made in mid-crop-year because April 1 is the start of the government fiscal year. The cost of inspection of grain being loaded on ships increased to $1.70 a tonne from $1.68 though outward official weighing during loading of ships, which is highly automated, remained at 16 cents per tonne. Outward official inspection of railway cars, trucks and containers now costs $153.43 instead of $151.01. License fees per location went from $289 a month to $294. The fee for inspection of submitted samples rose to $50.07 from $49.28. In view of the controversy over charges and fees that far exceed the cost of providing them, and the fact that the grain trade is forced by law to use most Grain Commission services, the least it could have done was to freeze rates for a year as a public relations gesture while the underlying issues are investigated. (04/17/2017)


The International Grains Council issued its first complete projections for world crop supply and demand for 2017-18 on March 30, forecasting a total cereal harvest of 2.050 billion tonnes. It would be a 3% decline from 2.106 billion last year but still the second highest in history and 2% above 2.007 billion in 2015-16. Consumption of 2.079 billion in 2017-18 will exceed production for the first time since 2013-14. Carryover is expected to drop to 484 million tonnes from 513 last year but will exceed the 479 of 2015-16. However record carry-in will almost offset the decrease in production. Total global supply of cereals was projected at 2.563 billion tonnes compared to 2.585 billion in 2016-17 and 2.464 billion in 2015-16. Wheat production is expected to be 2.5% lower at 735 million tonnes from 754 in 2016-17 and 736 in 2015-16. World wheat use is forecast at 740 million tonnes vs 737 and 719. Wheat carryover at the end of 2017-18 was put at 234 million, only 5 million under the current year's and 11 million higher than two years ago. Coarse grain output was projected at 1.315 billion tonnes (3% below 1.352 last year), with consumption similar to the current year's 1.339 (1.335) and carryover 250 million (274). The world corn harvest for 2017-18 was estimated at 1.024 billion tonnes, down 2.8% from the previous year's 1.053 billion with carryover of 205 million tonnes compared to 225 million. World soybean production was forecast at 345 million tonnes, a 3% gain over 336 in the current year. Anticipated use at 347 million would exceed production. Carryover will drop to 35 million tonnes from 38 million. However the IGC estimated Brazilian production at 110 million tonnes, 1 to 3 million below later forecasts. (04/10/2017)


Canada has some seasoned and experienced trade experts. But as the day of NAFTA reckoning approaches, it is unclear, and actually doubtful, whether the best people will be selected for the job by the Trudeau government, given its disturbing, radical obsession with diversity and matters of gender and partisanship. Even in the best case, the political and negotiating bench strength in Canada is far from a match for the American side. For the US, negotiations will be directed by commerce secretary Ross, the US trade representative-to-be Robert Lighthizer and Peter Navarro, director of the recently-formed National Trade Council. To a man they are extremist trade hawks and protectionists with identical ideas. There is no sign of a willingness to compromise, no acknowledgement that Canadian and Mexican points of view may be legitimate and no admission that the NAFTA agreement has benefits for the US. All three have faithfully and repeatedly restated in more civil terms the Trump bombast, that the US has been on the short end of NAFTA for two decades. Every word they have said about the agreement and alleged trade imbalances with Canada (see page 3) and Mexico has been belligerent, threatening and hostile. Ross, Lighthizer and Navarro are also highly capable and accomplished people. Actual face to face bargaining will be conducted by professional negotiators and trade lawyers but directed by the political level. Both (or all three) parties will meet and describe their positions, but the authority of negotiators to commit their countries is necessarily proscribed. They must go back to their administrations at each step, where it will be determined what is not negotiable, what concessions may be made and what trade-offs can be offered. The make-or-break decisions will be made by semi-pro politicians, specifically the prime minister and cabinet, where there is not trade or economic expertise commensurate with the need. (04/10/2017)


Not much more has been heard lately about the very disturbing pulse crop fumigation issue with India, especially not about what to expect after June 30. Cargoes that leave Canada before that date can still be fumigated on arrival in India. The Indian government previously and flatly refused an offer of certification of Canadian pulse shipments by the Canadian Food Inspection Agency as being free of insect pests. Even if accepted such a guarantee would be risky because infestations could develop during the roughly 25-day transit through tropical waters. The CFIA is understood to be exploring the use of phosphine in place of methyl bromide but Canadian ports do not have facilities to treat entire shiploads with any fumigating agent. Lentil and other pulse crop prices, which fell sharply in mid-February, had not recovered as of last week. (04/10/2017)


The US agriculture department's prospective plantings report issued March 31 put soybeans at 89.5 million acres, a record and a 7% gain over 2016. Planted area was 83.4 million in 2016 and 82.7 in 2015. Area reported by USDA was more than 1.2 million above average pre-report estimates. High-production states including Iowa, Minnesota, Michigan and Indiana showed some of the biggest increases. All wheat area was put at 46.06 million acres vs 50.15 last year, the lowest since USDA began keeping records 98 years ago. HRW area was 23.8 million (26.6 last year), spring wheat 10.6 (10.7) and durum 2.0 (2.4). Pre-report forecasts were for 46.1 million acres. All winter wheat area including SRW was 32.7 million, down 9% from last year. HRW in Kansas was 7.5 million acres vs 8.5 last year. HRS wheat in North Dakota was forecast at 5.4 million down 10% from 6.0 last year and 24% under 6.7 million in 2015. Durum area in the state was reported at 1.15 million vs 950,000 in 2016. Corn acreage was reported at 90.0 million, down 4% from 94.0 last year but above 88.0 in 2015. The average trade guess was 91 million. (03/31/2017)


US grain stocks as of March 1 were close to expectations. Soybean stocks were 2nd-highest on record, up 13% at 1.73 billion but farm stocks of 669 million were 8% lower and quarterly use was 2% lower at 1.16 billion. All wheat was reported at 1.66 billion, up 21%, with farm stocks 9% higher. Use in the quarter ended February 28 was 13% higher at 422 million. Corn stocks were a record high, up 10% from year-ago at 8.62 billion bu; quarterly use was 3.77 billion bu vs 3.41 a year earlier. (03/31/2017)


The Indian government last week agreed to a 90-day extension to June 30 of the exemption for Canada and other pulse exporters who cannot fumigate shipments with methyl bromide at loading, allowing fumigation on arrival to continue. However it said this is the final extension and thereafter all shipments will have to arrive fumigated. A Russian wheat-trade delegation was told India might accept alternatives to methyl bromide such as phosphine, during a transition period to June 30, but would require evidence that it is equally effective. India also last week unexpectedly applied a 10% duty on wheat imports, a decision unrelated to pulses but another sign of the confusion and disarray in India's trade and commodity regulation. Whatever happens Canadian exports of lentils and peas have been disrupted and about a month of normal movement has been lost. The extension means that cargoes can be loaded for India only to about June 1. The issue is not resolved, as a statement from Ottawa claimed and pulse business to the biggest buyer is as much in limbo as before. Pea and lentil prices did not recover with green lentils down 27% and reds down 21% from January highs. Indian pulse production for 2016-17 is officially placed at of 22.1 million tonnes, up 35% from the previous year, but seems to have been over-estimated by a sloppy and manipulative bureaucracy. More imports may be needed if consumption rises due to lower domestic prices. The lack of information, conflicting information and disinformation surrounding this matter is driving special crop dealers to distraction. No or almost no new-crop contracts are available. This is the third case in a year in which bureaucratic bungling in importing countries and sudden and unexplained policy changes led to trade disruptions and price consequences. Pulse crop acreage for 2017 will obviously be reduced, possibly sharply. (03/31/2017)


The March 22 budget was far more notable for what was not in it than for what was. Pre-budget consultations traditionally held by the finance minister with various interest groups led to an expectation of hostile changes to capital gains taxation. Small business owners and farmers are well treated under the present law with the lifetime exemptions and the 50% effective rate. These provisions remain. It was also feared that tax rates on corporate and higher personal incomes would be raised. In the end there were no significant tax increases. Excise taxes on alcohol and tobacco were raised by amounts almost too small to measure. However the government intends to make changes that will restrict the use of private corporations to lower taxes to small-business corporate rates from high-income personal rates and also the use of dividends and capital gain by small business corporations for income splitting in a family. A discussion paper outlining these changes will be issued shortly. Highly technical changes are proposed for treatment of spread trading in derivatives to defer taxable income, which could apply to individual commodity futures traders. A change in the way insurance companies are taxed on farm policy premium revenue may have the effect of slightly raising casualty insurance premiums in the future. A change will be made in the trade remedy system to allow interested parties to request an investigation by the Canada Border Services Agency to determine whether specific imported products fall within the scope of a trade remedy measure. Unions will have the right to participate as interested parties in trade remedy proceedings. Agriculture is mentioned a few more times without specifics, in connection with research and innovation support and transportation. The Canadian Food Inspection Agency gets an extra $149 million over five years to improve meat plant inspection. The finance department will propose restrictions on the use of crop sales cash ticket deferrals as a way to defer income but that is for another budget. And that's about it, except for a 6-cent-per-$100 increase in employment insurance premiums. Use of the unemployment insurance system as a delivery vehicle for welfare will be expanded further. Most big-money budget provisions simply detail how the $81 billion allocated to so-called infrastructure programs stretching out as far as 17 years will actually be spent. The emphasis is on expanding welfare and deeper federal government intervention into every part of the economy. Most new programs extend beyond the government's present mandate. It gives effect to the Trudeau principle that indefinite deficit spending is fine and the government does not have a year in mind in which it will start to pay its way from current resources.. (03/27/2017)


The Manitoba government has introduced legislation that will end the 11-year de facto ban on hog barn construction and renovation imposed by the former NDP government. The measure is Bill 24, the Red Tap Reduction Act, which repeals a total of 15 different regulatory schemes. The hog-farming prohibition is in the Environment Act. The bill will also remove the restrictions against manure spreading on fields during the winter months. However the regulation is not opposed by livestock groups and will remain under another law. Both measures were intended to reduce phosphorus run-off into Lake Winnipeg, and eventually covered the entire province, including areas far from the lake. Hog production and manure disposal were long ago shown to be minor contributors to lake pollution. Most of the phosphorus entering the lake comes from cities and towns in the watershed, including Winnipeg and communities south of the US border along the Red River. Phosphorus loading has been reduced in recent years. Under the hog-barn restriction, new construction and expansion were permitted only if they included prohibitively-costly industrial-type waste treatment facilities using anaerobic digestion or a similar process. A pilot project in 2015 allowed the use of two-cell manure lagoons for manure treatment but created little interest or new development. Hog production in Manitoba is dominated by Hutterite colony farms and large operations owned by or otherwise linked to the two large packers. Both are in a good position to expand quickly, with the most logical locations in western and southwest Manitoba, closer to packing houses in Brandon and Neepawa. (03/27/2017)


The US agriculture department will release its annual prospective plantings report, based on a national survey, on March 31. But numerous private broker and market advisory firms have already released acreage predictions all of which point in the direction of increased soybean area, much less corn and record-low wheat acreage. With the return to more normal yields from the records of 2017, US crop production could fall substantially with or without adverse growing season weather. If demand in 2017-18 holds up, especially this season's brisk exports, world grain and oilseed stocks could drop noticeably for the first time in five years. Other major producers are not cutting acreage because their prices, in weak currencies, are not low enough to discourage production. But in the US spot wheat prices under $4 a bushel are cash-money-losing. Corn at just above $2.75 is barely break-even in high-yield areas. Soybeans at $8.50 are making a few dollars an acre. So, according to the average of the credible estimates, some based on surveys of farmers, projected US corn area at 90.3 million acres compared to 94.0 in 2016, soybeans at 86.5 vs 83.4 and all wheat 45.7 against 50.2. Winter wheat was estimated at 32.7 million vs 36.1 last year, non-durum spring wheat at 11.3 million compared to 11.6 and durum at 3.05 million, up from 2.41. Corn area would still be the seventh largest area of recent years, although 7.3 million acres below the recent high in 2012 when it was 97.3 million. Soybean area would be a new record. Wheat acreage would be the smallest since 1919. In 2016 US average yields for corn, wheat and soybeans set new records at 174.6, 52.6 and 52.1 bushels per acre respectively. These were exceptional results that are not expected to be repeated soon. Trend-line yields are projected by USDA at 157.0 bushels for corn, 45.2 for wheat and 43.4 for soybeans. Assuming an average ratio of harvested to planted area, the US corn harvest should drop to 13.88 billion bushels from last year's 15.15, soybeans to 4.14 billion against 4.31 and all wheat to 1.86 billion from 2.31 billion. With carry-in from 2016-17, corn supply would be 16.20 billion bushels for 2017-18, soybeans 3.093 billion and wheat 2.885 billion. Using the same export and domestic use as in 2016-17, US corn carryover would drop 32% from 2.320 billion bushels to 1.580, soybeans would increase to 485 million from 435 million and wheat stocks would fall 40% to 614 million bushels from 1.025 billion. Corn carryover would be the smallest in almost 10 years and wheat the smallest in four years. Soybean carryover would be a record but by only 50 million bushels. (03/20/2017)


Bovine tuberculosis was discovered in a cattle herd in South Dakota on March 2. The differences in the way that case is being handled compared to the hysterical reaction to the TB incident in southeast Alberta by the Canadian Food Inspection Agency are arresting. The South Dakota herd and 12 directly adjacent properties with 8,000 head were quarantined for testing, which is well along after less than a month. Herds in which no positives were found were immediately pronounced clean and released. Only 26 cattle on the origin ranch have been euthanized and there is no plan to wipe out the entire herd. Control of animal disease is a state matter in the US and this case is being managed by the state veterinarian. South Dakota retains its TB-free status and officials stressed that there is no human health or food safety risk. No meat-importing country took or mentioned any trade action. Standard protocol is to track all cattle that can be identified brought into and sold from the affected herd over the last five years. Up to eleven states could be involved but as of last week no other state had placed restrictions on cattle from South Dakota. A single case of bovine TB was also confirmed in Michigan last week, a two-year-old steer thought to have been infected by wild deer. As of last week the CFIA still had 53 farms in southeast Alberta and adjoining Saskatchewan under quarantine, seven months after the first case came to light. Just 20 farms with 7,500 head have been released. Six animals have tested positive, all in the original herd. Over 10,000 cattle have been destroyed. The CFIA said last week that the investigation could take several more months and more sites could be quarantined. There are international standards for handling animal disease outbreaks. The CFIA has decided that greatly exceeding them enhances Canada's reputation as a source of safe food. We know that the costs of this policy are very substantial. We have not seen anything in the way of a market advantage. (03/20/2017)


Grown-up stock market investors don't mind it when a stock price drops. Prices fluctuate all the time for hundreds of reasons. Share prices go up and down. But when a stock drops 5.5% in one day (as happened on March 10) because a bunch of little boys and girls at the CBC decided to do a hatchet job on the biggest Canadian bank, it is beyond the pale. TD shares dropped from $70 to $66 after a spurious story alleged that its employees have to break banking laws to keep their jobs because of 'incredible' pressure to grow revenue. The CBC has a 'Go Public' portal to attract story tips, which are usually about cell phone bills and bad dental work. But when three complaints about a big bank turned up, the CBC saw some real dirt. A stream of pumped-up, sensationalized, repetitive stories was spread on radio, TV and its web sites, and was picked up by dozens of financial news outlets. When the stock tanked the CBC literally gloated. TD Bank has 81,000 employees and 10 million customers. It is regularly on lists of the top employers in Canada in ratings that assess workplaces from the employee point of view, and has been first or second in the respected JD Power customer satisfaction survey for 10 years. It has an internal hot line where employees can report any issue directly to top management. Everything a major financial institution in Canada does is under the constant purview of the Superintendent of Financial Institutions. Either the things the CBC alleged are false, were invented by disgruntled ex-employees who could not do their jobs and embellished, or occurred so rarely as to be completely not notable. The CBC wiped $6.7 billion off the assets of TD shareholders in 12 hours. Share prices of other banks also fell. Lasting and quantifiable damage has been wrongly done to TD's reputation and to that of the Canadian banking system. Bank stocks are held by pension funds and are the core of many people's old age security. With similarly malicious, twisted intent the same could be done to literally any company, any time. Every employer, including the firm that publishes this newsletter, has felt the wrath of vengeful separated employees and experienced the ensuing complications. There is no news here except fake news. A few irregularities in millions of transactions a month are insignificant. The CBC stories were irresponsibly written to create the impression that a tiny tip of a gigantic iceberg has been discovered by 'investigative journalists'. TD Bank won't sue the CBC for defamation, but shareholders should, forcing it to reveal the quantity and quality of its evidence and to account for its grossly, deliberately misleading conclusions. Short-selling activity in TD stock in the preceding month should be investigated. Then the CBC should be switched off. (03/20/2017)


After March 31 India will accept incoming shipments of pulse crops and wheat only if they have been fumigated to Indian specifications using methyl bromide at the port of loading. This has crested a crisis in the Canadian pulse crop industry, which developed largely because of the huge Indian market. Ostensibly the purpose of fumigation is to kill certain nematodes and other insects to prevent their entry into India. However all these pests are already present and widely dispersed in the country. Most are not present in Canada, and those present do not survive winter temperatures. Peas and lentils that have been stored in the conventional way over a prairie winter cannot possibly harbor any of these insects. Until now Canada and several other countries were exempted from the rule and their bulk and container cargoes were fumigated on arrival. The exemption was in the form of a 'derogation' for six-month terms that have been renewed without incident since 2004. This was considered a bureaucratic formality and the renewal was until now automatic. Fumigation involves the use of a gaseous form of methyl bromide. It is ineffective below 50 degrees F and most effective above 80 degrees. The applicable Indian regulation runs to 167 pages and covers more than 2,000 designated items from wood (with and without bark) to seeds and plants for propagation. In many cases imports without fumigation are specifically allowed subject to certification by a competent authority in the exporting country guaranteeing the goods are pest-free. But when the Canadian Food Inspection Agency proposed such a solution for pulse crops it was turned down flat. Canada cannot meet the fumigation requirement. Indian officials know it and they know exactly what they are doing. The renewal was declined with the expectation and intention that Canadian pea, lentil and chickpea imports would be immediately terminated. The Indian government pretends that this is a phytosanitary issue and is not interested in a resolution. It will not co-operate in the search for one. US exports to India are in the same situation, but not those from Australia, which also harvested a record pulse crop in 2016. Australian shipments to India have always been fumigated at the source and there are excellent facilities at export ports. India also has its own bumper crop of pulses, estimated at 22 million tonnes, a 35% increase from the prior year. The difference of about 7 million tonnes from 2016 is close to recent annual imports. The Indian government has a vital interest in maintaining prices to its growers, both to encourage higher domestic production in the future and alleviate rural poverty that is even more threatening than in China. Subsidies to both farmers and low-income consumers are already an overwhelming fiscal strain. Artificially supporting pulse prices by blocking imports is a way to transfer wealth from consumers to farmers without directly involving the government. It has chosen a crude, highly unethical way to keep unwanted imports out, probably taking a cue from China. (03/06/2017)


The International Grains Council last week forecast world wheat production in the 2017-18 crop year at 735 million tonnes, 2% less than in 2016-17, with both area and yields expected to be slightly lower. It is a very small decline in view of the size of the world wheat surplus. For 2016-17, it raised its forecast for total cereal output to 2.102 billion tonnes from 2.094 a month earlier, up 4.8% from 2.006 in 2015-16. Global cereal consumption was raised to 2.069 billion tonnes from 2.062 in the January report. Its forecast for 2016-17 world wheat production at 752 million tonnes was unchanged from January, 2.0% above 737 million in 2015-16. Global wheat carryover was estimated at 236 million tonnes, up from 235 million last month. The world soybean estimate for 2016-17 was raised to 336 million from 334 million tonnes last month. Consumption was put at 334 million tonnes, up slightly from 333 million in the prior year. Carryover remained at 35 million tonnes. (03/06/2017)


Agriculture Canada has released an annual outlook report, including farm income forecasts, for 2017. The report is a consensus forecast developed with the provinces and Statistics Canada. It expects virtually no change in gross farm receipts between 2016 and 2017. Farm cash receipts, including government payments, are forecast at $59.08 billion in 2016 and $58.88 billion in 2017, after the record $59.77 billion in 2015. Similarly small changes are expected for individual provinces. Crop-based farm cash receipts are estimated to have increased by 2% in 2016 to $32.59 billion, and are expected to gain another 1% in 2017 to $32.87 billion. Crop receipts are projected to increase primarily because of larger marketings and high prices of canola. However year-to-year changes are similar in eastern and western Canada. Farm gate income from livestock sales is expected to drop to $22.80 billion in 2017 from $23.87 billion in 2016 due to erosion in North American cattle and hog markets from record highs of 2015. Farm gate receipts from cattle and calves are expected to drop by 13% in 2017, partly offset by higher marketings. Hog revenue is forecast to drop 2% in 2016 and 8% in 2017. All livestock receipts, which declined by an estimated 7% in 2016, are forecast to slip by a further 4% for 2017. Government program payments rose by 24% in 2016 from the historic low of 2015 to $2.63 billion and are projected to rise another 22% in 2017 to $3.21 billion. Most of the increase is accounted for by crop insurance payments. (02/27/2017)


The Western Canadian Wheat Growers Assn has joined US Wheat Associates in urging the Canadian government to remove restrictions on US wheat imports into Canada and to allow as free a flow north as south. Both organizations agree that such action would improve the efficiency of the grain handling systems of both countries and narrow the artificial price differentials that are the main reason for large-scale US imports from Canada. They could have added that unless Canada takes such steps voluntarily, the inequality of market access and the large volume of Canadian wheat exports to the US will become an issue in the renegotiation of the NAFTA agreement. Currently Canadian wheat delivered by farmers to US primary elevators or traded commercially by grain companies receives the same treatment as US-grown wheat. But because of legislation and regulation, essentially the Canadian statutory grading system, virtually no American wheat is imported into Canada. US wheat delivered into the western Canadian elevator system, regardless of its quality, automatically receives the lowest grade, generally feed. US wheat does not qualify for a statutory grade even of varieties registered in Canada. It is not possible to see how the imbalance can be neutralized without abandoning the Canadian statutory grading system. The Canada Grain Act states that only Canadian wheat can be assigned a legal grade and that no wheat can be exported unless officially graded and inspected. Much American wheat is of varieties not registered in Canada, while the Act insists that wheat eligible for grading must be of an approved variety and class. (02/20/.2017)


The annual USDA outlook forum was held February 23-24, with preliminary projections for 2017. The figures were anticipated as the first official assessment of 2016 prospects. All wheat area was projected at 46.0 million acres, down 8% from 50.2 million in 2016. The wheat crop was put at 1.837 billion bushels, 20% under 2.310 billion in 2016 as average yield was also projected to fall to 47.1 bushels per acre vs 50.2 last year. US wheat exports for 2017-18 are projected at 975 million bushels compared to 1.025 billion in the current crop year. Carryover at the end of 2017-18 is expected to drop to 905 million bushels from 1.139 billion, the lowest since 2014-15. Soybean acreage was expected to increase 5.5% to 88.0 million acres from 83.4 in 2016. The soybean harvest was projected at 4.108 billion bushels, down 5% from 4.307 billion last year. Average yield is expected to be 48.0 bushels per acre from 52.1 last year, which was the record. With carry-in, 2017-18 supply will rise to 4.625 billion from 4.528 in 2016-17. US soybean exports in the new crop year are expected to increase to 2.125 billion bushels from 2.050. Carryover at the end of the 2017-18 marketing year is seen unchanged at 420 million bushels. USDA projected the 2017 corn harvest at 14.065 billion bushels, down 7% from 15.148 in 2016. Corn planted area of 90.0 million acres was forecast, down 4% from 94.0 last year. Average yield was foerecast at 170.7 bushels, compared to the 2016 record of 174.6. Corn use for ethanol was estimated at 5.400 billion bushels, almost unchanged from 5.350 for 2016-17. Corn exports are expected to drop to 1.900 billion bushels from this year's 2.225. Carryover will drop just slightly to 2.215 billion bushels from 2.320 at the end of the current year. USDA's forecasts for average farm-gate cash prices in 2017: corn $3.50 per bushel ($3.40 in 2016); soybeans $9.60 ($9.50); wheat $4.30 ($3.85). The numbers had no evident market impact, though soybean area was smaller and corn area larger than many pre-forum estimates. Some expected soybean acreage to be higher than corn, which has not been seen since the 1980s. (02/24/2016)


The much-quoted German newsletter Oil World (350 euros for six months) passed the opinion last week that canola area in Canada will increase “slightly” (up to 10%) in 2017 because of attractive prices. There is no argument about prices; canola futures last week were 5% higher than a year ago and 15% higher than two years ago. But canola area in western Canada is maxed out. Soybean prices are even more attractive, with futures 23% higher than in January 2016. High prices over several years have stretched canola acreage beyond a reasonable limit for five years. In 2016 32% of cropped area in the west was canola, including areas where little or none is grown. The average rotation is just over three years instead of the universally recommended four. Canola acreage has hit the wall, and while it is most likely to be similar to last year's 20.25 million acres it could be lower. Soybean area will continue to increase in western Canada and could reach 2 million acres for the first time, and some of the gain could come from canola. According to production cost estimates for 2017 from the Manitoba agriculture department, a 36-bushel-per-acre soybean crop will return $95 per acre after expenses at present prices compared to $56 for canola. Wheat will net $29 and barley will lose $22 per acre. (01/20/2016)


A new study from the US agriculture department on the life-cycle greenhouse gas balance of corn ethanol should but probably will not silence claims that ethanol use provides little or no environmental benefit. The study found that GHG emissions associated with corn-based ethanol are about 43% lower than gasoline on an energy equivalent basis. The use of ethanol at current rates was found to reduce emissions by as much as 35.5 million tonnes per year. The study is based on actual experience over the past decade, the current GHG profile of corn-based ethanol and the latest information about corn yields, inputs and fossil energy use. Corn and ethanol production uses less energy than ever before because of advances in both corn growing and ethanol distilling. Corn growers are producing corn more efficiently, using conservation practices such as reduced tillage, cover crops and improved fertilizer management which lower GHG emissions. Corn yields rose over 10% between 2005 and 2015 with little or no additional input use. During the period US ethanol production rose from 3.9 billion gallons a year to 14.8 billion. Improved ethanol production technology reduced GHG emissions at ethanol plants. If and when all available practices are adopted by farmers and ethanol producers, GHG benefits of corn ethanol would represent a 76% reduction compared to gasoline. Potentially GHG emissions can be reduced by over 120 million tonnes of carbon dioxide equivalent annually by 2025. (01/20/2016)


In the issue of this newsletter for April 11 2016 it was first noted that the Canadian Grain Commission is drastically overcharging for its services. Most of them, under the Canada Grain Act, are mandatory, so everyone subject to the Act is a captive customer. Commission charges and fees come out of the value of crops at the farm level, as do all other costs incurred in getting grain from where it is grown to where it is consumed. The Commission was required, like all federal government agencies starting in 2013, to substantially finance itself out of user fees. About $5 million a year continued to be paid by Ottawa because certain of its activities (it is hard to imagine which) were deemed to benefit the country at large. The Commission was given unlimited freedom to set fees and conditions of service, with the proviso that the risk of unplanned subsidies from the government be irreducible. The arrangement took effect at the start of the 2013-14 crop year, when massive increases were imposed. The cost of an elevator license rose by 33 times. Most other fees doubled or tripled. An automatic increase of 1.6% was set for each April 1, the start of the government financial year. Over the next three years the Commission collected $46 million more than it spent, and a 'revolving fund' into which all fee revenues go and out of which all expenses are paid soared to $65 million. This is nothing less or more than retained earnings by a government agency that is not supposed to be a profit centre. The only commodity organization that noticed this is Western Canadian Wheat Growers and it took until last week to do so. By now the so-called fund is around $100 million. The WCWGA wants fees adjusted back to a cost recovery range and the excess rebated to farmers. The Grain Commission fell through the crack between the Harper and Trudeau governments. The Junior Trudeauistes have as irresponsibly neglected the Commission as they have frivolously neglected numerous other core responsibilities of a credible government. The CGC was left without a slate of commissioners for over a year, during which it went into a self-driving mode while retaining all its powers and authority. The Grain Act, the Commission and the comical statutory grading system need a top-to-bottom zero-base shakeup. It is unpredictable when the conditions favorable for such an event might pertain, but it is definitely not in the foreseeable future. (01/13/2016)


The US agriculture department on January 12 issued its final 2016 crop production estimates, quarterly grain stocks and winter wheat seeded area. There were minor changes in both directions in corn and soybean production figures, not large enough to change the massive oversupply. Corn yield was lowered from 175.3 to 174.6 bushels per acre, still a record, and production reduced by 78 million bushels. Soybean yield was lowered by 0.4 bushel to 52.1 and production from 4.36 billion bushels to 4.31. Wheat figures were unchanged. Carryover at the end of 2016-17 was raised slightly for wheat to 1.186 billion bushels, an unprecedented 51% of production and 53% of crop-year use. Soybean carryover was lowered from 480 million bushels to 420, but still dramatically higher than 197 and 191 million for the preceding two years. Corn carryover was also reduced from last month but at 2.36 billion bushels is 37% larger than a year earlier
. US grain stocks as of December 1 were higher for all crops but close to trade expectations based on quarterly use. Wheat stocks were 2.07 billion bushels (1.75 a year earlier), soybeans 2.90 billion (2.72) and corn 12.38 billion (11.24). US winter wheat area seeded last fall was reported at 32.4 million acres, down 10% from the previous year's 36.1 million, with hard red winter at 23.3 compared to 26.6 million. Wheat area was the smallest since 1909 and the second-lowest since records began to be kept. Changes in world supply-demand estimates from the last report were too small to have market influence. Soybean futures prices rose by double digits following the report's release and wheat also rose, but the report was considered market neutral for old-crop prices. Reduced US wheat area for 2017 harvest is a positive sign but the report refers only to winter wheat. Spring wheat area could be maintained or increased because of strong prices, so that competition with Canadian wheat may be little changed in 2017-18. (01/13/2016)


Statistics Canada issued its final 2016 crop production report on December 6, and it was immediately second-guessed by just about everybody. The farmer survey from which it was developed was taken between October 21 and November 13 when the harvest was far behind and the outlook for completing it was at its most bleak. Ideas of yield loss from weather were all over the map. Not only were yields much better than feared according to Statistics Canada, but the 2016 harvest turns out to be the biggest crop that Canada has ever seen except for the miracle year of 2013. It is only the second time that national output of mainline crops exceeded 90 million tonnes. In western Canada it was only the second to top 70 million. The December report commonly shows higher figures than the first survey conducted in July and reported in August. It happened again, though not to the extent of other recent years. Last week's report showed 4.5% or 3 million tonnes more production than Statistics Canada estimated in August. In 2013 the December estimates were roughly 18% higher than indicated by the July survey and in 2014 9% higher. Nationally the all-wheat harvest was put at 31.73 million tonnes, 15% above last year's 27.95 million because of a jump in durum in the west, and recovery of the Ontario crop after the unusually short 2015 result. The wheat harvest was the second-largest of recent times, exceeded only by 37.53 million in 2013. All-wheat production in Alberta was reported 19% higher than in 2015 and 12% higher in Saskatchewan but little changed in Manitoba. The Ontario wheat crop recovered to a more usual 2.54 million tonnes from 1.55 million in 2015, when acreage of winter wheat was sharply reduced by a late soybean harvest. The average wheat yield in Ontario was a record, 90.9 bushels per acre, a 16% increase over 2015. The durum crop was reported at 7.76 million tonnes, up 44% from last year on only a 6% increase in seeded area. Durum yield was estimated at an astonishing 48.8 bushels per acre, barely 3 bushels below the spring wheat yield of 52.0 and 14 bushels above last year's 34.4, difficult to believe given the growing season. Provincial crop reports said about 9% of spring wheat area in Alberta and 6% in Saskatchewan had not been harvested when work ended. It is not clear what will be salvaged in the spring or what amount of yet-to-be-combined production is included in the estimates. The canola crop was estimated at 18.42 million tonnes, almost unchanged from the revised 18.38 million for 2015. It was 1.4 million tonnes higher than the first figure in August but strikingly similar to the 18.31 million predicted by the September satellite-image model. Prairie-wide average yield rose to 42.3 bushels per acre, a new record, but harvested area relative to seeded area was unusually reduced because of excess rain. Harvested (or to be harvested) canola area was estimated at 19.19 million acres compared to 20.37 million seeded. In Alberta harvested area was estimated down 11% from 2013. Average yields in Alberta and Saskatchewan were records at 46.4 and 41.2 but unexpectedly dropped in Manitoba to 39.0 bushels from 40.3 in 2015 and 41.0 in the record year of 2013. (12/12/2016)


Lentil production reached a record 3.25 million tonnes but results overall were disappointing. The harvest was 28% larger than in 2015 but seeded area was 45% higher and harvested acreage 42.5% higher. Average yield dropped to 1,248 lbs per acre from 1,391 in 2015 or 10%. In Saskatchewan average lentil yield was 16% lower. Peas did remarkably well considering adverse growing conditions. Area and production set new records with 4.84 million tonnes harvested with an average yield of 42.7 bushels per acre, 10 bushels better than in 2015 and second only to the 2013 record of 43.7. (12/12/2016)


Statistics Canada recently updated farm income statistics for 2015 and the first three quarters of 2016, which suggest that farm-gate revenue continued to climb to new records until the July-September period of 2016. Farm cash revenue grew by 3.2% for the 2015 calendar year over 2014 to set a fifth consecutive all-time high of $59.77 billion, following a 4.8% increase in 2014. The rising trend continued into 2016 with cash revenue 5.9% higher than a year ago in the first quarter and 2.5% higher for the second. However the bottom fell out in the third quarter with revenue down 8.8% because of lower prices for cattle and hogs and some crops, and lower quantities marketed in some cases. However 2015 was a banner year, according to the latest Statistics Canada figures. Nationally farm cash receipts from crop sales were 6.1% higher at a record $31.95 billion vs $30.12 billion in 2014. Canola sales generated $8.07 billion, 10% more than the previous year's $7.34 billion, accounting for 25% of national crop revenue and over a third in western Canada. Revenue from all wheat was $6.39 billion. Cash received from pulse crops also rose sharply in 2015, by 110% from lentils to $2.25 billion and 5% for peas to $870 million. For the first three quarters of 2016, farm cash receipts did not show the degree of decline that might be implied from downward movements in crop and livestock prices. The national total was $43.50 billion, a fractional difference from $43.59 billion in the same 2015 period. Nine-month cash receipts increased by 6% in Quebec, were unchanged in Ontario and Manitoba and declined by 1.4% in Saskatchewan and 2.4% in Alberta. Nationally, January-September revenue from crop sources was 6% higher at $24.33 billion and a new record, while livestock receipts were 7% lower at $17.81 billion. Nine-month canola sales were 12% higher at $6.70 billion, while wheat sales were 8% lower and barley 18% lower. Wheat marketings were slightly lower. Revenue from peas was 63% higher and lentils 3% higher, though the biggest gains will appear in the fourth quarter. (12/05/2016)


Without notice or warning, the federal Pest Management Regulatory Agency of Health Canada last week announced it will phase out agricultural uses of the neonicotinoid insecticide imidacloprid over three to five years, ostensibly because it is toxic to aquatic insects which fish eat. The agency will also review the registrations of two other widely used neonicotinoids, clothianidin and thiamethoxam, with the obvious intent of eliminating them also. The PMRA ban would apply to all modes of application, whereas in Ontario only seed treatments on corn and soybeans are restricted and not completely banned. The PMRA will receive public comments for 90 days, a formality. The ban would be national and total. Neonicotinoid seed treatments are used on almost all of corn and canola seed in North America and a large percentage of soybean seed. Imidacloprid (trade name Gaucho and others) is also approved for use in pulse crops including peas, lentils, beans and chickpeas and some cereals for wireworm control. In canola it is used to control flea beetles, the most damaging insect in a crop that is notoriously vulnerable to insect attack. There is no viable alternative for canola. These insecticides have not been controversial except among the extremist outfits such as the Sierra Club and the Suzukists. They appear to have instigated this action with the new health minister. (12/05/2016)


Not that anyone doubted him when the US president-to-be repeated hundreds of times during the campaign his intention to not proceed with the Trans Pacific Partnership trade agreement. But when he said “I am going to issue a notification of intent to withdraw from the Trans-Pacific Partnership, a potential disaster for our country. Rather, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto American shores” on November 21 he showed just how casually he takes the probability that the US will lose as much or more than it gains from backing out of free trade arrangements. The US Congressional Research Service estimated that the TPP would raise US agricultural exports by $7.2 billion and imports by $2.7 billion and increase US agricultural production by $10 billion. The whole American economy is likely the ultimate loser. The US farm and commodity organizations (more or less all of them) which supported both the Trump candidacy and the TPP have been made to look like fools. The unions are, or think they are, the winners. Potential agricultural trade in the TPP zone worth billions per year now will not be realized. What Trump did was not the worst thing from the Canadian point of view. The worst was the out-of-hand rejection by the Japanese prime minister of the notion that the TPP could be reworked with 11 members excluding the US. Perhaps the idea will be revisited, but to abandon the TPP without even trying to salvage it is irresponsible in the extreme. (11/27/2016)


The US Environmental Protection Agency last week announced final targets for biofuel use in motor fuels for 2017, at a total of 18.80 billion gallons of all renewable types. The target for ethanol was set at 15 billion gallons and for so-called advanced biofuels at 4.28 billion including 2.0 billion of biodiesel (up from 1.9 billion in 2016) and 310 million gallons of cellulosic ethanol from non-crop feedstocks such as wood waste. EPA also proposed a requirement of 2.1 billion gallons of biodiesel for 2018. It is the first time in four years that the agency has announced the mandatory requirements before the start of the calendar year to which they apply. The total is 6% higher than 18.11 billion gallons mandated for 2016. The 2015 volume was and 16.93 billion, when the Obama administration scaled back the targets from amounts written into the Renewable Fuel Standard with the claim that the limit has been reached in the quantity that can be blended without exceeding 10%. The ethanol mandate is an about-face for the EPA and a win for the industry. It will increase corn needs for ethanol to approximately 5.5 billion bushels for 2017-18 from 5.3 billion for the current crop year and 5.2 billion in the prior two years. (11/27/2016)


Parrish & Heimbecker and Paterson GlobalFoods have formed a joint venture called Fraser Grain Terminal to build a grain export facility on the Fraser River in Surrey, with an annual capacity of 4 million tonnes. The proposed project would have 34 steel bins with a travelling shiploader, a semi-loop track and container loading capability. The site is the Fraser Surrey Docks across the river from New Westminster. Plans have been submitted to the Vancouver Fraser Port Authority for development approvals and public comment is being received. This is the fourth proposed or completed Vancouver port development in three years as grain companies seek more load-out capacity of their own to support country origination. (11/27/2016)


According to Grain Commission sampling up to October 26, hard red milling wheat and canola quality are not far out of line. About 20% of CWRS spring wheat is No 1, 40% No 2, 20% No 3 and 20% feed. The top two grades normally make up 75% or more of the harvest; this year it appears is about 60%. In practice the large majority of buyers accept No 2 and many prefer it. CWRS wheat protein content so far averages 13.7% compared to 15.9 to 17.1% last year but very close to the ten year average of 13.9%. There is no quality problem with canola. Approximately 97% of samples have graded No 1. Average l content is 44.6%, better than last year's 44.2 and the ten-year average of 44.3%. Protein averages 20.3% vs 20.7% in 2015 and 20.5% over ten years. Average chlorophyll (green seed) content is 11.2 parts per million compared to 12.0 last year. However it is a much different story with other crops sampled. Roughly 14% of durum samples have graded No 1 (compared to above 50% normally), 14% No 2 and 14% No 3. There is not much of a milling durum market for quality below No 3, which makes up two thirds of the 2016 harvest. Of projected production of 6.8 million tonnes, only around 3.5 million may be saleable for semolina. Protein content averages a very poor 12.8% with Saskatchewan at barely 12%, compared to 14.1% last year. Lentils show the worst of all quality profiles. According to Grain Commission sampling 28% of the 2016 crop is No 1, 35% No 2, 26% No 3 and 11% No 4. Practically all production in 2015 and most other years is No 1 or 2. Even These figures suggest a much better picture than is being seen by pulse crop dealers. (10/31/16)


Domestic canola crush is setting new records. For the week ended October 25 a new weekly record was set at 198,859 tonnes, only the third week in history to exceed 190,000. The prior four-week average was 177,120. The Canadian Oilseed Processors Assn reported canola plants worked at 93% of capacity, which implies that crush could be as high as 214,000 tonnes per week. Cumulative crush for the crop year to date is 2.12 million tonnes, also a record, vs 1.85 million to the same point in 2015-16. Crush is up 13% from a year earlier, 18% from two years ago and 20% from three years ago. Crush accounted for 53% of total use in the crop year so far vs 44% a year ago. Crush is high because it is profitable. The implied value of canola products based on futures prices last week was $614 a tonne, $100 above the seed future. (10./31/2016)


On October 17, for the first time since June, canola futures in Winnipeg traded above $500 a tonne. Though roughly $30 below the contract high on June 8, the January month closed $55 above the contract low on July 23, set after the abrupt midsummer fall in all futures markets. Up to October 19 the canola future closed higher every trading day in October, an unbroken string of 13 trading sessions. Between October 1 and 19 canola futures gained 7% compared to 2.5% for soybeans. Spot-month canola futures traded at approximately 106.5% of the equivalent soybean price per tonne in Canadian funds compared to 102.8% a week earlier and 98.3% a month earlier. Canola futures volume soared with over 400,000 contracts traded up to October 20, exceeding monthly totals for July and August. Some of this remarkable strength was due to the stalled canola harvest and the possibility of substantial lost production. Between 3 and 4 million tonnes of the crop were still in fields as of October 12. Some of these fields will not be harvested this year and some not at all. But the big push came from the surge in world vegetable oil prices, especially palm oil, which posted six-month highs. Short supplies and higher prices for palm oil had been predicted for months, but the Kuala Lumpur futures market only reacted strongly on October 10. Palm oil futures jumped by 7% in four sessions ended October 17 as slew of statistics confirmed declining production, shrinking stocks and steady exports from both Malaysia and Indonesia. Palm oil strength was telegraphed to all leading oils including soybean oil, and of course canola oil. Since the oil content of canola is around 43% and soybeans 22%, the increase in oil value naturally moved canola seed prices by more than soybeans. (10/23/2016)


The Belgian government constitutionally cannot sign the CETA Canada-EU trade agreement unless all five of its provinces agree. As of last week the backward, rural, French-speaking province of Wallonia in southern Belgium (population 3.6 million) did not agree. The resistance came from farmers who fear grain and meat import competition, and that a CETA agreement will set the pattern for the much larger EU-US TTIP. The CETA deal requires unanimous consent of 28 European countries with a combined population of 350 million. For want of the Wallonian nail it is just conceivable that the whole CETA war could be lost. Panicky EU trade ministers and other officials met in Luxembourg, Paris and other places last week to try to resolve this almost unbelievable glitch, but no breakthrough was reported as of October 20. Elaborate concessions were offered, including a five-page declaration of principles to be added to the CETA text, some of which conflict with other parts of the agreement. The official signing ceremony was still on for October 27 but will be postponed if a settlement with the Wallonians is not reached. What happens after that is anyone's guess. To its credit the Trudeau government, which was between skeptical and openly hostile to the agreement during the election campaign of a year ago, is energetically trying to save it. However it is up to the EU to resolve what is an internal conflict. (10/23/2016)


The 2016 growing season on the prairies could not have started in a much more promising way, and could not have deteriorated more dramatically, especially as the harvest began. Seeding started more or less on time with excellent moisture but cool weather. It turned dry in Alberta in mid-May, bringing back the spectre of another droughty year. The rains came in late June, maintaining moisture conditions while weather turned warmer, to raise optimism for what briefly appeared to be the possibility of a near-record crop. But the rains became unrelenting through the mid and late growth stages when dry, hot weather is usual and required. As the rain continued temperatures dropped below normals. Every wet-weather disease attacked every crop, and quality plummeted. Harvesting started late because of slow ripening and excess moisture, and continued slow because of rain interruptions. A pattern set in across the entire prairie grain belt in which showers and light rain fell every few days, just often enough to prevent proper drying. Some areas of Saskatchewan did not have more than three or four consecutive combining days through the entire harvest season. A possibly record-large proportion of cereals was harvested at high moisture and required heated drying or aeration in storage. As of last week harvesting in Manitoba was above 95% done but in Saskatchewan only at about 85% and in Alberta under 80%. Snow fell across all of Saskatchewan and northern and southern Alberta on October 5-6 and as of October 12 still had not entirely melted. Standing crops were flattened but the worst damage seemed to be in swaths, which were thoroughly soaked as the snow slowly melted. Further yield and quality loss occurred. Temperatures are seasonally and drying is slow. Only a spell of exceptionally warm and dry weather, which was not in forecasts, can prevent further yield and quality loss in crops that remain to be harvested. Some fields will be abandoned and others will be left for salvage in the spring. There have been late years before with harvesting into November, but losses get very high. The 2016 prairie harvest will go down as the one with the lowest overall quality in modern times, probably in over 30 years. Nobody remembers it being worse. Disease in the largest-ever lentil crop was so degrading that up to a million acres were not harvested. Fusarium and mildew in wheat and barley are at unprecedented levels and all canola diseases are rampant. (10/17/2016)


Canadian grain exports are off to a slow start after week 9 of the crop year, compared to the two previous years. The total is 5.44 million tonnes, down 17% from a year ago and 25% from the same point in 2014-15. Off-farm deliveries and domestic use are similar. Commercial stocks are lower than a year ago but close to those of the same 2014-15 date. Shipments of all major crops are down from a year ago except peas, but most prominently non-durum wheat, which are only 2.25 million tonnes, less than two-thirds of the total reached by the same date in 2014-15. Canola exports are 25% lower than a year ago though domestic use is 3% higher. Commercial stocks are lower than a year ago but similar to week 9 of 2014-15. Country elevator stocks of the seven major western grains were 2.611 million tonnes, about 70% of capacity and low for this time of year, reflecting reduced farmer deliveries. Western terminal stocks were 2.472 million. also on the low side. Commercial canola stocks were 1.480 million, similar to 1.470 a year ago. Western crushers were well supplied with 177,000 tonnes vs 122,000 year-ago. (10/17/2016)


Agricultural economies work in cycles, in which periods of supply tightness alternate with shortages. Prices oscillate accordingly. In general, historically, times of strong crop prices tend to occur when livestock and meat prices are low and vice versa. During the last nine months cattle and hog markets erratically eroded along with most crops. As of last week prices of both were at multi-decade lows. Chicago hog futures dropped to $43.50 last week before a slight recovery, the lowest price for a spot month since October 2009. For the July-September quarter hog futures dropped roughly 40% for the worst three-month slide since late 1973. During September alone then nearby month lost 24%. Hog futures sold off ahead of USDA's September 1 quarterly hogs and pigs report (see page 3) which showed the US herd at its largest for any quarter since 1988 and 2% higher than a year earlier, also above all expectations. October live cattle futures fell to under a dollar a pound, to $98.90, the lowest on the continuous chart since November 2010. Live cattle futures dropped 17% during the quarter and 8% during the month, while feeder cattle lost 13% during the quarter, mostly during September with a drop of 11%. Cash markets did little better. US hog prices were under $40 per cwt live weight last week, prices last seen in 2008 and 2009. The cost of production in the US after accounting for all expenses including depreciation is in the low $60s. Cash cattle in the plains feedlot states were reported as low as $102 per cwt last week, a loss of $6 in seven days and over $20 in the past month. A year ago cash cattle were around $145. Canadian cattle and hog prices are American prices adjusted for the dollar exchange rate and transportation and transaction costs. Nothing that Canadian producers do affects continental prices noticeably. Canadian livestock numbers are about 10% of the North American total, so a change of a few per cent barely registers. Chicago futures prices are the basis for forward pricing programs offered by livestock organizations including the Western Livestock Price Insurance Program, available to hog and cattle producers in the four western provinces, and the Risk Management Program (RMP) in Ontario. Both programs currently pay off for producers because price guarantees are derived from hedges put in months ago when they were higher. These plans will not be able to lock in attractive prices if futures markets are in an extended decline. Fed and feeder cattle futures are currently inverted: nearby prices are higher than for later months. In the case of fed cattle the spot month was at around $102 last week and May 2017 at $96. Hog futures showed a more normal inter-month spread with spring contracts about $20 per cwt higher. These market disasters are the result of overproduction of meat and persistently slack domestic and export disappearance. They are also the latest instance of the peculiar tendency for livestock numbers to continue to rise for some time after it is amply evident that they are too high to sustain profitable prices. (10/10/2016)


The International Grains Council in its monthly world supply-demand report for September again raised its estimate of 2016-17 wheat carryover, by 2 million tonnes to 231 million, another new record. Carryover was 218 million a year earlier and will be 14% higher than at the end of 2014-15 according to this projection. The world wheat production figure was raised by 4 million tonnes to 747 million, up 11 million from 2015-16 with consumption expected top increase by 2 million. Larger wheat crops are expected in Australia, Canada, China and Kazakhstan than a month earlier. World coarse grain production was put at 1.326 billion tonnes, up 5% from the prior year with consumption of 1.314 billion up 4% and carryover of 263 million tonnes also 4% higher. Coarse grain trade in 2016-17 is expected to drop to 168 million tonnes from 178 the year before. World soybean production will rise to 325 million tonnes from 316 million but carryover will decline by 1 million to 32 million tonnes, the lowest since 2013-14. Consumption will rise to 327 million tonnes from 320 million in 2015-16. (10/10/2016)


Statistics Canada on September 20 released the second of its three 2016 crop production reports, this one based on a computer model using satellite images and agro-climate data in conjunction with seeded acreage results from the last farmer survey. This is the second year that the September assessment has been done in this way. As in 2015 yield and production results for some crops exceeded the first 2016 estimates reported in July by wide margins. The model-based method covers Quebec, Ontario and the prairie provinces. The year's final crop report, derived from the traditional farmer survey, will be released December 6. According to the report, Canada is on the way to the second-largest harvest it has ever produced. Production of the principal cereal, oilseed and pulse crops was put at 87.90 million tonnes, up 13% from 78.06 in 2015 and second only to the all-time high of 93.59 million in 2013. The total for western Canada was 68.01 million compared to 52.80 last year and the 2013 mark of 72.63. The new total was 3% above the July estimate nationally and 8% higher for the west. The biggest change from July was in canola. The latest report put the harvest at 18.3 million tonnes, 8% or 1.30 million higher than reported in July. Average canola yield was projected at 41.1 bushes per acre, which would be a new record, a startling 26% higher than in 2015 and 8% above the July figure. Average yield was put at an amazing 45.7 bushels in Alberta (compared to 41.2 in the first report), 38.4 in Saskatchewan (36.3) and 41.9 in Manitoba (38.1). The average in the record-setting 2013 year was 40.0 bushels. Last year the July survey came up with canola production of 13.3 million tonnes. The model-based September report raised it to 14.4 million with average yield of 32.6 bushels. The final report in December increased it further to 17.23 million tonnes and 35.1 bushels per acre. That was raised a fourth time to 18.38 million tonnes when data for the July 31 grain stocks report revealed a huge discrepancy between prior production and stocks reports. Between the first and last estimates for the 2015 canola crop there was a difference of 5.1 million tonnes or 38%. While estimates for other crops were more consistent, in the case of canola the credibility of these critical reports is the lowest of any government statistical agency of any agriculturally advanced country. These massive changes over short time intervals literally make these figures valueless for logistics planning by the grain handling and transport system. Clearly something much better is urgently needed. (09/22/2016)

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