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Mixed fortunes for Canadian farmers…

Canadian farmers can’t take a trick this year…

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Canadian farmers produced the smallest canola crop in four years on the back of lower plantings and unusually wet autumn weather that left crops sitting in the paddock unharvested, the latest blow in a miserable year which started with the Chinese ban on canola imports.

The heavy snow and rain during harvest across the Canadian Prairies have left around 810,000 hectares of canola buried under snow until spring.

Crops that remain in the fields over the winter are subject to wildlife damage and moisture spoilage, but some of it can usually be salvaged and marketed at a discount in the spring. However, the need to harvest the previous crop once fields dry can seriously delay the commencement of the spring planting program in affected districts.

Statistics Canada released their Production of Principal Field Crops report last Friday the more than 700,000mt was dropped off the countries 2019/20 canola production. Estimated production came in at 18.65 million metric tonne (MMT), down 8.3 per cent on last season, and 2.9 per cent below the five-year average.

The total harvested area fell 8.8 per cent to 8.34 million hectares but yields did rise by 0.5 per cent compared to the 2018/19 season to 2.24 metric tonne per hectare.

Canada is the world’s biggest producer and exporter of canola, and the crop has long been regarded as the most profitable for the Canadian farmer. China, Japan and Mexico have traditionally been the key export destinations, with the seed primarily used for the production of cooking grade vegetable oil and canola meal for stockfeed rations.

In the absence of their largest export customer, demand has been falling, inventories have been rising, and prices have been lower as a result. Nonetheless, Canadian farmers are adjusting to the reality of life without China by working on cutting costs, improving efficiency and modifying crop rotations to decrease their reliance on canola.

As of November 24, Canadian canola exports had decreased by 9.5 per cent compared to a year earlier. But the decline is much less than many had feared and is a reflection of the success in finding alternative consumers for the surplus export stocks. Several European countries are importing more Canadian canola for biofuel production, and shipments to the Middle East have also picked up in recent months.

In terms of wheat, Statistics Canada estimated current season production at 32.3MMT, a minor reduction of 140,000 compared to their previous all wheat production forecast. This put production around 0.5 per cent higher than last season and 6.5 per cent above the five-year average.

While all wheat classes were revised lower compared to the September estimates, it was a year-on-year rebound in spring wheat production that drove wheat production higher overall.

Spring wheat production is forecast to rise by 7.2 per cent to 25.67MMT, the largest spring wheat crop in six years. The harvested area is estimated to be 6.5 per cent higher than last year, and the average yield of 3.48 metric tonne per hectare is slightly higher than the 2018 harvest.

Canada western red spring makes up 86.4 per cent of all spring wheat produced, up from 83.7 per cent in 2018/19, well above both the five and ten-year averages. Durum production was estimated to fall by 13.4 per cent to 4.98MMT, with a year-on-year increase in yield unable to offset a 22.6 per cent decline in the harvested area.

Barley estimates were revised higher compared to those released earlier in the northern hemisphere autumn. Statistics Canada put total production at 10.38MMT, an increase of 23.9 per cent over the 2018 number and 28.2 per cent above the five-year average. The increase was due to harvested area, up by 13.9 per cent, and yields, which rose by nearly 9 per cent to 3.81metric tonnes per hectare.

Agriculture and Agri-Food Canada are suggesting that year-on-year barley stocks will double, quite a bearish scenario, particularly for the Canadian farmer. Up to the end of November total barley exports for the current marketing year sat just north of 600,000 metric tonne, 4.4 per cent behind the 2018/19 pace. With the world well supplied for malting barley requirements, feed channels would appear to be the best hope of boosting exports.

Even the humble oat, now considered a ‘superfood’ in eateries across the globe, benefitted from the swing away from canola with the crop 21 per cent up on last year, at 4.16MMT, and 23.7 per cent above the five-year average.

Statistics Canada revised both the soybean and corn numbers lower compared to their September estimates. Soybean production came in at 6.05MMT, down 18.5 per cent from 2018 and 11.7 per cent below the five-year average. The corn crop is forecast at 13.40MMT, down 3.5 per cent from 2018, just below the five-year average. 

Unlike Australia, where a dry season has decimated national grain production, in Canada the wet has made 2019 a year to forget. Not only has it severely hampered the winter crop harvest, summer crop farmers are calling it the ugly trifecta. Late planting, far too much rain and snow through harvest and high-moisture grain meaning substantial drying costs will be incurred to bring it down to a market acceptable level. On top of the unharvested winter crop area, the adverse autumn weather has left many farmers facing unharvested corn paddocks into December and possibly beyond. Of all the issues the Canadian farmer has faced this year corn left standing in the paddock deep into the winter is perhaps the one they dread most.

Mixed fortunes for Canadian farmers…

Mixed fortunes for Canadian farmers…

Posted by | Weekly Commentary | No Comments

The first official Canadian crop estimates for the 2019/20 crop year were released last Wednesday by Statistics Canada, the national statistical office. Surveys of more than 13,100 farmers were conducted between July 4 and August 5 and farmers were asked to report their estimated area, yield and production of grains, oilseeds and special crops.

Adverse seasonal conditions have been blamed for a fall in production of wheat, soybeans and corn with either wet and cold weather in the east, or hot and dry weather in the west, taking its toll on anticipated production.

Total wheat production is expected to fall by 2.9 per cent, or 950,000 metric tonne, to 31.25 million metric tonne (MMT) compared to the 2018/19 season. However, this still comes in at 880,000 metric tonne, or 2.9 per cent higher than the five-year average. The fall is on the back of a 1.1 per cent decline in harvested area and a 2.1 per cent decline in anticipated yield to 47.5 bushels per acre (3.19 metric tonne per hectare).

Breaking the total wheat number down, spring wheat production is expected to be the largest crop in six years, up 1.17MMT (4.9 per cent) to 25.11MMT. Countering that increase is a 23.1 per cent decline in Durum wheat production to 4.42MMT and a 31.4 per cent fall in winter wheat production to 1.72MMT.

At 18.45MMT, Canada’s canola production is expected to be the lowest in four years and 3.9 per cent below the five-year average. This is a fall of 9.3 per cent, or 1.89MMT, compared to last season and was almost 1MMT below trade expectations. The main contributor to this drop was an 8.2 per cent tumble in seeded acres as farmers reacted to the ongoing trade dispute with China.

In the row crop sector, soybean yields are expected to fall by 5.4 per cent to 40.2 bushels per acre (2.70 metric tonne per hectare). The harvest area is expected to decline by 9.7 per cent to 2.3 million hectares leading to a production decline of 14.6 per cent to around 6.2MMT.

An anticipated increase in the corn area of 1.5 million hectares will not be enough to counter a 4.1 per cent decrease in estimated yield. Final production is forecast at 13.6MMT, a year-on-year reduction of 2 per cent and the lowest in five years. The culprit was cold, wet weather across the major producing areas at seeding time leading to a delayed planting and poor germination.

The big winner out of the decreased canola area is barley, with Statistics Canada expecting a 12.8% increase in harvested area to 2.71 million hectares. At this stage in the season, barley yields are estimated to average 66.4 bushels per acre (3.57 metric tonne per hectare), 2.2 per cent higher than last season. The upshot is a substantial increase in production this season to 9.64MMT, the highest since 2013.

Oats is a minnow in the global cereal picture. Nonetheless, Canada is a significant producer. Production is forecast to increase to 3.95MMT based on a 15.2 per cent increase in the area expected to be carried through to harvest. The actual seeded area came in at 1.46 million hectares, but only 79.4 per cent of the crop will be harvested according to Statistics Canada, with the balance either grazed out or cut for hay and silage.

It has been a grim year for Canadian farmers, as canola exports bore the brunt of the trade stoush with China. Earlier this year China halted imports of Canadian canola, citing pests in some shipments. Canada is the number one producer and exporter of canola in the world. Since the turn of the century, China has grown from a relatively minor market for canola to the world’s biggest importer.

The importance of canola to Canadian agriculture has expanded significantly over this same period. In recent years, China has been the biggest buyer of Canadian seed, purchasing up to 40 per cent of the crop. According to Statistics Canada, canola production contributes more than $26 billion to the Canadian economy each year.

The wheat story is the complete opposite to canola, with Canada’s share of total Chinese imports increasing to more than 60 per cent in the 2018/19 season, compared to just 32 per cent in the previous twelve-month period. At 1.9MMT, the total export volume to China was almost double the previous season and the highest since the 2004/05 marketing year.

Fortunately, the spike in wheat sales is partially compensating producers for the lower canola sales with the export gains coming at the expense of the United States (US) and Australia. US wheat exports to China have plummeted over the last twelve months after China imposed a 25 per cent tariff on US wheat.

In Australia, the drought on the east coast last year led to a substantial decrease in the exportable surplus and pushed Australian values above export parity. This resulted in decreased exports overall and a reduction in Chinese market share.

The weather has traditionally been the most significant influence on global grain production. Farmers across the world accept that it will always play the lead role in their fight for sustainability and profitability.

However, we have now entered a new era of tariff and no-tariff trade barriers. These will continue to significantly impact traditional international grain trade flows as Canadian farmers have discovered to their chagrin in 2019.

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