Low prices, high global supply and a near-record high on U.S. wheat carry-over have some Manitoba producers scratching their heads on what to put into the ground.
“If you look at almost anything, nothing really looks overly good, in my opinion anyway,” Doug Heaman, a Virden seed grower and board member of the Manitoba Seed Growers Association, said. “The prices have all come down on most commodities. Hopefully it can only get better.”
Western red spring wheat sits at $6.26 net cash per bushel in Winnipeg, according to Manitoba Agriculture, as the bad news piled up in report after report.
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On April 11, the U.S. Department of Agriculture raised its U.S. wheat carry-over forecast by three per cent to 1.159 billion bushels as of June 1, 2017.
An April 27 report by the International Grains Council forecast global wheat carry-over would hit 240 million tons by the end of the 2016-17 season. The same report said average world wheat export values had hit a four-month low.
The Food and Agriculture Organization of the United Nations, meanwhile, has said it expects global wheat production to fall 2.7 per cent to 740 million tonnes in 2017, at least partially because of lowered acres in Australia, Canada and the U.S.
Bruce Burnett, director of markets and weather information at Glacier FarmMedia, noted that long-term wheat prices are unlikely to improve dramatically, suppressed as they are by global supply.
“We have gone through periods like this where some crops have not been profitable in the past and farmers, because they have to produce or plant something on that land, the best of those options sort of gets planted and I think this is probably something that’s going to happen this year for cereal crops because there is really no cereal crop that stands out as a really big money-maker,” he said.
Interestingly, the lagging market has not impacted overall wheat acres nationwide, according to March 2017 seeding estimates released by Statistics Canada. Overall wheat acres are expected to remain steady at 23.2 million acres, with Alberta’s 10 per cent increase to 7.4 million acres offset by 2.7 per cent less wheat in Saskatchewan and a nine per cent drop in Manitoba to 2.7 million acres.
Burnett said he was surprised to see wheat acres largely unchanged, given the currently unfriendly market. He speculated, however, that some acres in Saskatchewan and Alberta had switched from durum to red spring wheat, a reaction to the fusarium that plagued durum crops last year.
“In Saskatchewan and Alberta, especially in Saskatchewan last year as well as a couple of previous years as well, they’ve had increasing problems with fusarium in the durum and that sort of came to a crescendo in last year’s growing season,” he said.
In December 2016, Canadian National Millers Association president Gordon Harrison told the Canadian Workshop on Fusarium Head Blight that 2016 spring wheat damage was between 1.5 and five times worse than previous years.
Durum is expected to fall 18.8 per cent in Saskatchewan to 4.1 million acres and 8.5 per cent in Alberta to 1.1 million acres.
Looking for alternatives
While outlooks for soybeans and canola remain more positive (Winnipeg net cash returns sit at $10.56 per bushel for soybeans and $11.52 per bushel of canola as of April 21, according to Manitoba Agriculture), rotations have limited planting flexibility.
Manitoba is on track to plant a record number of soybeans in 2017 according to March forecasts, with acres expected to rise a meteoric 34.6 per cent to 2.2 million acres. Canola acres, meanwhile, are expected to fall slightly but still rank as the top crop in the province at 3.1 million acres.
“If you shove in more pulses and more canola, then economics would dictate that you do that,” Burnett said. “But really, there’s a limit to that (which) you can do in terms of your rotations, especially after last year when in Western Canada we planted record levels of pulses as well as a fairly large canola area. The amount of acreage that can shift is somewhat limited.”
With a weak wheat market on the horizon, Manitoba market analysts are expecting a shift to oats.
In Manitoba, acres are expected to rise 46.6 per cent to 550,000 acres, well over the 20.6 per cent increase expected nationally.
As of April 21, oat prices remained comparatively strong at $3.01 farmer net cash per bushel, according to Manitoba Agriculture.
While Heaman says he has not spoken with other seed growers, oats have been the one exception to his otherwise slow sales.
“By the amount of oat seed that we’ve sold already, there’s a lot of oats,” he said. “It looks like there could be a lot of oats going in.”
Burnett also pointed to oats as a popular replacement for wheat, but noted that a large-scale shift in acres might have the unintended effect of glutting the oat market.
“It’s very easy to have so many oats around that you can pull prices down significantly, because it’s essentially a North American market,” he said.
Other, smaller markets in pulses and special crops might also risk a glut should wheat acres shift, Burnett said, although he identified oats as the largest risk area.
Barley, meanwhile, sits at $3.29 per bushel net cash in Winnipeg. Acres are expected to fall eight per cent nationally and 11.1 per cent in Manitoba.
“Although the barley price for malting remains reasonable, feed barley prices are very poor. Farmers have decided that may not be worth the risk this year,” Burnett said.
With challenges on the horizon for crop alternatives, Burnett advised that farmers may still want to seed wheat, despite market circumstances.
“If you look at it from a logical perspective right now, sticking with wheat in the cereal acres is probably the thing to do,” Burnett said, but added farmers need to have a realistic view of the market they’re planting into, and be prepared to capture any pricing opportunities.
“When you see, for whatever reason, the market takes off and gives you an increase of 25 or 50 cents a bushel, in U.S. dollars, those should probably be viewed as pricing opportunities,” Burnett said.
Burnett also noted that pricing and profit will rely heavily on grain quality, making pre-pricing forecasts difficult.