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Summerfallow Acres Expected To Shrink

Canola futures on the ICE Futures Canada trading platform regained ground during the holiday-shortened week ending April 21. Much of the upturn in values reflected the advances experienced by CBOT (Chicago Board of Trade) soybean and soyoil prices. Concerns about the weather in Western Canada and its impact on seeding operations also influenced some of the price strength.

The upside in canola was kept in check by the continued upswing in the value of the Canadian dollar and the resulting absence of fresh demand for canola in either old-or new-crop months. The increased availability of cheap soybeans from South America also restricted any major push to the upside in prices.

There was also some position evening ahead of the Easter long holiday weekend and the April 26 seeding intentions report scheduled to be released by Statistics Canada.

The inactivity in western barley contracts continued this week with absolutely no demand coming forward for the commodity. Only the July and October contracts have any open interest. Cash barley values, however, again managed to move to firmer ground on the heels of increased demand from the livestock sector. The uptrend in CBOT corn futures also influenced some of the strength in the cash barley market in Western Canada.

CBOT soybean futures pushed upwards during the week ended April 21 with concerns about tight old-crop supplies stimulating some of the support. Adding to the upward momentum in CBOT soybeans was the unexpected downswing in the value of the U.S. dollar. Some chart-based speculative demand helped to fuel some of the price advances, as did the general strength displayed by global crude oil futures.

The ongoing soybean harvest in Brazil and Argentina, and expectations for those crops to come in much larger than anticipated, tempered some of the buying enthusiasm in CBOT soybeans. The drop-off in demand from China also restricted the upside in the commodity.

Old-crop corn futures at the CBOT came under some downward pressure while new-crop months managed to push to higher ground. The taking of profits by a variety of individuals prompted the weakness in the nearby May and July futures, with the absence of demand from the export and domestic sectors adding to the bearish price atmosphere.

New-crop corn futures managed to move higher responding to the weather outlooks, which called for poor planting conditions. The upside in new-crop contracts was offset by sentiment that a window of opportunity for seeding operations could translate into much higher-than-anticipated corn area being planted in the U.S.

Wheat futures at the CBOT, KCBT (Kansas City Board of Trade) and MGEX (Minneapolis Grain Exchange) all exhibited some good strength during the week ended April 21. Support for wheat at all three exchanges came from the weather. Dry conditions continue to plague the U.S. winter wheat areas, with concern that yields will be down sharply as a result. In the spring wheat-growing areas of the northern- tier U.S. states, excessively wet conditions and flooding have caused some concern about significant delays in planting the crop. Weather issues have also been hurting wheat production in other major growing regions of the world, which in turn helped to augment the upward price action in the wheat futures market.

The big topic dominating the market in the U.S. and Canada is acreage. There are all kinds of ideas circulating in both countries but ultimately the weather dictates what goes into the ground. Statistics Canada will release its first look at what producers in Canada are planning on seeding this spring on April 26.


In Western Canada, private individuals are betting hard that the area left as summerfallow will decline big time this spring, with canola, wheat, flax and oats all seeing some sizable increases in seeded area as a result. Some of the increase will also come at the expense of pulse and specialty crops, given that values for those have failed to garner much attention from producers.

There are ideas that when the price incentive is combined with the solid moisture conditions in Western Canada, the area to summerfallow will decline. However, that is based on the assumption the weather cooperates through to the end of May.

Cool and wet conditions would tend to favour canola. Based on the price for the commodity all winter long, it will be one of the main choices for producers.

Canola area in Canada has been pegged at 17 million acres if conditions are less than favourable to as high as 19.3 million if perfect conditions exist. That compares with 2010 seeded canola area of 16.82 million acres.

The fact that world wheat values have caught up in terms of global corn and soybean prices was seen bumping up all wheat area in Canada this spring.

All wheat plantings in Canada this spring were likely to be in the 23.29-million-to 25-million-acre range. This would surpass the 21.06 million seeded in 2010.

Producers in Western Canada were also expected to work oats and flaxseed into the rotation this spring.

Oats area has been projected in the 2.5-million-to 3.81-million-acre range, which compares with the 2.91 million seeded last spring. Flaxseed area was seen coming in above one million acres and as high as 1.5 million. In 2010, 920,000 acres of flaxseed were put into the ground.

Meanwhile, in the U.S., the possibility of corn area coming in above early expectations is definitely very strong. Sure, there have been lots of complaints about the weather and the potential for delays in seeding the U.S. corn crop in day-today comments from the industry. However, what has not gone unnoticed is the fact that the per-acre net revenue advantage of corn is around US$207. While that’s down from the $245 seen earlier in the week, that is still a historically high value for corn over soybeans.

As a result, there are ideas that U.S. soybean area could be at least one million to two million acres less than the drop already being anticipated in U.S. soybeans by the industry this spring.

Dwayne Klassen and Phil Franz-Warkentin write for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.


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