Record Crop Production in Canada to Affect Prices?

Wheat-haHula-ISRAEL2Statistics Canada estimates record-large crops of wheat and canola despite a late start to spring seeding. Statistics Canada released their November Production of Principal Field Crops report on December 4, and Canadian wheat producers reported record wheat production of 37.5 million tons, up 38 percent from 2012 numbers. Bruce Barnett, a market and weather analyst with the Canadian Wheat Board says, “The market will view these numbers negatively. Most of the increase in wheat production will have to flow to carryout.”

John De Pape of Farmers Advanced Risk Management Co (FARMCo) says, “The crop size will pressure prices and stress the whole grain marketing system as it tries to clear this huge crop. This pressure on the market will be characterized a number of ways. Beyond the obvious pressure on prices, it will demonstrate an increased need for good, timely market information on stocks, sales, movement, and prices.”

“The silver lining in this market scenario where an increased amount of grain will be stored likely into the new crop year,” continues De Pape, “is that the markets will be poised to pay to store grain through futures carrying charges and possible better basis in forward positions. The challenge among farmers will be to learn how to capture these storage premiums effectively.”

Devendra P. Singh, an institutional specialist in agriculture research, explains, “The issue of increase in the production of wheat by 38 percent is not likely to have an effect on market prices, but other factors will play a role. These are export figures, production figures of other food crops, demand of industries using wheat and export of wheat products, production figures of wheat in other countries- China, India, USA, Australia, etc.- and demand of Canadian wheat quality abroad.”

 

 

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