Canada Markets

Saskatchewan Agriculture's Crop Planning Guide 2019 provides a starting point for crop planning decisions based on a myriad of assumptions, although the report is clear that actual costs and yield potential will vary from farm to farm across the province while market prices are based on a snapshot in time and volatility can be assured.

Of the data presented for the crops selected for the attached graphic, the following consistencies are noted based on assumptions made:

1) Positive returns across all three soil zones were noted for spring wheat, durum (two soil zones only), flax and canola.

2) Negative returns were consistent across all three soil zones for malt barley, red lentils, and yellow peas.

Input costs for most crops are being viewed as higher relative to 2018, although varies widely by crop. Looking at the dark brown soil zone only, variable costs for large green lentils are estimated 18.3% lower, while 2.2% lower for spring wheat and 13.6% higher for canola.

While potential returns are a snapshot in time, based partly on the government's November Farm Income Survey, the government warns they can be quickly outdated. One price that jumps out is an $11.59/bushel or $511/metric ton on-farm price for canola. Since September, the November 2019 contract has struggled to hold above $500/mt, with Wednesday's close at $494.30/mt, while at a glance, current basis for October delivery ranges from $25/mt to almost $50/mt under the November contract across a number of locations in Saskatchewan. With a potential for a year-over-year increase in canola ending stocks, this return could prove to be well over-rated.

Farm Credit Canada's 2019 Ag Outlook was perhaps more conservative. Spring wheat margins are expected to be at break-even or slightly above, corn profitability is expected to be slightly above break-even, both canola and soybean crops are expected to achieve break-even to positive margins and pulses are expected to face pressure this crop year.

Agriculture and Agri-Food Canada should release their first supply and demand and price projections for the 2019-20 crop sometime in the next week, but should also remain conservative, given the many uncertainties facing the market.

On Wednesday, a Rabobank analyst tweeted from a conference, "The No. 1 rule of a financially savvy operation: know your true cost of production and make decisions based on those costs." To add to this, take profits when you can.

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DTN 360 Poll

This week's poll asks what crop you think shows the best chances for a positive return on your farm or in your area. You can weigh in with your thoughts to this poll located on the lower right of your DTN Canada website.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow him on Twitter @CliffJamieson

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