Canada Markets

There are many factors taken into account when determining the cropping plan in any given year. The case of canola, which has gained in seeded acreage in each of the last six years, from 13.055 million acres in 2005 to 21.531 ma in 2012, is no exception.

Factors may include issues surrounding relative input costs, relative returns, issues surrounding rotations and relative risk factors surrounding the various cropping choices. Weather patterns and environmental factors can also play a role. In 2012, wheat performed better in many areas due to the crop's ability to deal with the climatic issues that dealt blows to some areas, largely in the way of excess moisture.

It will be difficult for the canola industry to face a potential decline in canola acres in the 2013/14 crop year, with some forecasts suggesting canola acres could be 7% to 10% lower, a shift that may see increased acreage of wheat.

The attached chart shows how the canola/wheat spread (MGEX) has been gaining since 2008, as indicated by the blue uptrend line drawn on the lower study. This spread ranged from a February low of $67.79/mt in February of 2008, reached a high of $367.04/mt in April 2012 and has settled at $327.40/mt as of today. While below the highs, the uptrend line is still very much intact and clearly shows the trend of the price advantage of canola over wheat.

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

(AG)

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