Canada Markets

Statistics Canada presented some hefty surprises in today's March Intentions of principal field crop areas release. This is their first look at seeding intentions for the 2013/14 crop year, taken from data obtained between March 25 and April 3. While data releases driven by producer surveys can often be highly suspect, this report in particular can be viewed with skepticism, given the adverse weather since the data collection took place and the potential shifts in acres due to spring planting delays. The one certainty is that actual acres will vary from the reported acres for this reason.

The largest surprise in the report is seen in the shift from canola acres to wheat. Canada's all-wheat acres were forecast at 26.618 million acres, which is 12.3% above 2012 and higher than the highest trade estimate of 25.326 ma. The largest shift in acres is seen in the spring wheat acres on the Prairies, with Saskatchewan expected to add 1.435 ma, while Alberta is forecast to add 610,000 acres and Manitoba is to add 360,000 acres.

An increase in potential wheat acres has been talked of for a few months, largely due to challenges faced in the 2012 canola crop and favorable wheat returns seen in the first half of this crop year. Canola rotations have also been pushed to the limit in many areas, another factor suggesting that wheat would also gain on canola plantings.

Durum acres were also a surprise, with acres forecast at 5.105 ma, 9.1% higher than last year and slightly higher than the highest trade estimate of 5.1 ma. Given durum's lackluster market performance this crop year and discount to wheat price, an increase in plantings of this magnitude was not expected.

For wheat to gain to this extent, something has to give, while it is a reduction in canola plantings that will allow for this expansion in wheat. Canola plantings were viewed as another surprise. While consensus in the industry was for canola acres to be lower in 2013, perhaps nobody expected an 11.1% drop to 19.133 ma. The lowest trade estimate was calling for 20 ma to be planted.

Other large shifts include an expected drop of almost 1 million acres or 21.5% in summerfallow acres along with an 18% drop in lentil acres. The 3.522 ma of forecast summerfallow acres, would reflect by far the lowest acres of summerfallow seen in the past five years. This would perhaps be easy to digest on a normal year given the response to higher crop prices and adequate moisture conditions, although this spring's weather conditions all but guarantee that this number will be higher than the current forecast.

In 2011, summerfallow acres reached 11.8 ma due to excessive moisture in eastern Saskatchewan and Manitoba. According to Bruce Burnett, Weather and Crops Specialist for the CWB who presented on this morning's conference call hosted by the Minneapolis Grain Exchange, this scenario is not expected at this time, although he suggested a more realistic target would be to hold at last year's acreage of 4.485 ma. The key will remain with what he terms "nuisance showers", as spring moisture in addition to the current snow pack may greatly impact the ability to seed some acres this spring due to flooding or saturated soils.

Conflicting data presented this morning could perhaps be seen in an increase in oat acres of 18.4% to 3.379 ma, while at the same time, a drop in barley acres of 2.2% to 7.240 ma. The increase in oat acres would perhaps suggest an early move towards shorter-season crops due to the moisture situation at the time of data collection, while one would expect producers to announce higher plantings of barley for the same reason.

The report called for an expansion of acres for Canada's row crop production, with corn acres to increase 7.6% to 3.813 ma and soybeans to increase 3.4% to 4.294 ma. The largest increases are forecast in Manitoba, with corn acres to jump from 300,000 acres to 400,000 acres, a 33% increase, while Manitoba's soybean acres are forecast to increase from 800,000 ac to 1.085 ma, an increase of 35.6%.

Given the weather developments across the Prairies since the data was taken for this report, this report may be soon forgotten as we turn our focus on the badly needed warming and drying trend needed across the Prairies in order to begin spring planting operations.

According to Burnett, the crops at risk given the current scenario are soybeans, corn, wheat, durum and canola, where the shift would see a move to shorter season crops such as oats, barley and some of the special crops. It's interesting to note that the lower-than-expected canola acres would suggest the campaign to reach a 15 million metric tonne target by 2015 may not be achieved in 2013 as has recently been forecast. While the new crop November future is currently $4.10/mt higher, the market response was delayed upon the release of the report, while current trade has backed off $6/mt from the morning's high. This could perhaps suggest that the market is struggling with this morning's data release.

One Chicago trader interviewed by Dow Jones has suggested that the Canadian wheat acreage is "outright bearish" and adds to the fact that other producing regions of the world are expected to recover from last year's challenges and build stocks globally. MGEX wheat futures for December are currently 1 1/2 cent lower although traded lower during the overnight session. The market continues to find support from the fact that spring wheat seeding on both sides of the border is delayed.

The weather over the next few weeks will provide the best indication of the seeded acre story that will determine Canada's potential this crop year, while the Preliminary Estimates of Principal Field Crop Areas to be release in June will be more valuable in capturing pending acreage shifts.

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

(AG)

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