Canada Markets

My first trip back to Saskatoon's Crop Production Show in many years was a most interesting one, given the discussions taking place regarding the challenges faced in moving the bumper 2013/14 crop and also stressful decisions of what to plant (or should I say what will move?) in the upcoming crop year.

While the challenges to producers are obvious, the domino effect across the entire industry is also evident as the decision-making process is in low gear. This compresses the timeline available for the entire chain of product and service providers who supply seed, crop chemical, fertilizer, or perhaps services such as seed cleaning or custom hauling.

Fertilizer dealers suggest the amount of product booked is well behind previous years; there's concern that product will run out or that logistics will not allow for product to be placed in time before spring seeding. At the same time, producers struggle to determine what to plant, given the challenging outlook faced for many commodities. This leaves them unable to book inputs until their cropping plans are determined. Besides, the fertilizer bins remain full of grain in many cases and do not allow for delivery of new product.

One special crop contractor released a favorable contracting program only to be overwhelmed with responses and forced to terminate the program much quicker than expected. Fears mount among the players involved with the smaller crops as the possibility exists that growers, currently disillusioned with the prospects for wheat and canola, swing to smaller crops such as pulses, which will lead to overproduction of these crops next year. Buyers will be well aware of this, which may lead to a lack of price signals moving forward. Buyers will be comfortable with Canada's carryover supplies, along with the fact that more will be produced.

A look at Saskatchewan Agriculture's Crop Planning Guide 2014 highlights the challenges in making cropping decisions for the upcoming year. While this work does not represent provincial average costs and is simply a snapshot in time given a set of assumptions, it does give producers a starting point that can be adjusted by one's own estimates.

In the dark brown soil zone, the return over total rotational expenses for summerfallow crops was negative for six of the eight crops listed, ranging from a 17 cents/acre loss for durum to a $71.53/acre loss for oats. Positive results were indicated for canola at $19.27/acre, as well as flax at $49.69/acre. Across all three soil zones, flax posed the best opportunity on summerfallow acres. Looking at stubble seeded crops in the dark brown soil zone, green edible peas achieved the highest potential return over rotational expenses at $105.04/acre, which is the highest return reported from all cropping options across the province.

Planning becomes more of a leap of faith when one considers that market prices from early December were used, some of which have since fallen. As well, at a glance, some of the fertilizer prices reported have since gone up, to further squeeze potential returns.

2014 will see producers increase their focus on delivery opportunities, as the 2013/14 crop will continue to weigh on the system for this calendar year.

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

(ES)

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