Canada Markets

Australia's ABARES released the Australian Crop Report along with global and domestic crop forecasts through 2024-25. Its forecast calls for higher world prices for both wheat and canola, with producers to seed more acres to both crops.

ABARES has estimated the canola indicator price for 2020-21 at $379/metric ton USD, up 3% or $11/mt USD from the current crop year, based on the FOB Vancouver price. This compares to the most recent February AAFC forecasts, which show the range of prices for 2020-21 based on track Vancouver trade up $25/mt to up $35/mt, to $480 to $520/mt. ABARES sees the FOB Vancouver price rising sharply to match competing oilseeds when Canada and China come to terms in trade, while assuming the 2022-23 crop year for this to happen.

ABARES has estimated the world wheat indicator price, based on No. 2 hard red winter wheat FOB the Gulf of Mexico at $225 USD for 2020-21, a modest $5/mt or 2.3% increase from the current crop year. This compares to AAFC's current range of new crop estimates of $220 to $250/mt for 2020-21, both up $10/mt from the current crop year and based on a No. 1 CWRS 13.5% protein average Saskatchewan cash price.

Current forecasts point to Australian producers increasing acres planted to wheat by 18.7% or 4.680 million acres, while acres dedicated to canola are forecast to rise by 555,975 acres or 12.5%.

Current AAFC estimates point to a modest increase in wheat acres planted in Canada in 2020-21 of less than 1%, rising for the fifth straight year. Acres seeded to canola are forecast to fall by 1.6% in 2020-21, for the third straight annual drop.

The attached chart shows the trend in Canada's seeded acres for canola (grey bars), along with the November canola/December spring wheat spread reported for the month of March on the month spread chart. From 2000 to 2012, the Canadian dollar spread reported for the month of March increased from a low of $87.91/mt (canola futures over spring wheat futures) in 2001 to a high of $274.02/mt in 2012, driving acres from a low of 9.456 million acres in 2001 to 22.176 million in 2012.

Since 2013, the trend in both seeded acres and the canola-HRS spread has been mostly sideways, while the spread is seen less predictable in terms of how producers will respond. Of these seven years, the weakening spread led to lower canola acres seeded in three of the seven years. At the same time, seeded acres moved opposite to the move seen in the spread in four of the seven years. The current spread based on Nov20 canola/Dec20 wheat is calculated at $204.50/mt, up from $192.86/mt at this time last year.

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

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(ES)

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