A Look at the Long-Term Canola-Spring Wheat Futures Spread
On Monday, the United Nations' Secretary-General Antonio Guterres stated that world food supplies are in peril due to the ongoing war between Russia and Ukraine, with already tight global vegetable oil supplies and uncertainty about South American production potential adding further challenges. As a result, grain and oilseed futures markets have shown volatility and speculation has increased as to how producers will respond in the Northern Hemisphere.
Stephen Vandervalk, Alberta vice-president of the Western Canadian Wheat Growers Association, told Producer.com, "For me, I won't be changing anything and I'd say that's probably 75% of farms," when addressing the issue of crop rotations. Dr. Sylvain Charlebois, Senior Director, Agri-Food Analytics Lab at Dalhousie University, widely known as the Food Professor on Twitter, found another way to present it, stating on Twitter "Good news. With higher prices, hearing 10% to 20% of Prairie farmers will plant more wheat this year than first planned."
The attached chart shows the continuous active canola/spring wheat spread, measured in Canadian dollars/metric ton, highlighting one of the challenges the country faces in boosting wheat production. The March 15 close is $598.27/metric ton (mt), while this monthly chart shows the March 2021 close at $435.63/mt. The five-year average for the March close is $221.97/mt and the 10-year average is $254.14/mt.
This does not mean wall-to-wall canola being seeded, with many decisions made months ago. At the same time, last-minute decisions will not necessarily favour more wheat acres with potential seen across a number of markets.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow him on Twitter @Cliff Jamieson
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