Canada Markets

Thursday's USDA report indicates that growers to the south of the Canadian Prairies have shown far less interest in growing wheat, while they will plant more durum, corn and soybeans and diversify further into pulse crops.

Consistent with the trends seen across the country, the largest swings on an acreage basis seen in Montana's planted acreage are seen in wheat, with a 150,000 or 6.4% reduction in acres estimated to be seeded to winter wheat and an expected 450,000 or 17.6% reduction in spring wheat acres to 2.1 million acres. The large cut in spring wheat acres is the second largest acreage reduction made across the 10 States listed next to North Dakota, while the 17.6% cut exceeds the 14% national average.

Montana's durum acres are expected to increase 1.6% to 630,000 acres, consistent with the 3% increase estimated for the country. As seen on the attached chart, the largest percentage move across the selected crops for these two States is a 113% jump in lentil acres in Montana, from 235,000 acres to an expected 500,000 acres. This year's record prices and profit potential are an incentive to replace almost one-half of the lost wheat acres.

Planting intentions for North Dakota can be summarized by a shift from crops such as wheat, barley, flax and dried beans to row crops, durum and pulse crops.

The largest acreage change seen in North Dakota's data is a one million acre cut in spring wheat acres to 5.7 ma, the largest cut seen in any state listed. The year-over-year percent change is a drop of 14.9%, just slightly more than the USDA data which showed a 14% cut overall across the country. Another sharp cut is a 28.6% drop in barley acres to 800,000 acres which makes up the lion's share of the overall 12% cut seen across the U.S. industry.

While durum acres are expected to be 3% higher across the U.S., the only class of wheat expected to see acres increase year over year, North Dakota, the largest producer, is expected to see aces increase 10% to 1.2 ma. Durum's premium to spring wheat as well as rumblings in the U.S. that Canadian supplies are tightening may support growth in durum acres.

The expansion of the row crops into northern States is evident in data reported for North Dakota. While U.S. corn acres were reported to grow by 6% overall, North Dakota's acres are estimated to grow by 24% or 650,000 acres to 3.4 ma, tied with Kansas for the largest year-over-year acreage growth. While U.S. soybean growers are expected to trim total acres by 1%, North Dakota acres are expected to increase acres by 2.6% to 5.9 ma, matching the record set in 2014.

North Dakota canola acres are expected to grow by 2.8% or 40,000 acres to 1.450 ma, the largest growth seen in any single state, although overall U.S. acres are forecast down 2%, with a 50,000 cut seen in Oklahoma. Overall acres seeded to flax are expected to fall 16% in 2016 across the U.S., with North Dakota acres expected to fall close to the National average, down 17% to 340,000 acres.

As seen in the attached chart, pulse crop interest is also growing in North Dakota. The state's lentil acres are expected to jump 46% to 240,000 acres, while dry pea acres are expected to increase 66% to 640,000 acres. Pulse crop returns relative to cereals has contributed to this growth, while efforts such as the formation of the "Protein Highway" which creates a joint-effort between three Canadian provinces and six U.S. States to produce protein for the world likely to see this trend continue.

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