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JANUARY 5, 2012 | WWW.PRODUCER.COM | THE WESTERN PRODUCER
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WHEAT | MARKETING
Will farmers hold crop into new year? Attractive new crop price | Open market bids for 2012-13 top current wheat board price offerings BY SEAN PRATT SASKATOON NEWSROOM
Farmers have a strong incentive to hold old crop wheat over into the new crop year, says a risk management specialist, which will create marketing and logistical headaches. John De Pape, who publishes the CWB Monitor online commentary, said Viterra was bidding $7.40 per bushel for No. 1 CWRS 13.5 wheat new crop delivery in Saskatchewan on the day following royal assent of Bill C-18. The Canadian Wheat Board’s Pool Return Outlook for the same wheat is $6.63 per bu. basis Saskatchewan and its fixed price contract for that wheat was $6.19 per bu. as of Dec. 16. “The price that Viterra offered gives a large incentive to sell old crop wheat into a new crop position,” said De Pape in a recent commentary. A grower could receive an additional 77 cents per bu. over selling
into the 2011-12 pool and $1.21 per bu. over the fixed price contract. “Under the current circumstances, (the CWB) could lose a lot of grain into the new crop,” said De Pape in an interview. If that happened, the CWB would have a tough time meeting customer needs and there could be “burdensome demand” on the grain handling system early next crop year. De Pape expects the CWB will respond with some mechanism that provides farmers with attractive prices to prevent that situation. “They would probably be wise to close the pool early and start offering GDC’s (guaranteed delivery contracts) or cash contracts of some sort,” he said. C WB spokesperson Maureen Fitzhenry said it remains to be seen whether farmers will carry over much of their 2011 wheat crop into the 2012-13 marketing year. “There will be some farmers who
Farmers might hold off wheat deliveries if new crop bids prove too attractive to ignore. | FILE PHOTO may feel that’s a good option for them and will be in a position to do that and others who will not,” she said. “We are proceeding as usual with marketing the 2011-12 crop in the way it has traditionally been done and we expect that farmers will continue to participate in our current
year program.” However, the CWB doesn’t plan to offer Series B and C contracts in 201112. Those contracts usually have to be signed by Jan. 31 and May 31 respectively. “The expectation is we won’t have B and C because of moving into the
more competitive environment,” said Fitzhenry. “We had very good sign-up for Series A and expect that (farmers) will be honouring their contract commitments.” De Pape thinks the lack of Series B and C contracts indicates that the CWB anticipates it will have a struggle competing with the open market in the last half of the crop year. “I fully suspect that the new board will do something to keep business going for the latter part of the year.” One option might be for the wheat board to move to an open market sooner than Aug. 1, he said. “I think they could very easily do that on barley. Maybe not so much malt barley but certainly feed barley.” Fitzhenry said the board is working on the details of new programs for 2012-13 that it will announce soon. She wouldn’t provide hints of what is coming, other than that the programs will be competitive with what grain companies are offering and may not resemble what the wheat board has offered in the past. “Everything will be very different.” access=subscriber section=markets,none,none
CROP OUTLOOK | UKRAINE
Ukraine barley, canola trouble may spur Canadian exports BY SEAN PRATT SASKATOON NEWSROOM
There has been plenty of talk in grain markets about how dismal growing conditions could reduce Ukraine’s 2012-13 winter wheat crop. However, there has been little chatter about two other winter crops of interest to Canadian growers: rapeseed and barley. Winter grain comprises half of Ukraine’s seeded area, and about a third of the crop is entering winter in weak condition because of “unusually and persistently” dry weather, according to a recent Commodity Intelligence Report prepared by the U.S. Department of Agriculture. Fall precipitation was the lowest in recent history, resulting in inadequate surface moisture levels and the
expectation for extensive winterkill. Ukraine’s agriculture ministry said Dec. 26 that only 80 percent of fall planted crops had germinated compared to 93 percent last year at the same time. Of the crops that had sprouted, 34 percent was in poor condition and the rest was satisfactory to good. The government thinks 3.7 to 4.9 million acres of winter crops will need to be replanted in the spring, but the full extent of damage won’t be known until the end of winter. “Rape is the winter crop most susceptible to winter damage, and winterkill is significantly higher for rape than for wheat and other grains,” said the USDA. Growers planted an estimated 2.25 million acres of rapeseed, down 19 percent from the fall of 2010.
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GREG KOSTAL KOSTAL AG CONSULTING
Greg Kostal, president of Kostal Ag Consulting, said Ukraine exports all the rapeseed it grows, and any disruption could be an opportunity for Canadian canola. “Europe would need to import more canola or more canola oil to make up the difference,” he said. An increase in spring planting could make up for some of the lost winter rapeseed, but the spring rapeseed crop is typically much smaller, so a complete recovery is unlikely.
Kostal is particularly intrigued about what will happen with Ukraine’s winter barley crop, which accounted for more than 30 percent of the country’s nine million tonnes of barley production in 2010-11. Ukraine has been the world’s largest barley exporter in four of the last five years, accounting for an average of 4.4 million tonnes of the 17 million in annual global barley trade. “If you have any hiccup in that part of the world, it has a more pronounced impact on world price,” said Kostal. “It’s sure something to watch.” Markets will also be monitoring how Ukrainian farmers respond in the spring. Barley has traditionally been the crop used for spring reseeding if there has been winterkill, but Ukrainian agriculture officials and private
commodity analysts believe corn and soybeans could make up a large portion of the reseeded area in 2012. Kostal will also be following how the Ukrainian government responds to the potential grain shortfall. In the past, it has relied on export bans and tariffs to keep supplies at home, which could result in a decline in what Ukraine has to export. The other crop of interest to Canad i a n g ro w e r s i s w h e a t , w h i c h accounted for 81 percent of 2012-13 winter crop plantings, or an estimated 16.1 million acres. However, winter wheat is a remarkably resilient crop that can recover if spring growing conditions are favourable. As well, plenty of wheat is in storage around the world, so a supply shortage in Ukraine might not have a dramatic impact on global wheat prices. access=subscriber section=markets,none,none