Situation report – July 2009

View the most recent version.

US crop area and production

The National Agriculture Statistics Service (NASS), an agency of the US Department of Agriculture (USDA), released its latest acreage report on June 30^th. Corn planted area was estimated at 87.0 million acres, up 1.0% from last year. This was the second highest planted area since 1946, behind 2007. US farmers reported that 97.0% of the intended corn acreage had been planted at the time of the survey interview even though planting was slowed by wet and cold weather.

Soybean planted area for 2009 was estimated at a record high 77.5 million acres, up 2.0% from last year. Area for harvest was up 3.0% from 2008 at 76.5 million acres.

All wheat planted area was estimated at 59.8 million acres, down 5.0% from 2008. The winter wheat planted area, at 43.4 million acres, was 6.0% below last year but up 1.0% from previous estimates. Durum planted area for 2009 was estimated at 2.6 million acres, down 6.0% from the previous year.

US winter wheat production was forecast at 41.3 million metric tonnes, up 2.0% from June but down 18.0% from 2008. Expected area for harvest is estimated at 34.8 million acres. The winter wheat yield was forecast at 1.2 metric tonnes per acre. Durum wheat production was forecast at 2.2 million metric tonnes, down 4.0% from 2008. The expected area to be harvested was 2.5 million acres.

US and World supply-demand

The US Department of Agriculture (USDA) projected world wheat opening stocks for the 2009/2010 crop year to be lower at 167.4 million metric tonnes in July compared to the June forecasts. The decline in world beginning stocks mostly reflected higher 2008/2009 exports for EU-27, Canada and Russia. Global wheat production projections for 2009/2010 increased as higher output by the United States and FSU-12 countries more than offset reductions in Argentina, Canada and the EU-27. Despite the increase, ending stocks for 2009/2010 are expected to contract.

Global 2009/2010 soybean production was projected at a record 243.7 million metric tonnes, up 2.1 million metric tonnes from June because of higher expected production in the United States and Canada. World soybean 2009/2010 ending stocks were projected at 51.8 million metric tonnes, up 0.81 million tonnes from the June forecast due to a higher US ending stock projection.

World 2009/2010 corn production was projected at 789.8 million metric tonnes, up from June. Ending stocks were projected at 139.2 million metric tonnes for 2009/2010 as a result of an increase in the projected US stocks to 39.4 million metric tonnes. US corn supplies were projected at 357.5 million metric tonnes, up 8.5 million metric tonnes from 2008/2009. By contrast, food, seed and industrial use declined 0.9 million metric tonnes, reflecting lower expected use for sweeteners and starch.

Prairies growing conditions

The prairies had fairly dry weather throughout July, slowing down crop development. During the last week of the month, precipitation, mostly received in Manitoba and Saskatchewan, enhanced topsoil moisture conditions. Crop development was still behind but was improving.

Taber corn in Alberta was also late because of cool spring conditions, June snowfall and dry July weather. Calgarians had to wait an extra few weeks before tasting their sweet corn.

US Crop conditions

NASS published its last Crop Progress report of July on July 27^th. US soybean growing conditions were rated excellent at 53.0% and corn at 52.0%. According to the Agency, 55.0% of grain corn was at the silking stage and 60.0% of soybeans were blooming. U.S. winter wheat harvest was 79.0% completed on July 26^th, 2009.

Cargill opens canola research facility

Cargill expanded its capabilities in canola with the opening of a new specialty canola research and production centre in Aberdeen, Saskatchewan. The new facility will bring together all of Cargill Specialty Canola Oil divisions on the seed research and production side and will also complement Cargill’s canola crushing facility in Clavet, Saskatchewan.

BioExx Expands into the United States

BioExx announced in July that it will open a new canola protein processing facility in Minot, North Dakota. Earlier this year, the Toronto based company started operations at its new canola processing plant in Saskatoon, Saskatchewan where it has the capacity to crush 40,000 metric tonnes of canola. BioExx is a Canadian company that extracts oil and high-value proteins from oilseeds utilizing patented low-temperature extraction and proprietary protein separation technology for the global food market.

Prices

In July, the Canadian Wheat Board (CWB) decreased its 2008/2009 wheat values $2 per tonne from May’s Pool Return Outlook (PRO). Milling durum wheat values were $2 a tonne higher. Malting barley values had declined by $3 per tonne from May, while Pool B feed barley was unchanged from the June PRO.

For the 2009/2010 crop year, CWB lowered its wheat values by $12 to $17 per tonne from last month’s PRO. Durum was down $14 to $18 per tonne, while designated barley dropped by $6 per tonne from June’s forecast.

Winnipeg canola futures’ prices dropped in July. Canola prices posted losses as commodity funds aggressively liquidated their long canola positions. Generalized weakness across oilseed and vegetable oil markets were seen internationally and pressured canola prices down during the month. Demand was also lethargic toward the end of the month with low export demand and fading crusher demand as crush margins deteriorated.

Throughout July, corn futures’ prices were pressured down by weaker crude oil prices and favourable weather conditions.

Soybean futures’ prices were on the low side, pressured down by a firmer U.S. dollar, sharply lower energy prices and nearly ideal growing conditions for central U.S. crops.

Wheat futures’ prices traded sideways for most of July but ended the month on the down side. Wheat prices were influenced by lower Chicago Board of Trade prices for corn and soybean. Worries about increased U.S. government regulation and higher U.S. wheat ending stocks also pressured wheat prices down.

Field pea markets started the month unchanged but strengthened as July progressed, mainly due to weather concerns. Rains across much of the pea growing area of Western Canada brought welcome relief from the dryness. Cool temperatures throughout much of the month helped to prolong the flowering stage, helping to further stabilize yields. Markets remained concerned about potential weather problems before the harvest is complete – mainly frost. An early frost could result in low-quality peas.

Canadian pea markets were supported by the steady rise in the Canadian dollar and the need to maintain opening season selling interest. Meanwhile, markets in the United States continued to be supported by government demand for product for food aid. For the 2008/2009 crop year, the USDA food aid tenders were expected to consume over a third of all US-origin field peas.

Seeding of India’s monsoon or kharif season pulse crops continued, but at a slower pace than previous years. Rainfalls have been well below normal so far. Markets were concerned about the potential for reduced seeded area and average yields for pulses. This led to an increase in India’s domestic market and interest in buying new crop pulses from export countries, including Canada and Australia. The Indian government recently announced that it will provide funding to help subsidized pulse imports in an attempt to manage food inflation while offer price stability and affordable food security to the less fortunate.

North American lentil markets held steady throughout the month as weather problems continued to influence the market. Needed rainfall and modest heat during the flowering stage helped to increase projected yields. Generally considered to be drought tolerant, lentil yields were estimated to be average. The biggest concern remained the potential for frost before the crop was fully mature. A slower start to the growing season and initial slow development of the crop has resulted in development from seven days to two weeks behind normal. A frost in August could severely damage crop quality and quantity.

Supply pressures on international red lentil markets were eased by reports that Syria would allow exporters to sell up to 25,000 metric tonnes of red split lentils. Australia’s lentil industry also estimated that this year’s crop would be larger than initially expected.

Desi chickpeas experienced improved demand from the Indian subcontinent during the last half of the month. While seeding was not yet complete, seeding of all pulse crops grown in the monsoon season was down almost 6% from last year. Markets perceived India as a major market for the upcoming season yet again. Interest shown to date for new crop shipments by Indian importers suggested a potential shortfall in Indian desi chickpea production.

Limited trading activity continued to be reported in Canadian canary seed markets, a situation that has characterized the market since the fall. Lower demand impacted price movement throughout the crop year. While demand for canary seed is generally steady, the global economic downturn caused some end-users to back away from the market for the short term.

Reduced acreage and weather concerns could provide upward potential for the canary seed market. A large number of canary seed acres were planted in the drier areas of Saskatchewan and Alberta. Rainfall continued to be limited in these areas, slowing crop development and increasing the risk of frost damage before harvest. A steady increase in the value of the Canadian dollar and reports of Eastern European canary seed and millet crops not large enough to offer sustained competition in the upcoming marketing year helped to support new crop prices.

Mustard prices have remained steady in recent months but could weaken as harvest nears if crop conditions remain reasonably favourable. Mustard has a shorter growing season than other crops, reducing the risk of frost damage if the harvest is delayed. Recent rainfall helped to support yields around average levels, although there were still some dry areas in western Saskatchewan and eastern Alberta. The European mustard harvest started. Expectations were for an adequate yellow mustard harvest in the region, which could create competition for Canadian supplies. If high demand for biodiesel continues, European buyers could be back again in the market this year for Canadian yellow mustard to support domestic supplies.

World production of sunflower seed was estimated to decline as poor weather conditions and lack of moisture plague the two leading producing countries, Ukraine and Russia. Crops in Romania, Spain and Hungary were also expected to be lower because of poor weather and production in the United States was estimated to decline because of 17% reduction in acres.

The Canadian sunflower spot market was supported by strong end-user demand and concerns about the crop throughout July. The strength in prices encouraged some farmer movement of confectionary sunflowers into the cash market. New crop bids continued to lag the spot market but were expected to rise in the near future.