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AAFC MARKET ANALYSTS FORECAST HIGHER PRICES FOR 2018-19 CROP YEAR

on June 10 | in Ag News | by | with No Comments

From the Outlook for Principal Field Crops Report, by the Market Analysis Group/Grains and Oilseeds Division of Agriculture and Agri-Food Canada (AAFC)

In their preliminary assessment of the upcoming 2018-19 crop year, market analysts for Agriculture and Agri-Food Canada are predicting higher prices for corn, soybean and wheat (lower protein wheat).

Here are some of the highlights from the latest Outlook for Principal Field Crops Report that was released on May 24:

Corn:

For 2018-19, seeded area is forecast to increase by 5% from 2017-18 due to steady prices and continued good overall demand. Production is forecast to increase 5% to 14.8 Mt due to the higher area and the assumption for average yields. Imports are forecast to decrease by 41% due to the higher domestic supply. Despite near record carry-in stocks and higher production, the lower imports will cause total supply to decrease by 1% to 17.8 Mt. Total domestic use is forecast to increase by 1% due to slight increases in ethanol production, industrial use and livestock feeding. Exports are forecast to decrease by
14% due to a slight drop in demand. Carry-out stocks are forecast to decrease by 2% but remain above the previous five-year average.

The nearby Chatham corn price is forecast to increase due to a projected higher U.S. corn futures and a near to unchanged Canadian dollar.

Soybeans:

For 2018-19, planted area is forecast to fall by 11%, to 2.6 Mha, the sharpest decline in soybean area in Canadian history and a reversal of the long-run trend of steadily increasing area in Canada. The decline results from a combination of factors: (1) attractive returns from competing crops such as wheat, (2) dry weather across Western Canada where most of the decline occurs, and (3) burdensome world soybean supplies which are weighing on prices.

Production is forecast to fall by 7%, to 7.2 Mt, as the decline in harvested area more than offsets a slight increase in yields based on a five year average. Total supply is forecast to decrease slightly to 8.6 Mt as the decline in output is more than offset by the sharp rise in carry-in stocks. Exports are forecast to rise to a record 5.3 Mt, with shipments headed to a diverse group of countries. Domestic processing is forecast to rise marginally to 1.9 Mt, slightly under the record pace set in 2015-16. Carry-out stocks are forecast to fall slightly to 0.88 Mt, the second highest level on record.

Soybean prices are forecast to increase slightly to $430-470/tonne on support from higher U.S. prices and the discount of the Canadian dollar against the American greenback.

Wheat:

For 2018-19, the area seeded to wheat in Canada is expected to increase by 13% from 2017-18 as an 11% decrease for winter wheat is more-than offset by a 15% increase for spring wheat. Production is projected to rise by only 1.5% to 25.4 Mt due to a return to trend yields from the above trend yields of 2017-18. Supply is forecast to increase only slightly due to lower carry-in stocks. Exports are expected to increase by nearly 1% due to growing demand in world food markets. Carry-out stocks are forecast to be the same as for 2017-18 at 4.9 Mt.

The prices for high protein wheat in Canada for 2018-19 are forecast to be similar to 2017-18, as support from lower supply for Canada is offset by a return to normal protein premiums, which are lower than for 2017-18. However, the prices for lower protein wheat are forecast to increase.

The main factors to watch are: the production volume of winter wheat in the U.S., the EU, Russia and Ukraine where the harvest will be starting in June; and precipitation in the spring wheat growing areas of the U.S. northern plains and Canadian Prairies, which are drier than normal and need timely rains.

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