War may not cause big wheat acre jump

A 50 to 60 percent increase in global wheat prices might not be enough to entice growers in Western Canada to plant a lot more of the crop this spring, according to some farmers and analysts.

“For me, I won’t be changing anything, and I’d say that’s probably 75 percent of farms,” said Stephen Vandervalk, Alberta vice-president of the Western Canadian Wheat Growers Association.

He usually plants durum in favour of spring wheat, and that is going to be the case once again this year.

“I’ll just stick with what I know,” he said.

New crop spring wheat prices of $12 per bushel are not that much more attractive than malting barley bids of $9.50 per bu. or canola prices in the $21 to $23 per bu. range in his area near Fort Macleod, Alta.

Competing crops have been at record values for months. Wheat was late coming to the party.

Vandervalk said the recent rally may have convinced some growers who were considering switching to barley to go back to planting wheat, and it could pull some swing acres into wheat production.

However, he noted that seed may be hard to find due to last year’s drought.

He thinks Canadian wheat acres may be up only five or 10 percent over last year’s levels despite Chicago wheat futures soaring 50 to 60 percent since Russia invaded Ukraine.

MarketsFarm analyst Bruce Burnett is on the same page as Vandervalk.

He noted that spring wheat hasn’t rallied nearly as much as other classes of wheat. In fact, as of March 9, Chicago wheat was trading at a $1.15 per bushel premium over Minneapolis wheat.

That is a dynamic he can’t recall seeing in all his years in the business. It is usually the other way around.

“There’s a lot of strange stuff going on here,” said Burnett.

“It’s very hard to base planting decisions on things that don’t make a lot of sense.”

Another factor to consider is that many farmers are reluctant to price their 2022 crop because of lingering dryness concerns and some of the contract woes from last year.

Vandervalk said that is definitely going to be a factor this year. He said grain companies that are hoping for immediate post-harvest movement in the August-September time frame will be disappointed because of the 2021-22 fiasco where farmers were forced to buy out contracts at inflated prices.

“Good luck with contracts, guys, because farmers aren’t going to sign,” he said.

Another reason growers are reluctant to sign is because prices keep climbing steadily higher, although he noted that a ceasefire in the war in Ukraine could rapidly bring a halt to the bull market.

Burnett said that “more and more” he is starting to think farmers will simply stick to rotations.

If anything, it is the sky-high fertilizer prices that may play a role in their decision-making process.

That would favour crops such as pulses and even barley and oats.

On a strict price-comparison basis, he agrees with Vandervalk that $12 wheat doesn’t buy any more acres than $21 canola, although he does think spring wheat will take some acres from durum because durum prices are “in a funk.”

Another analyst believes wheat’s wild ride is definitely going to cause some shift in acres.

Marlene Boersch, managing partner of Mercantile Consulting venture, said spring wheat is rapidly climbing up her rankings of the most profitable crops to grow in 2022-23.

“There’s no question about it,” she said.

“Wheat certainly has had a boost now, and we will need more wheat.”

Boersch said canola is doing extraordinarily well, too. Meanwhile, pulses haven’t kept pace with the gains in wheat, canola and other crops.

“Everybody is still saying we’ll have increases in pulse acres. I don’t see that. The numbers don’t tell me that,” she said.

Vandervalk agrees that today’s sky-high fertilizer prices might not have as much influence on pulse acres as many are suggesting.

Like many farmers, he bought his 2022 fertilizer needs last summer so the huge price swings of late have had no impact on his seeding plans.

He agrees with Burnett that farmers, for the most part, will likely stick with their rotations despite the war in Ukraine having a profound impact on world grain markets, as evidenced by the U.S. Department of Agriculture’s March World Agricultural Supply and Demand Estimates report.

The USDA shaved three million tonnes off Russia’s estimated 2021-22 wheat exports and four million tonnes off of Ukraine’s.

It also made adjustments to Black Sea sunflower oil exports. Russia and Ukraine typically account for about 80 percent of global trade of the commodity.

The USDA cut Ukraine’s 2021-22 sunflower oil exports by 14 percent because of the closure of the country’s port and crushing facilities. Russia’s oil shipments were reduced by a more modest four percent.

As a result, sunflower oil that was priced lower than rival vegetable oils before the conflict is now selling at a huge premium in places such as Argentina.

That is helping bolster canola prices, which are closely tied to world vegetable oil prices.

Russia and Ukraine account for one-fifth of world rapeseed/canola seed exports and 15 percent of oil exports.

The USDA left Ukraine’s rapeseed exports unchanged because nearly all of its crop was shipped between July and December 2021.

However, Russia’s exports were dropped by 33 percent because of weak buying from China over the first half of the marketing year.

The Western Producer

Tags: prices, wheat, plant, Western Canada, durum, spring wheat