What U.S. Flooding Could Mean for Canada’s Prairie Farmers

Flooding across the U.S. agricultural belt continues to thwart the planting of key crops in that country — something that could help some Canadian farmers fetch better commodity prices

by Tony Seskus – CBC News

Flooding across the U.S. agricultural belt continues to thwart the planting of key crops in that country — something that could help some Canadian farmers fetch better commodity prices.

New data this week revealed several states are well behind schedule for planting thanks to weeks of rain, with more wet weather in the forecast for some regions.

Some of the greatest concern is over corn and soybeans.

As the week began, only 49 per cent of corn crops in 18 key states had been planted when more typically it might be 80 per cent. Less than a fifth of soybeans had been planted when it might normally be closer to half, according to the United States Department of Agriculture.

While it’s still too early to tell if the poor conditions will persist or exactly how crop yields will be affected, one analyst says the impact of the flooding is already rippling into the market.

“As rain hampers planting efforts in the Midwest, analysts grapple with the ‘domino effects’ on crop prices”

 

“In the last couple of weeks, we sort of have a market that’s … almost maybe woken up to some of the weather threats here that were building,” said Jonathon Driedger, a senior market analyst with FarmLink in Winnipeg.

Corn and soybeans are key to the American farm sector.

Corn is widely used in grocery products, animal feed and fuel. Soybeans are a leading agricultural export in the U.S., worth $22 billion US in 2017.

Though the outlook for both crops could improve in the coming weeks if weather improves, the poor conditions in the U.S. have traders considering what the supply picture might look like later in the year.

For example, the Wall Street Journal reported this week that the July contract for U.S. corn recently climbed by 13 per cent in just seven sessions.

“The U.S. corn crop is so integral to the world markets that, you know, they get a sniffle and we all get pneumonia,” said Barry Prentice, a professor of supply chain management at the University of Manitoba.

Canada exports only a fraction of the corn and soybeans that its southern neighbour does, though they’re still important crops for a number of Canadian farmers.

More broadly, as Driedger explains, farmers on the Prairies could benefit from what he calls the “spillover” effect.

While poor weather has had an adverse effect in parts of Ontario, Driedger said that, generally, seeding progress in Western Canada has not been far outside what farmers might expect at this time of year.

“Corn is so influential on pricing, soybeans are influential on pricing, that as those prices rise for those crops, it sort of helps elevate other crops as well,” Driedger said.

For example, the price of barley could also climb with corn as it is a direct substitute into livestock feed, he said.

“That’s sort of the domino effects that I think traders are trying to assess and process right now, because at this stage of the game, in terms of the production side, we’re still playing a game of ‘what if,'” Driedger said.

Where there may be a more direct impact for Canadian farmers is on wheat, he added. There are concerns about the impact heavy rain has had on the U.S. winter wheat crop and the planting of spring wheat, he said.

He said wheat prices have been improving in Western Canada over the last couple of weeks.

Derek Brewin, head of the department of agricultural economics at the University of Manitoba, said wheat prices also move up and down with corn because some grades of wheat compete with corn as livestock feed.

“And then there’s the higher quality wheat,” Brewin added. “If there is a shortage of that, the difference between the high quality and the low quality gets wider. They get really good prices.”

Some believe canola prices could get a small lift if soybean prices rise.

Canadian canola farmers are already feeling pressure because of China’s boycott of the crop. If soybean prices improve, it could also drag canola prices up “a little bit,” Driedger said.

However, Prentice thinks poor U.S. weather could ultimately be a drag on canola prices. He said if American farmers switch from planting corn to soybeans, which take less time grow, that could affect oilseed prices.

“If the Americans grow more soybeans, that means that we’re likely to see lower prices for canola,” Prentice said.

It will take weeks — or even months — for the situation to unfold as farmers, traders and analysts get a clearer picture of the impact on the number of acres planted and the health of those crops, Driedger said.

“Maybe we wake up six weeks from now and all the weather cleared, the crop got in a little bit late but conditions were excellent, and so maybe that so-called scare isn’t so much of a scare,” he said.

“Or, you know, things [could] get progressively worse.”

Source: CBC News