The Saskatchewan government wants to know how a proposed takeover of grain handler Viterra by a Swiss company will affect the province.

The government announced last week that it is reviewing the $6.1-billion deal that would see Viterra acquired by Glencore International.

Much of the business would remain in Canadian hands because Calgary-based Agrium Inc. and privately held Richardson International, based in Winnipeg, would buy the majority of Viterra's Canadian assets for a combined $2.6 billion in cash.

Saskatchewan Premier Brad Wall said Informa Economics Inc. will report on the implications of the deal for Saskatchewan.

"We'd like this independent group to explore some questions, including what's the impact... on Saskatchewan farmers? What's the impact in terms of the concentration on the competitive side on farm inputs? What's the impact economically to the province, if any?" Wall says.

The report will also look at grain industry employment in Saskatchewan, competition within the western Canadian grain-handling system and Saskatchewan's strategic position in the international grain industry.

"On the grain-handling side, there appears to be actually a more diffuse market if this takeover happens because of the market concentration the former Viterra had and what's going to be happening with Richardson's or Pioneer elevators, so that part seems to be addressed, but again we're going to do the work," Wall says.

"It's less clear on the input side, certainly with respect to not just fertilizers but the retail presence in rural Saskatchewan and across Western Canada."

The federal Competition Bureau will do its own review, but it's unclear how long that will take.

The province is to get the report from Informa Economics by May 7 and make it public a few days later. However, the government is likely to take some time before it releases its position, Wall said, as it waits for the competition review.

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Widespread precipitation in March has helped restore soil moisture in most regions of the Prairies after a winter that saw relatively little snow.

However, some regions remain dry and crops will need timely spring rains to get off to a good start, officials say.

For now, however, most crops have enough topsoil moisture to germinate.

"We’re certainly not in a crisis situation," says Stuart McMillan, a Canadian Wheat Board weather and crops analyst.

An abnormally dry, mild winter had previously raised fears of a spring drought, especially after a late, dry fall. But rain and snow across most Prairie regions last month have eased those worries, McMillan says.

The main areas of concern are south-central Saskatchewan and the Peace River region, where low soil moisture levels persist, he says.

Unseasonably warm weather in March sparked rumours of an early start to spring seeding. As of last week, however, provincial agriculture officials had no confirmed reports of seeding underway.

Grant McLean, a cropping management specialist with the Saskatchewan Ministry of Agriculture in Moose Jaw, says seeding in southern regions of the province normally gets underway in late April or early May and he sees no signs of that changing significantly this year.

Despite above normal temperatures, the mercury is still dipping below zero overnight in much of Saskatchewan. Farmers normally do not seed when there’s a risk of frost, McLean says.

Pam de Rocquigny, a Manitoba Agriculture, Food and Rural Initiatives cereals specialist, says some producers in the province have been out spreading fertilizer and doing early fieldwork but not actually seeding.

Provincial regulations prevent Manitoba farmers from applying fertilizer on fields after Nov. 10 and before April 10. But last month, MAFRI temporarily lifted the ban three weeks early because of high temperatures and low soil moisture.

The early spring has raised hopes that some crops could set acreage records, especially canola. Some industry sources predict canola plantings could reach 20 million acres in 2012. Canadian farmers harvested over 18 million acres of canola in 2011, according to Statistics Canada.

However, canola has small seeds which must be seeded at a shallow depth. More soil moisture will be needed this spring for canola plantings to hit a new high, says McMillan.

"If we’re going to get 20 million acres of canola in the ground, we will need to get some good rains."

Maple sap is still running in some regions of Quebec, but time appears to be running out for the 2012 maple syrup yield.

According to officials with Quebec’s maple syrup federation, which represents the province’s 7,400 producers, the record-setting heat wave across much of Canada in March played havoc with the harvest this spring.

Notably, the inherent sugar-making qualities of sap have been affected, resulting in production drops of between 30 and 50 per cent over last year, which was considered an average year.

"Producers have been surprised by the amount of sap this year (but) it’s only one to 1.5 per cent sugar, whereas it’s usually two to three per cent sugar," Serge Trépanier, assistant director of the Quebec maple syrup federation, told The Montreal Gazette earlier this week. "This means you have to treat more (sap) to produce the same amount of syrup."

Maple syrup is made when sap is boiled down to 66 per cent sugar.

Most production occurs during a roughly 25 -day window between the middle of March and the end of April.

Quebec accounts for roughly 80 per cent of world maple syrup production.

According to Trépanier, sub-zero nights and mild daytime temperatures are the best weather conditions for collecting good quantities of quality sap.

But the record-setting night and daytime temperatures in March cut production short in the more southern reaches of Quebec.

Trépanier notes that producers in more northerly regions of Quebec, particularly in the Gaspé Peninsula, still have their taps turned on.

Trépanier says temperatures over the next two weeks are expected to be average in eastern Quebec, which should help production.

He adds that whatever the results of the 2012 harvest, the federation has 36 million pounds of maple syrup tucked away in its new warehouse near Quebec City.

Trépanier says that strategic reserve is a key component of the federation’s long-term goal of ensuring a steady supply -- and good prices -- of maple syrup.

Saskatchewan flax producers will pay a higher levy in the new crop year.

A growers meeting in Regina in March voted unanimously in favour of doubling the levy to $2.36 per tonne for flax seed. The 50 cent per tonne levy for flax straw remains unchanged.

SaskFlax is going through a revenue crunch following a sharp decline in seeded acres.

"Flax acres have been cut in half because of both the Triffid issue and the very wet seeding conditions in southeast Saskatchewan for the last two years," says David Sefton, a SaskFlax director from Broadview.

The flax industry continues to deal with the fallout from the detection of very small traces of the deregistered, genetically modified flax variety in shipments to Europe in 2009. The European Union, with its zero tolerance policy for the import of GM products, has reduced Canadian flax imports by 35 per cent. The only flax going to the EU is for industrial purposes.

Currently, about four per cent of flax samples show traces of Triffid, which compares with 10 per cent when testing first started with the 2009-10 crop.

Sefton says southeast Saskatchewan grows between 70 and 80 per cent of provincial flax production. SaskFlax hopes to expand the production area by funding research to develop a high-yield, high omega-3 flax variety for the northern grain belt.

"We want to be able to continue some of the promising research and market development work we've invested in," says Lyle Simonson, Chair of SaskFlax. He points to new opportunities for flax in the North American and global health food markets and the emerging natural fibres industry.

One of the biggest challenges facing flax is the ever growing popularity of canola. Sefton believes the traditional flax growers in the southeast will put flax back into their rotation, but a large percentage of the 2011 unseeded acres will likely go to the other oilseed.

Agriculture Canada forecasts flax acreage will rise 10 per cent this year.

Green Prairie International of Lethbridge, Alta. is the first Canadian company to ship alfalfa hay to China.

With an estimated value of $600,000, the recent shipments mark the beginning of what promises to be a lucrative market for the global wholesale forage supplier, according to president and CEO John Van Hierden.

The company is currently contracting a minimum of 10,000 new acres in southern Alberta for the coming growing season and has started a large expansion of its infrastructure, including the addition of a new dehydration facility.

Van Hierden says over the next five years, Green Prairie forecasts a four-fold increase in volumes as the Chinese market demand continues to surge. The growth rate is being driven by plans to double milk production by 2015.

Although China shows great promise, Green Prairie also exports to a number of other expanding markets including India, Japan, Korea, Kuwait and the United Arab Emirates.

Van Hierden says the company ships product through U.S. west coast ports.

Green Prairie, known for its timothy hay, plans to continue and expand its exports of this product to lucrative Asian markets. Volumes are expected to grow rapidly as the Canadian government moves to conclude negotiations with China to allow access to timothy hay imports in addition to alfalfa.

The British Columbia government has unveiled a new Agrifoods Strategy aimed at increasing the province's agri-food and aquaculture revenue from the current $10.5 billion to $14 billion a year by 2017.

The strategy is a five year plan based on promoting B.C. products, expanding domestic and international markets and enhancing industry competitiveness.

The glossy 32-page strategy booklet includes target timelines for 21 action items grouped under seven goals:

- ensuring a safe, secure food supply
- developing innovative products and processes
- strengthening domestic markets
- expanding international markets
- growing BC's agri-foods system
- securing a strong future for farming
- providing a sustainable land base for production.

The provincial government intends to concentrate on high quality products, bring underutilized land into production and expand domestic and international markets.

Agriculture Minister Don McRae has already gone to China twice to promote B.C. agri-food products and plans a third trip to Asia this fall. The B.C. Ministry of Agriculture has also launched an interactive online Foods B.C. initiative incorporating a website, Facebook and Twitter accounts.

Premier Christy Clark calls the agri-foods sector critical to B.C.'s future, saying the strategy "will target economic growth and development which, in turn, will lead to increased jobs. We envision an innovative, adaptive, globally competitive sector valued by all British Columbians."

B.C. Agriculture Council chair Garnet Etsell says the strategy's initiatives help "move the agriculture sector in the right direction."

The provincial government has also committed to reviewing the generally disliked carbon tax.

"The carbon tax is unique to B.C. and makes it hard to sell internationally," McRae admits, promising to work with the greenhouse sector, the sector hit hardest by the tax, on relief.

The plan is available online at http://www.gov.bc.ca/agri/down/bc_agrifoods_strategy.pdf.

The United States biofuel policies have been painted as a major contributing factor to strong commodity prices in recent years.

The landscape of ethanol production south of the border changed considerably at the end of 2011, when the tax credit offered to U.S. ethanol plants and the tariff applied to foreign ethanol were removed. Ethanol profit margins in the U.S. have since been negative and some suspect this could lead to a decline in corn ethanol production. Given that ethanol consumes nearly 40 per cent of U.S. corn production, it is natural to ask whether these policy changes will affect the outlook for agricultural commodity prices.

Ethanol blenders benefited from a reduction in fuel taxes in order to be competitive with standard gasoline. Profitability in the U.S. ethanol industry is roughly determined by the ratio of oil to corn prices.

When oil prices started their rapid ascent in mid-2007, ethanol profit margins jumped to around 75 cents per gallon. The subsequent increase in corn prices reversed course and triggered negative margins. But the tax credit allowed ethanol blenders to break even, despite negative market conditions.

The import tariff of 54 cents per gallon was introduced to keep out Brazilian ethanol, made from sugar cane and cheaper to produce. Strong oil prices, the tax credit and the import tariff contributed to the growth of the American ethanol industry.

Will the removal of the tax credit and tariff cause ethanol production to decline?

Not according to the United States Department of Agriculture. The USDA recently projected that American ethanol production will continue to increase over the next ten years, albeit at a much slower pace than the last five years.

Between 2006 and 2011, U.S. corn acreage increased from 78.3 million acres to 91.9 million acres and roughly matched the increase in corn used for ethanol production. The growth in corn acres has come from acres taken out of the U.S. Conservation Reserve Program and from acreage historically used for feed grain production. Acreage allocated to wheat and soybeans has remained flat in the U.S over the last five years, despite the significant increase in foreign demand for grains and oilseeds.

The main driver of the ethanol market is currently the Renewable Fuel Standard. Established in 2007, the RFS sets a minimum volume of renewable fuel to be blended with transportation fuel. The 2012 RFS stands at 15.2 billion gallons of ethanol, out of which two billion gallons must be advanced biofuels -- mostly bio-diesel but also cellulosic ethanol. Cellulosic ethanol is produced from wood chips, grasses or the non-edible parts of plants, such as corn stover or wheat straw. The first commercial scale cellulosic ethanol plants are currently being brought into production, but there are still significant technical challenges in converting biomass residues into fuels. Not until second-generation ethanol becomes commercially viable will the linkages between energy markets and corn weaken.

Currently, there is little room in the marketplace for cellulosic ethanol because of the so-called "blend wall." U.S. consumption of gasoline has declined since 2007 because of poor economic conditions and better fuel mileage on new vehicles. At a constant 10 per cent blend rate of ethanol with gasoline, the potential market for ethanol is shrinking. One way to move back the blend wall is to sell fuel with a blend rate of 15 per cent. U.S. retailers have been lukewarm to the idea so far because of logistical and infrastructure concerns.

The RFS establishes a floor on potential demand for ethanol because retailers are obligated to meet mandated levels. This guaranteed demand, coupled with the current ethanol production capacity in the U.S. Midwest, all but assure that corn ethanol production will continue at current levels, despite the absence of subsidies.

The negative profit margins observed early this year have been the result of ethanol plants ramping up production to capture the tax credit before the end of 2011. As the ethanol market slowly sorts out the ethanol surplus, positive profit margins are expected before the end of 2012.

Research from Iowa State University suggests that ethanol production can remain a break-even business as long as gasoline prices remain above US$3 US per gallon -- which is highly probable, given the current outlook for oil demand and supply.

One factor that could challenge U.S. ethanol production capacity is Brazil.

While Brazilian ethanol businesses had a competitive advantage over U.S. corn ethanol, the short term outlook is different. The growth in domestic demand has been too much for the Brazilian industry. It is estimated that about half of the domestic vehicle fleet in Brazil runs on a 20 to 25 per cent content of ethanol in gasoline. High world sugar prices led to a decrease in ethanol production below the 2010 level and the forecast is for 2012 production to decline further.

The U.S. corn ethanol industry is clearly entering a maturity phase characterized by slow production growth, with continued strong demand because of the U.S. Renewable Fuel Standard.

This will continue to sustain high grain prices at a time when corn stocks are low compared to potential overall demand. Continued development of alternative energy technologies (including cellulosic ethanol, geothermal energy or the production of fuel from algae) will lead to a diverse energy future. In the meantime, agribusinesses need to continue planning for a short-term future in which grain-based ethanol is a major driver of grain markets.

Last Friday, March 30, the United States Department of Agriculture released a slew of highly anticipated reports, including its 2012 Prospective Plantings and Grain Stocks data.

Coming into the report release, grain and oilseed markets seemed to be losing bullish momentum, but the data re-invigorated buying interest, with strong gains for grain and oilseed markets Friday.

The question is: can a renewed turn higher in grain be sustained going into the spring seeding season? Let's look at the report first.

USDA forecast 2012 American corn acres came in higher than expected, though old crop quarterly stocks are lower than initial trade ideas. U.S. soybean acres for 2012 are at only 73.9 million though, well below trade expectations and served as the key bullish feature of this report.

However, since this report survey was taken near the beginning of March, I suspect that with the big rally in the soybean market relative to corn over the past six weeks or more, we probably have already seen some shift in grower seeding intentions back to beans. So I expect this soybean acreage number to rise in subsequent reports.

Even the wheat numbers came in more market positive than expected. U.S. total wheat acres for 2012, pegged at 55.9 million, came in well below trade expectations and are only a tick higher than 2011. The difference maker here is the much lower than expected U.S. spring wheat acreage estimate.

The following table summarizes the USDA's prospective plantings and quarterly grain stocks reports. Estimates are in millions of acres for 2012 US prospective plantings and billions of bushels for grain stocks as of March 1.

Link to prospective plantings and grain stocks charts

Corn
American farmers, driven by the prospect of strong crop prices, will be planting nearly 96 million acres of corn this year, topping market expectations and increasing acreage by four per cent over last year. A shift over to corn and away from soybeans is behind much of the increase as farmers try to predict where the best returns will come from. The new forecast calls for the largest U.S. corn acreage base since 1937.

The supportive feature for the corn market in this report, though, came from old crop stocks estimate. The USDA reported stockpiles from the last year's corn crop lower than expected. U.S. corn stocks, stored either on- or off-farm, total 6.01 billion bushels, an eight per cent decrease from about this time a year ago.

Old crop U.S. corn futures rallied on the tightening old crop stocks situation. In the aftermath of this report, traders are so far focusing more on the old crop tight stocks figure, as larger new crop plantings generally were already expected.

Soybeans
U.S. soybean acreage for 2012 is expected to decline to about 74 million acres, a one per cent drop from last year and five per cent less than 2010. The level of soybean planting either remained the same or dropped off from last year throughout the American corn belt and Great Plains.

"Compared with last year, planted acreage intentions are down in many areas as some acreage is expected to shift to corn," the USDA said. "Additionally, soybean acreage intentions in Kansas, Oklahoma and Texas are down from 2011 due to drought conditions that have continued from last year into early March."

But as mentioned above, I suspect that with the big rally in the soybean market, we probably have already seen some shift in grower seeding intentions back to beans since this report survey was taken. So, as stated earlier, I look for this soybean acreage number to rise in subsequent reports.

Regardless, bullish for bean futures near-term as it raises the stakes for a U.S. crop that needs to build inventories, particularly after South American production this winter did not live up to early expectations. Private estimates out of South America seem to show production in both Argentina and Brazil declining daily, while Chinese demand for oilseeds continues unabated.

Wheat
U.S. wheat numbers came in more market positive than expected. Total American wheat acres for 2012, pegged at only 55.9 million, came in well below trade expectations and are only a tick higher than 2011. The difference maker here is the much lower than expected U.S. spring wheat acreage estimate, with a loss to corn acres talked about as planting season gets an early start.

USDA projects only 12.0 million acres of spring wheat, far below the average analyst estimate of 13.4 million and below what any projected. Traders assumed U.S. spring wheat acreage would rebound from 2011's 12.4 million, as farmers reclaimed North Dakota fields that were flooded last year. The lower acreage number is particularly supportive for Minneapolis spring wheat futures.

Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.