Increasing global production and record U.S. corn and soybean yields in 2016 have led to growing stocks and lower prices, especially for coarse grains. What does this mean for seeded acreage and what should Canadian farmers expect in 2017? Over the next two weeks, I will present an overview of planting and farm input decisions for grain and oilseed producers in both Eastern and Western Canada. This week I provide the assessment for Eastern Canada.
Soybeans in Eastern Canada expected to be record in 2017
On January 30, 2017, Agriculture and Agri-Food Canada (AAFC) released its first . AAFC is projecting Canadian seeded corn acres will decline by 3% along with a reduction in winter wheat acres of 12%. Canadian soybean seeded acres are expected to increase by 8% in 2017, to a record 5.9 million acres.
Thefrom the Ontario Ministry of Agriculture, Food and Rural Affairs estimates that the difference between the contribution margin of soybeans and corn is about $50 per acre for a typical producer in Eastern Canada. This lines up well with AAFC projections of larger soybean acres and smaller corn acres.
While current projections favour soybeans, corn remains profitable and several factors could impact the grain and oilseed market between now and the end of the crop year. The United States Department of Agriculture’s (USDA) planting intentions report which will be released on March 31, 2017, will be an important market driver. Current estimates put the U.S. soybean crop exceeding 85 million acres. In addition, the size of the soybean crop in South America will impact pricing in future markets. A good indicator of profitability to assess market prospects of corn and soybeans is the soybean-corn ratio (calculated as November soybean futures divided by December corn futures). Typically, a ratio above 2.5 favours soybeans, the current value is around 2.6.
Farm inputs remain stable
According to Statistics Canada, Eastern Canadian farm input prices declined 2% in the first three quarters of 2016 compared to the same period in 2015. We expect farm input costs to slightly increase in 2017 as energy prices trend slightly up terms of fertilizer, prices actually declined on average 10% in the first three quarters of 2016 and are expected to remain lower in 2017 than 2016 average prices.
Canadian soybean acreage is forecast to reach a record in 2017, but not all the increased acreage will be in Eastern Canada. Next week I’ll take a look at farm inputs and planting intentions for Western Canada, a region with a more diverse crop mix as well as expanding acreage of soybeans and various other crops.