Make seeding intention part of your marketing plan
The 2018 crop year may be months away, but producers are already busy planning seeding decisions. Many variables must be considered, most of which remain unknown like market prices, moisture conditions and market access to India for pulses. Preliminary planting intentions in Canada reveal projections for profitability in 2018.
Significant declines in pulse acres expected, with cereal and oilseed
Agriculture and Agri-food Canada recently projected that Canadian producers are looking to increase cereal and oilseed acres while reducing pulse acres.
Lower market prices for peas and lentils caused by large supplies and limited market access to India should result in a decrease in lentil and pea acres of 27% and 21%. The decline in pulse acres will support an increase in both cereal and oilseed acres.
Strong demand for feed barley and a reduction in durum supplies is helping to support prices. As a result, it is forecast that durum acres will increase 5% and barley acres will increase 7% in the 2018-19 crop year. Overall, total wheat acres are expected to increase 4% and corn acres are expected to climb 2%.
Strong profit margins for oilseed are expected to trigger a positive supply response. Canola acres are expected to increase nearly 5%. Soybean acres are also expected to increase 2%, and are expected to continue their impressive growth in the Prairies.
Cereal acres less sensitive to price changes
As prices continue to evolve, so do planting decisions for 2018. Historical seeded acres along with past prices can be used to project the supply response of producers in Canada.
Seeding intentions for wheat and canola are not nearly as sensitive as peas and lentils.
For example, an increase of 5% in the expected price of wheat for 2018 relative to its 2017 price would cause on average to increase seeded acres by 1%.
For canola, an increase of 5% in the 2018 price relative to 2017 would cause to increase seeded acres by 3%.
Movement in the price of lentils and peas usually result in larger shifts in acres. This is generally true of all smaller acre crops as market opportunities are often more limited because of geographical concentration due to factors such as processing and climatic conditions.
Seeding decisions are not made in a vacuum. They must be considered across the spectrum of available crops in a region. Seeded acres of a crop can still go up even if its own price is not expected to climb. A large enough decline in the price of other crops (like pulses) could lift acres of a crop despite profitability projections being limited (like wheat).
Build a marketing plan function of your risk tolerance and volatility
Understanding seeding intentions across Canada, along with knowing available inventory and strength of demand is an essential part of any marketing plan.
Craig joined FCC in 2009 as an Agricultural Economist, specializing in monitoring and analyzing the macroeconomic environment, modelling industry health, and providing industry risk analysis. Prior to FCC, he worked in the livestock branch of the Saskatchewan Ministry of Agriculture. Craig holds a Master of Agricultural Economics degree from the University of Saskatchewan.