In uncertain times, stick to the basics

To get you through these trying times of trade wars and tariffs, stick to the fundamentals of crop planning and marketing

As harvest wraps up and you sit down to plan next year’s crop, you could be forgiven if thoughts of trade wars and train cars dance in your head.

To wit: In September, the U.S. made good on its threat and imposed tariffs on US$200 billion of Chinese imports. China countered with tariffs on US$60 billion of American products. What’s next? Who knows? How will the new USMCA play out? How will ongoing pipeline issues affect rail capacity for grain?

Bruce Burnett knows that trade and transport issues are the loud kids in the room, but he urges western Canadian farmers to not get too distracted by them. The director of markets and weather information at Glacier FarmMedia, Burnett says the fundamentals of crop marketing and planning are what will keep prairie operations ticking along in this time of upheaval.

Global grain stocks and weather issues are still the dominant factors to consider. “Statistics Canada yield assessments at the end of July came in below market expectations for wheat, canola and durum,” explains Burnett.

Keep in mind those assessments were made before harvest began, so are likely to go up as harvest is completed, but overall yield won’t be great this year. “It’s a tale of two types of production scenarios on the prairies,” he says. “The northern growing areas did better than the southern areas because of drought conditions in the south. Overall, in Canada, yields will be close to average.”

In fact, Burnett says, global wheat production is down significantly to around 733 million tonnes from 758 million tonnes last year. Most of that is weather related. “There were smaller yields in Russia,” he says. “The EU had drought this year, as did eastern Australia, and the U.S. southern plains were also dry.”

He thinks wheat prices should go up as this year’s crop is consumed, which should have a positive affect on demand for Canadian wheat. And with stocks lower than they have been for a while, demand for seed is going to be fairly robust come spring, which is something farmers should be thinking about as they make plans for next year.

Smaller trade disputes are also having some impact on stocks and prices. Italy’s phytosanitary barrier has put a stop to Canadian durum exports to what was one of our largest customers. India’s tariffs on Canadian pulses are putting a dent in prices but not stocks. “Pea stocks have doubled and lentils nearly tripled, despite the fact we reduced the growing area and had poor yields this year,” he says.

While North African markets for Canadian durum and lentils are growing, Burnett doesn’t see the prices rising any time soon, even though Canada remains the world’s largest exporter of these two commodities.

On the oilseed front, “The U.S.is expected to produce a massive soybean crop, which is going to overshadow the oilseeds situation just now,” says Burnett. While he thinks the trade issues will affect Canadian soybeans to a degree, the trade war is supportive of canola prices. Otherwise, he says, the U.S. trade war with China shouldn’t particularly impact other western grain and oilseed markets.

It is an interesting thing to watch, says Burnett. U.S. futures have dropped soybeans by over $2 per bushel, and the country is aggressively marketing those soybeans to all other markets. Brazil, in the meantime, is reserving its soybean production for China.

It’s a lot to think about, to be sure, but keep your eye on what counts as you plan ahead. “Just try to make sure you have some diversity in your market, particularly with canola,” says Burnett. “If you have access to local crushers, they tend to be very consistent in terms of delivery requirements. Or, if you have direct access to mills for wheat in Southern Alberta and around Saskatoon, that’s something to look at.

“Monitor trade situations, sure, but don’t get too caught up in them,” adds Burnett. “Look at your fundamentals: stick to rotations, look at levels of debt, plan purchases.” He says the markets are too negative overall to be making decisions on what you think might happen with trade deals and issues.