Hey there, time traveller!
This article was published 22/10/2013 (1005 days ago), so information in it may no longer be current.
Canadian wheat and canola grower Mike Bast spent five years building silos to store 100,000 bushels on his 2,000-acre farm in La Salle. It wasn't enough. He's already dumping grain into his neighbour's bins.
Harvests this year across the Prairie provinces of Canada, the world's top canola producer and the second-largest exporter of wheat, will jump 14 per cent to a record 80.8 million tonnes, the government said Oct. 16. The supply surge is eroding prices and testing the limits of domestic storage. Farmers are leaving crops in uncovered mounds amid a shortage of silage bags and a lack of space at grain elevators and export depots.
"I've never seen this much grain out in fields, in bags or in piles," said Tyler Russell, the national grain-marketing manager for processor Cargill Inc.'s Canadian unit in Saskatoon. "We have a monster crop." Most storage space will be "pretty much full" during harvest months, he said.
'I've never seen this much grain out in fields, in bags or in piles. We have a monster crop'
Bin-busting output in Canada is compounding record global supplies as planting expanded from Brazil to Ukraine to the U.S. Midwest after last year's drought sent futures surging. Goldman Sachs Group Inc., Citigroup Inc. and Rabobank cut their price forecasts in the past month. Global food costs that reached a three-year low in September probably will drop six per cent in 2014, the International Monetary Fund said on Oct. 8.
Wheat, Canada's biggest crop, fell 10 per cent this year to $6.9675 a bushel on the Chicago Board of Trade, and canola in Winnipeg slid 15 per cent to $498.50 a ton. Grain and oilseed prices during the 12 months that began Aug. 1 will be as much as 30 per cent lower on average than a year earlier, Agriculture & Agri-Food Canada said Oct. 16, after boosting its harvest forecasts by 5.7 per cent from September.
The Standard & Poor's GSCI Agriculture Index of eight commodities dropped 16 per cent this year, including a 36 per cent slump for corn, the biggest decline among 24 raw materials tracked by the S&P GSCI Spot Index, which is down 1.8 per cent. The MSCI All-Country World Index of equities advanced 17 per cent since the end of December. The Bloomberg U.S. Treasury Bond Index lost 2.2 per cent.
Improved yields and expanded acreage will boost Canadian wheat output by 22 per cent this year to a record 33.17 million tons, the government estimates. Canola production will jump 16 per cent to an all-time high of 16.03 million, while barley expands 18 per cent to 9.43 million, the most since 2009. Corn was forecast to match last year's record of 13.1 million tons.
While capacity at grain elevators has increased 5.4 per cent in the past decade to 11.6 million tons, that's down from 14 million in 1990, when the country had four times as many elevators, Canadian Grain Commission data show. The government doesn't track storage on the nation's farms, where production of grain and oilseeds are up 38 per cent since 2003.
This year, wheat yields will be a record 3.23 tons per hectare, up 13 per cent from last year, barley yields will jump 27 per cent, and canola fields will produce 2.07 tons per hectare, up 31 per cent from 2012, government data show.
"No one anticipated the size of the crop that we've actually got," which may take more than a year to market, said Brent Watchorn, executive vice-president of marketing for Winnipeg-based Richardson International.
Export demand may soak up some of the surplus and help limit price declines. Canada will ship 20.5 million tons of its wheat crop to foreign buyers in the current crop year, the most since 1995, according to the U.S. Department of Agriculture. Canola sales will jump 10 per cent to eight million tons, Agriculture & Agri-Food Canada said Oct. 16.
A bumper crop in Canada will help global wheat output jump by 5.8 per cent to 692.6 million tons, the most ever, in the 12 months that began July 1, the International Grains Council said on Sept. 26, boosting its forecast from a month earlier by two million tons.
Grain supplies in Canada also may wait longer than normal on farms or in storage because there isn't enough shipping capacity by a rail industry that transports about 95 per cent of the nation's crops, said Wade Sobkowich, executive director of the Winnipeg-based Western Grain Elevator Association. Companies may need twice as many rail cars as normal to move all the grain this year, he said.
Most of the export-terminal capacity is sold out through November and some buyers are booking deliveries into April to make sure they're not waiting for supply, Watchorn said.
Three elevators that have exceeded their capacity were storing a total of 96,000 tons on the ground in the first week of October, according to the Canadian Grain Commission in Winnipeg.
Bast, the Manitoba farmer, said he spent $150,000 this year to add 10,000 bushels of storage capacity, an 11 per cent increase. That only gives him enough room to store about 60 per cent of his crop, which means the rest will have to be sold at low prices or put into someone else's bins.
"If the terminals are plugged and can't take more grain, then everything has to sit at a standstill," Bast said. "Everything is full at the farm right now, and we've got some more that's got to come off the field yet."
-- Bloomberg News