Blue comments are notes on current StatsCan Seeding Intentions report against the backdrop of the April report reaction.
Bullish: Barley(mildly) Neutral: Canola, Flax, Pea, All Wheat Bearish: Lentil
Durum – The print is bad – 5.1 when largest estimate was 4.8 and average was 4.5. Hopefully Canola can hold it up as acres have shifted out of Durum and into Canola since survey – if they haven’t price spread may have to widen further. The print is now 4.7 – slightly below expectation average but within the range. This is more where we hoped the starting point would have been in April and leading to a June at 4.5 but we will take what we can get. So we remain a solid 200,000 above our original thesis level and with Durum country having exceptional yield potential South of #1 and into the US, we aren’t overly Bullish. The Western half of Saskatchewan may be weaker due to excessive rainfall and Wheat has broken its multiple year downtrend, so Durum can strengthen on the back of Wheat and Canola and not so much on its own fundamentals until we see how western Saskatchewan plays out.
Canola – slightly below average estimate of 20.6, coming in at 20.4. Should confirm the Bullishness we’ve seen to date but not a catalyst for a higher move on its own. At a new 21.3 print, Canola is more in line with expectations than the April number. The Canola crop is not nearly as impressive as it looked to be in mid-June and with the US Corn crop burning up, Beans are likely to battle for acres well into 2013, so 21.3 million acres is not seen as Bearish or anything that would stall a rally, probably confirms the Bullish move if anything.
Lentil – not at all Bullish coming in at 2.5 million verse last year’s 2.6 – a meager drop of 4.3%. Pipeline is more empty than this time last year and Global area will be down, but will be at least 2013 before we are happy with Lentil prices again. This report won’t give us a run-down on Greens vs Reds or Large vs Small, but my guess is that we are flat to higher Large Green and way up year over year on Small. Not good for either market. This is worthy of an OMG – 2.6 million acres – what????. If this is even within 300,000 acres accurate, the Saskatchewan farmer needs a severe kick in the rear. Lentils are like the CWB in that it traditionally sends the wrong market signals at seeding time, but we are unsure how any signal could have been perceived as needing to actually add acres. I’m not sure if this can be accurate, but it certainly explains the #2 Old Crop bids moving down to 18c.
All Wheat – was slightly above expectations at 24.3 and would be considered mildly Bearish but it’s Durum that is much of that extra acreage. Now at 23.8, this should be mildly positive for a market already moving into Bullish territory on a Global basis, though it will remain a relatively slow process as Wheat is nowhere nearly as tight as Beans or Corn.
Pea – within expectations at 3.3, mildly Bearish on expectations, but having seeded 3.6 million in 2010, we don’t think this is too bad, though that is 42.5% more acres than last year. At 3.5, this seems about perfectly seeded but would have expected some of the additional 200,000 acres to have come at the expense of Lentils but apparently not. We continue to believe there will be upside in Peas as we move into 2013 but have no problem selling “off the combine” movement near $8.
Flax – At over 1.0, is not out of expectations but a very large increase of 49.6% over last year. With struggles in the Ukraine (which claimed our dominance spot on the export front) this might all be needed depending how badly that crop took the weather stress, and if the EU is willing to spend. Now at 1.1, there is still speculative upside given the right time horizons for Eastern Block flax to run out in early 2013.
Summerfallow – is down to 4.0 from 12.4 in 2011 and 10.8 in 2010. This is fairly priced in, but worth noting as StatsCan believes that almost all flooded land over the last 2 years will be seeded. This was to be expected given our winter. Now reported at 3.9 – so does not seem that StatsCan is reflecting new unseeded or flooded acres in this report – perhaps leaving us a Bullish nugget for a later date?
Overall, this report can easily be dominated by the current weather rally we are in or that rally’s own sudden stop if some timely rains become forecast. Lentils was the biggest and most impacting surprise for our area. It’s understandable that a Bearish crop can have additional acres in the Prairies this year because of so much unseeded land last year – but Lentils were not a predominant crop in those unseeded areas – I’m at a loss on this one. Saskatchewan farmers should have put in 2 million acres at the most. This could take a while to slug through unless crop condition really begins to deteriorate going forward.