Canada Farmers Expand Oilseed Acres as Returns on Wheat Decline

In the new era of low grain prices, Canadian farmers like Hubert Preun are planting more land to oilseeds that they see as more profitable bets than wheat or corn.

Preun says he will sow 2,200 acres of soybeans next month on his farm in Selkirk, Manitoba, up from 1,700 acres last year. In 2014, the crop fared better than his wheat fields during periods of drought and too much rain, and soybeans are cheaper to produce than corn, he said.

“It’s a very resilient crop,” said Preun, 47, who also grows canola and corn on his 7,000-acre farm.

Canada, the world’s top canola producer and the second-biggest wheat exporter, probably will sow a record soybean crop for a seventh straight year, according to a Bloomberg News survey of nine analysts. Canola planting also will rise, the respondents said. The government will release its forecast on Thursday.

Grain Slump

After global surpluses sparked double-digit declines in wheat and corn prices over the past year, canola futures in Winnipeg are down just 2 percent. While soybeans also slumped, they are easier to grow than corn and don’t require nitrogen fertilizer, said Dan Mazier, the president of Keystone Agricultural Producers, a farmer-advocacy group in Manitoba.

“It’s a no brainer,” said Mazier, who plans to double the acres of soybeans on his farm north of Brandon, Manitoba. “The oilseeds are definitely holding their value,” with better demand from exporters and processors, so farmers probably will switch some land from wheat, he said.

Part of the reason canola prices have fared better is because of the weaker Canadian dollar, said Ken Ball, a senior commodity futures adviser at PI Financial in Winnipeg. That probably adds about C$50 to canola futures that closed on April 22 at C$451.50 a metric ton, he said. Corn, wheat and soybeans traded in Chicago are priced in U.S. dollars.

Normal Rotations

While wheat may be dropping out of favor because of the price decline, growers probably aren’t shifting acres “aggressively” and appear to be sticking with normal rotations, Ball said.

With more farmers planting canola, wheat acres may drop as much as 3 percent this year, Jerry Klassen, a manager of Canadian operations and trading at Gap SA Grains & Produits in Winnipeg, said in an April 22 telephone interview. The cost of growing canola is not that much higher than wheat and yields are “sharply higher,” Klassen said. “With wheat this past year, the low prices have actually discouraged acreage.”

Production Outlook

Because flooding limited Canadian output last year, production in 2015 probably will be higher even with the switch to oilseeds, the government said.

Grain and oilseed harvests will rise 4.3 percent to 76.8 million metric tons this year, because more land will be seeded, the nation’s agriculture agency said in an April 17 report. Canola and soybean output will rise 5 percent to 22.65 million tons in 2015, compared with a 0.7 percent increase in wheat production, the agency said.

Parts of southeast Saskatchewan might see a 10 percent increase in plantings this year after warm spring weather helped dry out waterlogged land, Arlynn Kurtz, head of the rural municipality of Fertile Belt in Saskatchewan, said in an April 16 telephone interview.

Milder Weather

Temperatures in the Canadian Prairies are expected to remain above normal until mid-April, spurring an early start to planting season, according to Commodity Weather Group in Bethesda, Maryland. “Abnormally mild spring temperatures” are expected to promote rapid fieldwork and early wheat planting, Martell Crop Projections said in an April 10 report.

“The land has dried up pretty good,” Kurtz said. “It we get another week of decent weather, I think there will be some guys out there starting to seed.”

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