International politics add to uncertainty for crops in 2019

Canada’s diplomatic spat with China among the factors that may influence demand for canola

[UPDATED Feb. 26, 2019] Some producers are responding to the market while planning their spring planting decisions. Others are going with tried-and-true rotations. But everyone is watching the weather and geopolitical events.

D’arcy Hilgartner.
photo: Supplied

“From a pulse perspective, things have improved a lot since the fall of 2017, when India closed its markets. Prices have risen some, but not a lot,” said D’arcy Hilgartner, former chair of the Alberta Pulse Growers Commission.

He said the market signs are encouraging and some growers are putting peas back into their rotation. In southern Alberta, lentil prices have rebounded a bit.

“They’ve come up from the lows they were from 2017 and 2018. Depending on people’s rotations, it can be a viable option.”

Brennan Turner, CEO of FarmLead, said lentil prices depend on India.

“You’re not going to see import tariffs relax until September, maybe October or November,” he said.

This is due to the federal election coming in India. Nothing will change in terms of trade or tariffs before the election, said Turner. The Indian government will see if there are good monsoon rains from June to September.

Brennan Turner.
photo: Supplied

“If they don’t get their monsoon rains, they won’t see as many pulses planted and that will impact production,” said Turner, who is based in Foam Lake, Sask. Producers likely won’t see anything done about the tariffs and trade with India until October-December 2019, and that’s if India gets the monsoon rains. If it doesn’t, tariffs could be relaxed a little sooner.

China is interested in Canadian peas, but it started buying them later in the year, because Russia and Kazakhstan harvest starts about a month and a half before the western Canadian harvest.

“The challenge is that harvest that you see in Western Canada for pea prices gets elongated into the second half of Q4, which is frustrating. If you’re thinking of locking in peas, try to get between 30-40 per cent sold, and if you’re willing to take on an act of God clause, you can get to 50 per cent sold. We know there will be a lot of peas planted in a lot of places,” he said.

India is still importing some peas despite the tariffs.

Hilgartner said he uses a relatively set rotation each year on his farm near Camrose. Pulses are a significant part of his rotation. He will be trying new crops, and expanding into fababeans a little bit, because he sees opportunity.

“We’re trying some soybeans on our farm. It’s more to learn how to grow them and see if they are a future option for us.”

Geopolitical risks

Jonathon Driedger, senior market analyst with FarmLink Solutions in Winnipeg, said that most of his farmer clients are comfortable with the level of weather uncertainty going into spring, as that’s just a feature of agriculture.

Jonathon Driedger.
photo: Supplied

“What adds more uncertainty to the bigger picture than we’ve seen in a long time is that there’s more geopolitical and regulatory risk. I think that is something that has been building over the last couple of years. I don’t think that is something that is going to go away very quickly,” he said.

He mentioned the U.S./China trade disputes, and how the dispute between them is impacting Canada.

“We’ve also got this thing with Huawei and even though they’re not targeting Canadian canola, some of our canola seems to be tied up with stuff like that,” he said.

All of this creates an element of greater uncertainty, and makes it more difficult for analysts to try and figure out what is going to happen, he said.

Dave Bishop, the new chair of the Alberta Barley Commission, farms near Barons. He’s concerned with the weather in his area.

Dave Bishop.
photo: Supplied

“Down in the south, for three years parts of it have been pretty dry,” he said.

He’s also been watching the political situation with China, but doesn’t know if that could affect agriculture.

“At the moment, it doesn’t seem to be affecting on the barley side anyway. I’m hearing rumblings that canola could be affected. There’s always going to be a geopolitical issue that we don’t know about that could hit us,” said Bishop.

He thinks barley acreage could go up, and Turner doesn’t disagree.

“We’ve had record exports for the second straight year in barley out of Canadian ports. That’s a strong factor,” he said.

There are strong feed prices for barley, and there will probably be a lot more feed barley exported, since Australia is not as able to compete in this market as much because of its drought.

Gary Stanford.
photo: Supplied

Gary Stanford, the new chair of the Alberta Wheat Commission, makes his decisions based on crop rotation. The Magrath-area farmer is watching very closely to see how trade issues are shaping up with the United States, since he is so close to Montana. He’s planning to cut back on his durum acres since the price is down, but hopes Canada can strike a deal with Italy to lower its tariffs.

*Turner said he would not be surprised to see wheat prices pick up a bit. He advised farmers to do their contracting before the end of June for delivery at harvest time.

“There are opportunities right now for the Canadian wheat market, specifically the exports being bigger,” said Turner. There are signs that it could be a record year of exports, with good prices. But strong prices will not likely last long.

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“CPS has surprised everyone. I have to give praise to some of the crop organizations that have been going to Africa and Latin America and opening up doors to this lower-protein wheat that we are producing in Canada. I think that’s going to continue to support the market. We’re seeing record levels,” Turner said.

*Update: A quote by Brennan Turner was updated to indicate when farmers should do their grain contracting.

About the author

Reporter

Alexis Kienlen lives in Edmonton and has been writing for Alberta Farmer since 2008. Originally from Saskatoon, she has also published two collections of poetry and a biography about a Sikh civil rights activist. Her freelance work has appeared in numerous publications across Canada.

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