Agronomist Notes

I’ve spent a number of days reviewing seeding and fertility plans with clients. I am very thankful we had our fertilizer positioned last fall because the price is now roughly $600 tonne for urea and phosphate. Many were able to book in under $400 tonne for urea and $425 tonne for phosphate last fall. The NH3 purchased last September was for $470 tonne and later on at $600 tonne. Today the spot price is around $1,000 tonne for full service! Fertilizer prices seem to change daily with no guarantee unless you're underneath the spout and ready to take delivery. What a spring!

Agronomy

I have included my cost of production spreadsheet this week to give you an example of what I use to determine overall profitability. My personal situation is different than most as I do not have any fixed costs; I rent everything and have my fieldwork custom done. I encourage you to nail down your own numbers to give you a true cost of production so you’ll recognize a good price for your commodities when you see one. We're about to embark on a wild commodity market ride starting now, and we had better be in a position to take advantage of pricing opportunities when they arrive.

Insert COP spreadsheet here or the last page.

Market News

World Price Outlook: Snapshot

• · Non-durum wheat prices are expected to decline in 2007-2008, as a result of the rising US and major exporter stocks. Protein premiums are expected to increase, assuming normal protein levels in the US and Canadian spring wheat crops for 2007.
• · Durum prices are expected to decline, due to larger supplies in the major exporting countries. However, the premium over nondurum wheat is expected to increase sharply, due to the relatively tighter world stocks of durum vs. non-durum wheat.
• · Barley is forecast for higher production and lower prices. Area seeded to barley is forecast to increase by 21% from 2006-2007, with production rising by 28% to 12.8 million tonnes (Mt). Domestic feed barley prices are forecast to decrease by $15/t, to $135/t for 1CW, in-store Lethbridge. The CWB pool returns for malting barley are projected to decrease.
• · Corn production and prices forecast higher. Area seeded to corn is forecast to increase by 20% from 2006-2007 because of higher prices. Production is projected to increase by 19%, to 11.0 Mt, due higher area while total domestic supply is expected to increase by 11%. Feed use is forecast to rise by 4% due to the increase in available supplies.
• · Oats production higher and prices lower. The area seeded to oats is forecast to increase by 12% from 2006-2007, as a result of higher prices and lower production costs relative to other crops. Production is projected to increase by 15% to 4.2 Mt. Total supply is expected to increase by 11%, as higher production more than offsets lower carry-in stocks.
• · Canola production forecast at record high with higher prices. The area seeded to canola is forecast to increase by 11% because of high prices and strong expected demand. Production is projected to rise by 8%, to a record high 9.8 Mt, due in part to the widespread adoption of robust, high-yielding, hybrid varieties. Total supply is expected to rise to a record high due to increased production. Domestic crush is forecast to set a new record as the processing industry moves to supply the growing food and biofuel demand. The average price is forecast to rise slightly on support from higher US soyoil prices, lower carry out stocks and the forecasted drop in the value of the Canadian Dollar.
• · Flaxseed production forecast lower with stable prices. The area seeded to flaxseed is forecast to fall by about 38%, from the 10 year highs set in 2006-2007, because of burdensome carry-in stocks and low prices relative to other crops. The average price is expected to increase marginally.
• · Lentils forecast for lower production and higher prices. World production is expected to increase by 5% to 3.53 Mt mainly because of higher production in Australia. However, world supply is forecast to decrease by 5% to 3.93 Mt, as lower carry-in stocks more than offset the increase in production.
• · Soybean production forecast lower with higher prices. The area seeded to soybeans is forecast to decline sharply due to as farmers switch into corn because of high prices. Production is forecast to decline by 19% as the return to more normal yields from the records of 2006- 2007 complements the drop in output.

Full Report: http://www.agr.gc.ca/mad-dam/index_e.php?s1=pubs&s2=bi&s3=php&page=bulletin_20_01_2007-01-12

World Wheat Outlook

International Grains Commission’s first assessment of wheat supply and demand for 2007/08 is for a marked recovery in production but global supplies will remain historically tight. Crop conditions remain mostly favourable in the northern hemisphere, although there have been excessive rains in India and drought is a problem in Morocco. The forecast of total production is unchanged at 624 Mt, 34 Mt up from 2006. The main increases will be in the EU, the US, the CIS, India and Australia. Consumption is projected at 622 Mt Half the 15 Mt increase from 2006/07 is due to greater feed use as wheat supplies improve relative to feed grains. World trade is forecast near unchanged at 107 Mt, increased imports of wheat for feed mostly offset by a decline in milling wheat. No significant recovery in world stocks is expected in 2007/08.

Source: http://www.igc.org.uk/downloads/gmrsummary/gmrsumme.pdf

World Barley Outlook

World productionis forecast at 150 Mt, up by 12 Mt from 2006. A rise in plantings, especially of spring barley, in the EU should lead to a larger crop there, while a big increase in plantings is expected in Canada. With normal weather, Australia’s crop should increase considerably.

Source: http://www.igc.org.uk/downloads/gmrsummary/gmrsumme.pdf

Canadian Grains, Oilseeds, Pulses and Special Crops Outlook 2007-08

Production of grains, oilseeds, pulses and special crops in Canada is forecast to increase to 72 million tonnes (Mt) in 2007, from 69 Mt in 2006, due to higher area and yields. However the total supply is forecast to decline due to lower carry-in stocks. Although exports are projected to decrease, food and industrial use is forecast to increase significantly due to the strong demand for biofuel. Carry-out stocks are forecast to decrease slightly. World wheat prices are expected to decrease as US and Australian growing conditions return to normal. Canadian prices will be moderately supported by the weakening Canadian dollar. World corn and oilseed prices are expected to increase on support from the growing biofuel sector in the US and the EU. The market outlook is very tentative due to uncertainty regarding global supply and demand conditions. Unusual weather patterns or policy changes in any of the major importing or exporting countries could significantly alter the outlook.

Canadian Farm Fuel and Fertilizer Expenses

In 2007, fuel prices are forecast to be lower than in 2006 but fertilizer prices are expected to continue to increase due to the continuation of tight supply relative to demand. The US Energy Information Administration (EIA) forecasts the price for WTI crude oil to average US$59 per barrel in 2007, 10% below the 2006 average. Diesel prices are projected to show a 4% decrease while gasoline prices are forecast to decrease by about 9% in 2007. Assuming that the Canadian dollar will depreciate slightly in 2007, AAFC expects farm machinery fuel prices to be down by about 2% for 2007 in Canada.

Source: Agriculture & Agri-Food Canada

USDA Crop Acreage Snapshot

Corn up, spring wheat up, durum wheat up, winter wheat up and soybeans are down. To view the complete list of acreage reports see full story.

Full story: http://www.agweb.com/get_article.aspx?src=gennews&pageid=135215