One truth about farming is that acres tend to flow to crops deemed to have the best chance of a good return.
On first look that statement is rather obvious, and would seem to make sense. If a crop is enjoying good prices it would be wise to grow that crop.
Of course the problem that arises is that good prices today are far from a guarantee of good prices by the time the next crop comes off.
Prices can dip rather quickly in the world of commodities which at the heart of their markets rely on supply and demand.
Certainly over the years government trade subsidies from one country, or another, trade barrier tariffs and other outside pressures have circumvented the supply and demand mechanic of markets, but the amount of a crop available to the world market, and the amount buys need to fulfill their requirements remains a key factor.
And therein lies an ongoing reality for producers.
Producers see good prices as a signal to boost production. They do that by looking to seed more acres. In upping seeded acres they send a message to the market that supply will grow, putting downward pressure on prices. It鈥檚 a cycle replayed on an almost annual basis.
So with canola futures edging toward $500 per tonne, thanks to a lower American dollar and soybeans seeming to have found their low benchmark, farmers here seem to see the crop as one to make a dollar on moving forward.
Witness a forecast from Agriculture and Agri-Food Canada predicting a one million acre increase in canola area in 2018 compared to 2017. If you estimate a 30 bushel per acre crop that means a significant increase in production could hit the world market in the fall of this year.
The situation has the potential to be more burdensome on the market when coupled with the prediction via Ag Canada which suggests large ending stocks of two million tonnes for the current crop year and 2.25 million by July 2019.
That would compare with the 1.3 million tonnes carried forward from this past crop year.
The situation is one where the signal to produce may well stagnate prices moving through the current year, and into 2019.
And of course Canadian Prairie farmers are not the lone producers on canola either, and some interesting developments may be taking place stateside regarding the crop.
The U.S. Canola Association is looking at a program whereby farmers would receive a federal subsidy for growing the crop 鈥� see the outside influences in prices mentioned earlier.
USCA is putting forward a proposal in conjunction with the National Sunflower Association and the American Honey Producers Association to increase the acres planted to canola and sunflowers to provide more suitable habitat for honey bees and wild pollinators. U.S. growers receive subsidies for adopting conservation stewardship practices such as no-till seeding and variable rate fertilizer application.
Such a move will add another level to the market pressures on the crop should the program 小蓝视频 officially launched and farmers in the US adopt it in a major way.
Calvin Daniels is Editor at Yorkton This Week.
