April 2017 – New Crop Edition. Traditionally in April, there is a lot of spirited debate on the projected acreage numbers for Canadian Special Crops. This year is voicing more of a stunned silence from market participants when looking toward the 2017 production potential. The hesitation is not surprising given the February collapse of the old crop markets and lingering uncertainty about import restrictions on several main import markets for lentils, peas, and canaryseeds. The memory of quality problems at harvest for Canadian crops is also fresh in the minds of both growers and buyers alike. Farmers are not likely to risk undervaluing their future crop while buyers have strong fears of overpaying for poor quality products that they may have trouble importing.
My feeling is despite these polar points of view the market mostly has it right. Acres for most crops will be down slightly due based on lower price expectations and the need for disease control in rotations. There is ample moisture to get crops out of the ground and the probability is that yields are going to be better than 2016. We can’t get a wreck at harvest 3 years in a row, can we?
Last year we started out pricing similar to the numbers we are discussing today. Grower bids for Reds in the mid 20’s, Lairds in the Mid 30’s. If things generally stay the same this is where we should be in September. With both farmers and importers taking a more wait and see approach there should be a lot of free agents looking to do business off the combine rather than worrying about delivering on production contracts. This should balance nicely against the demands of buyers who will be willing to pay market prices for increased certainty in quality. Canary is a bit of a dog today but fundamentally it’s hard to see the situation getting much worse. A moderate increase in buyer participation should float the canary back up toward the mid 20’s through 2018.
All of this depends on the weather, though I would argue to a lesser degree than history has revealed. Seed varieties and production methods have shown a remarkable sophistication in their ability to harvest a decent crop in conditions that would have been a total disaster 1o years ago.
Looking forward, expect markets to remain defensively priced with growers slow to participate until more clarity arrives in the special crops narrative. By June 2017 the industry should be in a good position to move forward. Dn2017