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Production
Estimates and Crop Assessment Division |
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Production
Estimates and Crop Assessment Division |
March 22, 2004
FAS analysis suggests that canola area will increase at the expense of barley, oats, and wheat. For the past three years, farmers on the Canadian prairie have generally been responsive to projected net returns, including price signals, when making decisions about which major grain and oilseed crops to plant. For the period 2001 to 2003, there was a generally a strong positive correlation between projected net returns and planted area for spring wheat (1 CWRS and 2 CWRS classes), barley (1 CW), oats (3 CW), and to a lesser extent durum wheat (1 CWAD) and rapeseed [canola] (1 CAN). Analysis showed that farmers responded to an increase in projected net returns by increasing planted area, and by decreasing planted area in response to a decrease in projected net returns. Projected net returns in this analysis were a function of total variable costs (seed, fertilizer, chemicals, fuel, repairs, crop insurance, interest, and other costs), projected yield, and projected price. Yields were average for the region, and prices were forecast prior to planting. Wheat prices were based on the Pool Return Outlook given by the Canadian Wheat Board monopsony.
There are two major soil groups in Alberta and Saskatchewan, the brown soil zone and the black soil zone. The brown soil region has a warmer, dryer climate, making it very suitable for the production of durum wheat, which is susceptible to disease under moist conditions. Also, the heat and dryness is conducive to cultivation of the high-protein spring wheat varieties (class 1 CWRS). However, crops such as canola and oats require the levels of moisture found in the black soil zone, and these crops are viable alternatives to wheat cultivation if the net returns are favorable. The graph below illustrates that farmers in Saskatchewan have been sensitive to the economics of growing spring wheat. Projected net returns for spring wheat, and spring wheat area planted are highly correlated over the period 2000 to 2003.
The table below shows the correlation between projected net returns for major field crops, and the seeded area of major field crops planted in western Canada. Correlation is shown for the most recent three years, 2001 to 2003, and for most crops there is a strong positive relationship between profitability and what farmers plant. There are other factors besides profitability that affect what is grown. For example, planting wheat or canola year after year can result in yield and quality-reducing disease problems, so farmers may decide that crop rotation is more important than projected net returns. Weather may also have a role, because a farmer in a moist climate may be willing to plant wheat into a dry field and hope for rain, but that may not be true for canola. Barley and oats provide some flexibility because in Canada, a significant portion of the area is often chopped "green" and used for livestock feed instead of being harvested for grain. The percentage that is chopped depends on net returns for green-chop--a function of the livestock market and weather conditions--but can range from 10 to more than 30 percent.
| Province | Commodity | Region | Class | Correlation Between Projected Net Return and Planted Area: 2001 - 2003 |
| Alberta | spring wheat* | brown soil | 1 CWRS | 0.87 |
| black soil | 2 CWRS | 0.90 | ||
| durum wheat+ | brown soil | 1 CWAD | -0.28 1/ | |
| canola* | brown soil | 1 CAN | 0.73 | |
| black soil | 1 CAN | 0.92 | ||
| oats+ | black soil | 3 CW | 1.00 | |
| barley* | brown soil | 1 CW | 0.97 | |
| black soil | 1 CW | 1.00 | ||
| Saskatchewan | spring wheat* | brown soil | 1 CWRS | 0.89 |
| black soil | 2 CWRS | 0.94 | ||
| durum wheat+ | brown soil | 1 CWAD | 0.75 | |
| canola+ | black soil | 1 CAN | 0.05 2/ | |
| oats+ | black soil | 3 CW | 0.95 | |
| barley* | brown soil | 1 CW | 1.00 | |
| black soil | 1 CW | 0.97 | ||
| Manitoba | wheat | all | 2 CWRS | 0.73 |
| canola | all | 1 CAN | 0.82 | |
| oats | all | 3 CW | 0.89 | |
| barley | all | 1 CW | -0.93 3/ | |
| *Complete
planted area data was not available at the Region level.
However, projected net returns for the different soil Regions within a Province were highly correlated. Therefore, correlation between projected net returns at the Region level and planted area at the Province level was determined to be a valid approximation. |
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| +These
commodities are grown predominantly in one Region per Province.
Therefore, correlation between projected net returns at the Region level and planted area at the Province level was determined to be a valid approximation. |
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| 1/ possible explanation: projected net returns too pessimistic in 2003 (projected price ~85% of final price) | ||||
| 2/ possible explanation: difficulty planting (actual seeded area was ~90% of March planting intentions) | ||||
| 3/ possible explanation: projected net returns too pessimistic in 2001 (projected price ~50% of final price) | ||||
Precipitation on the Canadian prairie over the winter has been variable, according to Agriculture and Agri-Food Canada (AAFC). Since November 1, a large portion of Alberta and northern Saskatchewan has experienced record dryness, while southern Saskatchewan has been very wet--and buried under a thick blanket of snow. Precipitation in Manitoba has also been extremely high. Farmers typically begin field work in late April, so moisture conditions over the next few weeks will set the tone for the 2004 growing season. At this point, it appears that a large portion of the prairie will begin the growing season with a substantial soil moisture deficit.
According to reports from AAFC and provincial agriculture departments, canola has the best projected net return compared to last year of all the major field crops. Net returns from barley and oats are projected to be less than they were prior to planting in 2003. The situation for durum wheat is mixed, but net returns for spring wheat are slightly more promising than they were at this time last year in Saskatchewan and Manitoba, but slightly less promising in Alberta. However, soil moisture conditions at planting time may dictate the type of crop that farmers are able to plant.
Based on the results of this analysis, it is likely that farmers in western Canada will decrease their barley and oat plantings and increase area seeded to canola, if possible. Since projected net returns for canola are so much larger than wheat, area seeded to wheat may also decline so that more canola can be planted. This was also the conclusion of AAFC, in their seeded area report published on February 6, 2004. On April 23, Statistics Canada will publish their "March intentions of principal field crop areas" report, which is based on telephone interviews with farmers. The Statistics Canada figures will be available through their website. The first official USDA grain production forecast for the 2004/05 season will be published on May 12, 2004. The first oilseed forecast will be available on June 11.
For information about where crops are grown in Canada, see the PECAD Canada country page.
Canada:
Third Year of Low Yields on the Prairie, 9/12/03
Canada: Crop Condition Update, 7/14/03
Canada: Prairie Drought Slashes Production, 9/13/02
Canada, Grain and Feed Annual 2004, CA4013
(pdf), 2/24/04
Canada, Oilseeds and Products Annual 2003,
CA3030 (pdf), 5/15/03
Canada, Grain and Feed Annual 2003,
CA3021 (pdf), 4/10/03
For timely crop conditions in Canada and throughout the world, visit Crop Explorer
For current and historical official USDA data on production, supply and distribution of agricultural commodities for Canada and much of the world, visit PS&D Online
