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Any opinions expressed here at Seeking Alpha by me are strictly my own personal views and ideas and should not be considered advice of any kind nor considered to be professional opinions. You should always seek advice from a qualified professional before embarking on any market trading or investing.
  • Crisis Brewing for Canadian Wheat Crops 3 comments
    Sep 9, 2010 2:07 PM

    Muddy, wet and rain soaked fields. Tractors buried to their axles on the land and grain fields that cannot be harvested owing to the incessant rains. Those are the images of much of the Western Canadian prairies today as the rain continues to drown the hopes of farmers who actually managed to get a crop planted this year.

    Here in Saskatchewan, Canada, one of the worlds most important grain growing regions, the outlook is dismal as we are now well into harvest season but with no respite from the weather to allow bringing in the crop.

    Canada may not the biggest grain producer on the planet but we are certainly in the top two worldwide when it comes to who exports product. And Saskatchewan producers account for the lions share of Canadian wheat production. Given recent grain export restrictions imposed by both Russia and the Ukraine and the drought affected crops throughout that region, what happens here now will have a magnified impact on prices going forward. A grains “price shock” is no longer out of the question.

    So just a heads up, it is looking like a crisis may be brewing for Saskatchewan grains as the harvest period progresses. Weather makes all the difference now and it is not favourable. It has started raining again (heavily in many areas) and farmers are now unable to get onto the land to harvest the crop. The soil conditions are just too muddy. The land is saturated too from a long summer of non-stop rain.

    You might be aware that only about 70% of seeding was successful in the province this year due to heavy spring rains and that meant millions of acres went unplanted. It has still not been determined just how much of the crop was washed away by the incessant rains but to make matters much worse, now that harvest has arrived, those who were successful at getting the seed in the ground may still not see a crop at all. Many are sitting on the sidelines and hoping for a solid week of warm dry weather. That liklihood is diminishing daily.

    To date, only a meagre 8% of the crop has been taken off and that was all during the recent warm sunny spell we had. The five year average for this time of year is typically more than 15%.

    Yesterday I talked to a couple guys I know who advised me that if the rain does not stop the seed quality will be quite low and will begin to sprout. Not even good for animal feed in some cases. It could not be worse news for these guys. More rain is expected over the coming week across much of the grain belt and it is expected to be heavy in some places.

    Soil saturation levels means that this crop may not come off the field at all as farmers will opt for the insurance instead of wasting resources trying to salvage what is in some cases just waist-high weeds that have thinned field productivity. Many farmers were simply unable to get into the fields this year to spray and knock down weeds and this has now become a problem unto itself.

    There is a lot at stake for global grain stocks if this crop does not come in successfully this year. Now is the time to watch the weather closely to see how it all plays out but we are now on a knifes edge where a substantial portion of the production could end up being lost if the weather situation does not turn around and soon.

    Winter is on it's way in the North too and an early first frost combined with the current moist conditions would take a heavy toll on production and take another share out of the global export crop. How much is anyones guess at this stage. Mere days will tell this story.

    Fingers are crossed that there is not an early frost yet worries persist that the very late plant means much of Saskatchewan's crop is still not yet mature as we head into the cooler season.

    Heavy rains meanwhile are expected to continue falling unabated through the coming week.



    Disclosure: No Positions
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Comments (3)
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  • tradinghouse
    , contributor
    Comments (52) | Send Message
     
    Hello Abegaz Very valuable report. Thank you.
    16 Sep 2010, 11:50 PM Reply Like
  • bob adamson
    , contributor
    Comments (4555) | Send Message
     
    Thanks Abegaz. This is a developing story that is not getting the wider publicity it deserves. The agricultural sector in Alberta, Saskatchewan and Manitoba has, generally speaking, been assumed by most Canadians to have been a bright spot in the economy over the past couple of years in stark contrast to the 1930s; the last period of global depression. Your post prompted me to check the Canadian Wheat Board site (below)

     

    www.cwb.ca/public/en/f.../

     

    which puts the harvest prospects on the Prairies in a global perspective.
    17 Sep 2010, 03:28 PM Reply Like
  • Asbytec
    , contributor
    Comments (5821) | Send Message
     
    Abe, got part way through it and couldn't stop wondering about the 12th century Islamic influence in the country. How do they feel about prosperity and Chinese involvement? If I understand 3rd world provincial values, one can realize their core values are not Wall Street values.

     

    As for food prices, they do have well armed factions who can quickly contribute to instability when food prices rise. They may or may not care about flat screen LCD TVs, but they do care about food prices. This seems to be a major flash point and extremists will use it to berate the west and inflame tensions. Also, what is the risk of a Zimbabwe style bout with hyperinflation? Pretty real, it seems.

     

    I'm in the middle of another project, currently, but I'll get back to this a bit later. Maybe you already addressed those issues, if they're issues at all.
    22 Dec 2010, 10:25 PM Reply Like
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