Canadian wheat and canola grower Mike Bast spent five years building silos to store 100,000 bushels on his 2,000-acre farm in La Salle, Manitoba. It wasn’t enough. He’s already dumping grain into his neighbor’s bins.
Harvests this year across the Prairie provinces of Canada, the world’s top canola producer and the second-largest exporter of wheat, will jump 14% to a record 80.8 million metric tons, the government said Oct. 16. The supply surge is eroding prices and testing the limits of domestic storage. Farmers are leaving crops in uncovered mounds amid a shortage of silage bags and a lack of space at grain elevators and export depots.
“I’ve never seen this much grain out in fields, in bags or in piles,” said Tyler Russell, the national grain-marketing manager for processor Cargill Inc.’s Canadian unit in Saskatoon, Saskatchewan. “We have a monster crop.” Most storage space will be “pretty much full” during harvest months, he said.
Bin-busting output in Canada is compounding record global supplies as planting expanded from Brazil to Ukraine to the U.S. Midwest after last year’s drought sent futures surging. Goldman Sachs Group Inc., Citigroup Inc. and Rabobank cut their price forecasts in the past month. Global food costs that reached a three-year low in September probably will drop 6% in 2014, the International Monetary Fund said on Oct. 8.
Wheat, Canada’s biggest crop, fell 10% this year to $6.975 a bushel on the Chicago Board of Trade (CBOT:WZ13), and canola in Winnipeg slid 15% to C$498.60 ($484.50) a ton. Grain and oilseed prices during the 12 months that began Aug. 1 will be as much as 30% lower on average than a year earlier, the government’s Agriculture & Agri-Food Canada said Oct. 16, after boosting its harvest forecasts by 5.7% from September.
The Standard & Poor’s GSCI Agriculture Index of eight commodities dropped 16% this year, including a 37% slump for corn, the biggest decline among 24 raw materials tracked by the S&P GSCI Spot Index, which is down 1.6%. The MSCI All-Country World Index of equities advanced 17% since the end of December. The Bloomberg U.S. Treasury Bond Index lost 2.2%.
Improved yields and expanded acreage will boost Canadian wheat output by 22% this year to a record 33.17 million tons, the government estimates. Canola production will jump 16% to an all-time high of 16.03 million, while barley expands 18% to 9.43 million, the most since 2009. Corn was forecast to match last year’s record of 13.1 million tons.
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