Overflowing Canada grain bins compound global glut

No Bags

While capacity at grain elevators has increased 5.4% in the past decade to 11.6 million tons, that’s down from 14 million in 1990, when the country had four times as many elevators, Canadian Grain Commission data show. The government doesn’t track storage on the nation’s farms, where production of grain and oilseeds are up 38% since 2003.

Grain Bags Canada, the largest seller of plastic sheets used as a cheaper alternative to metal bins for keeping harvested crops dry, has been sold out for the past month. It’s the first time in its seven-year history that the Humboldt, Saskatchewan-based company had none to sell, including the popular 10-foot-by-300-foot (3-meter-by-91-meter) bag that can hold as many as 15,000 bushels, President Aaron Yeager said.

“We knew before harvest there was going to be a shortage of grain bags,” said Yeager, adding that he plans on ordering as much as 40% more next year so he doesn’t run out. “Every direction I look, I can see a bag or two in the distance, and they’re not all mine.”

Bumper Crops

Output in North America has rebounded after drought last year cut U.S. corn production by 13% and soybeans by 2.6%. Hail and adverse weather in 2012 reduced Canada’s canola crop by 5.1%, and wheat and barley yields fell.

While planting in western Canada was delayed this year because of excess rain and cool weather, crops progressed as the weather improved. Wheat yields will be a record 3.23 tons per hectare, up 13% from last year; barley yields will jump 27 percent; and canola fields will produce 2.07 tons per hectare, up 31% from 2012, government data show.

“No one anticipated the size of the crop that we’ve actually got,” which may take more than a year to market, said Brent Watchorn, executive vice-president of marketing for Winnipeg-based grain handler Richardson International.

Exports Rising

Export demand may soak up some of the surplus and help limit price declines. Canada will ship 20.5 million tons of its wheat crop to foreign buyers in the current crop year, the most since 1995, according to the U.S. Department of Agriculture. Canola sales will jump 10% to 8 million tons, Agriculture & Agri-Food Canada said Oct. 16.

Canola futures probably will rise to C$505 by the end of March, fueled by increased export demand, said Terry Reilly, a senior commodity analyst for Futures International in Chicago. Exports of oilseeds including canola may gain 12% on demand from China, Japan and Mexico, said Ken Campbell, a vice president of North American Softseed Crushing for Decatur, Illinois-based processor Archer-Daniels-Midland Co.

Farmers with storage may be reluctant sellers, and grain buyers may be eager to restock inventories depleted by last year’s smaller crops, Richardson’s Watchorn said. Wheat reserves before this year’s harvest tumbled to a five-year low of 5.057 million tons, down 15% from a year earlier, and canola inventories fell 14% to 608,000 tons, Statistics Canada said Sept. 6.

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