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FCC Profitability Outlook Unchanged from January

Despite highly uncertain production on both sides of the U.S.-Canada border and continued global trade tensions, Farm Credit Canada is sticking to its original profitability forecast for the grains and oilseeds.
Back in its initial outlook in January, FCC said profitability of canola, soybeans and lentils should remain near break-even, with corn margins positive and spring wheat near break-even or just above. Winter wheat margins were expected to be under pressure.
Months later, and after unprecedented seeding delays in large portions of the U.S. Midwest and Ontario, early drought on the Prairies and amid the still-ongoing international trade difficulties, FCC said in an update last week there’s no change in its forecast. However, it did caution that “significant headwinds” still persist.
The trade tensions between China and the U.S and market access challenges for Canadian crops remain the main hurdles to profitability, it said, adding that growth in this year’s crop production will be needed to offset the expected lower prices for soybeans, pulses and canola. Further, U.S. corn production, even after this month’s supply-demand update from the USDA, still remains uncertain.
At US$3.60/bu, the USDA’s average projected corn price for 2019-20 is now identical to last year. However, it could climb higher in the near future if the USDA’s yield or planted acre assumptions prove too optimistic. Canadian producers may also see improvements in local basis this year, FCC said, noting that Ontario corn production was also delayed with a wet spring, with possibly 500,000 fewer viable acres than Statistics Canada’s early estimate of 2.2 million acres.
Weather has taken a toll on Ontario’s soy and wheat crops too, although crops elsewhere in the country look good, according to FCC.
Overall prairie lentil, pea and soybean production is expected to be near to, or slightly exceeding, average levels. Both Alberta’s and Saskatchewan’s winter and spring wheat crops were progressing well, if not better than average, at the end of July, it said.
The condition of other major crops, including canola, remain highly variable but in line with longer-term averages, FCC said.
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