(Reuters) — The recent rally in grain and oilseed prices is based more on concerns about crop levels than on speculation by investors, Canada’s agriculture minister said on Monday.
Prices of crops such as wheat, corn, soybeans and canola are at their highest levels in more 2-1/2 years amid flooding in Australia and dryness in Argentina. Prices are well below their 2008 peak, but they have been high enough to spark protests in North Africa and the Middle East.
“This time around it’s based more on, ‘Will the land be in production and will there be enough?'” Agriculture Minister Gerry Ritz told Reuters in an interview.
Ritz said he could not predict when prices will ease. Global consumers may see higher food prices, but any increase in Canada will likely be minor, he said.
Saturated soil and heavy snowfall in Western Canada have raised potential for severe flooding this spring that could take millions of acres out of production.
The uncertainty means farmers are holding off on buying fertilizer and chemicals to prepare for planting, Ritz said.
“The biggest impact that you’ll see right away is the lack of dollars going into inputs,” Ritz said from Markham, Ont.
Farmers “are going to look at the (crop) rotations, make last-minute decisions and then they’ll try to scratch and find the seed and fertilizer they need at the last minute, which could be problematic.”
Such caution could take some of steam out of North American agricultural stocks such as Viterra, Canada’s top grain handler and retailer of farm inputs, which has gained 13 per cent this year as grain prices rallied.
CWB changes on hold
Ritz also said chances of changes to the Canadian Wheat Board, the world’s last major agricultural monopoly, are “slim to none” while the ruling Conservatives are without a parliamentary majority.
The Conservatives want to end the wheat board’s wheat and barley marketing monopoly, but hold only a minority of seats in Parliament and can’t change the law unless other parties agree. Opposition parties support keeping the board’s monopoly.
Ritz said he’s focused on whittling down trade barriers to Canadian farm exports.
China and South Korea have banned Canadian beef since a 2003 discovery of BSE on a Canadian farm. China agreed last summer to accept some Canadian beef and Ritz said commercial beef shipping should resume quickly, with Canadian officials now in China finalizing details.
Canada has complained about South Korea’s stance to the World Trade Organization, and Ritz expects a resolution this year.
Ottawa has supported the supply-management structures of its dairy and poultry industries, a position thought to be keeping it out of talks toward freer trade with Asian markets.
Supply management is a system of quotas and tariffs to restrict production and support prices.
Ritz said Canada has less to gain from the Trans-Pacific Partnership, since it already has good relations with most of the countries, than from free trade with the European Union.
— Rod Nickel writes for Reuters in Winnipeg.