WESTERN CANADIAN GRAIN OUTLOOK.

Farmers across Canada continue to struggle with low crop prices, and no real relief is in sight. Prices are expected to remain low in 2001, while at the same time production costs are rising. To try to get ahead of the game, growers are planting grains they believe will bring them the best possible income. As a result, some shifts in planted acreage are expected.

Another result of the adverse conditions for Canadian farmers is their increasing animosity toward U.S. producers, who are receiving billions of dollars in aid from the government. Canadian leaders will push hard to level this part of the playing field in the next round of World Trade Organization negotiations.

Below is a summary of the situation for the major crops grown in Western Canada.

World wheat stocks are snug, and a production decline in any major exporting country would cause prices to strengthen. U.S. winter wheat acres are the lowest since 1972. High protein wheat net returns from the Canadian Wheat Board could push above $5/bushel in 2001-02. The wheat market is fundamentally solid. Canadian milling wheat returns could increase about 10 percent in the 2001-02 crop year.

Canada is gaining market share in world chickpea trade. Large size Kabulis should maintain a 30 cent/lb.-plus bid heading into the new crop year. Canada has a strong reputation as a key supplier of quality chickpeas. Farmers are boosting acreage because of impressive returns.

European and Middle Eastern demand for Canadian edible peas is rising. Prices for green and yellow peas should oscillate between $4/bushel and $5/bushel in the next crop year. European Union (EU) demand for non-genetically modified crops in general favors Canadian peas. Feed pea use in hog rations is expanding as hog numbers climb. The high cost of fertilizer will shift more acres toward Canadian pea production.

New crop Canadian flax prices could range from $5.75/bushel to $6.50/bushel at the farmgate in 2001-02. The stockpile of Canadian flax is expected to shrink this year and next. EU flaxseed production is dropping, and member countries are boosting their purchases from Canada. Still, world oilseed supplies are expected to persist, which will keep a lid on flaxseed price potential.

Malt barley prices are expected to fluctuate between $3/bushel and $3.50/bushel for six- and two-row barley. Demand should be strong. Feed barley farmgate prices are expected to hover in the $2.20/bushel to $2.60/bushel range. Good yields and strong demand from feedlots could push feed barley returns well into the black, especially in Alberta. In Saskatchewan and Manitoba, growers face high trucking costs. High and rising livestock numbers are boosting domestic use -- which should lead to larger spring plantings of feed barley.

Canola remains a follower, not a leader, in the oilseeds markets. Canadian canola prices are expected to range between $5.50/bushel and $6.50/bushel. A spring price rally is expected, but it will be modest. Canola acreage will decline in 2001, but the market will be driven by the potential for huge crops elsewhere. In addition, high fertilizer costs will cause some growers to plant additional soybeans rather than canola this year.

Canada's 2000 corn crop was down more than 25 percent compared to 1999 because of very poor growing conditions. To offset the short crop, Canada has had to significantly boost imports. If yields recover in 2001, production should be up dramatically -- even with a modest decline in planted acreage. Canadian corn prices in 2001-02 should be very close to this year's levels, basically between $110 and $130 per metric ton.

Soybean yields and production also were hurt by poor growing weather last year, but the year-to-year drop in output was relatively small. Huge soybean crops in South America and in the United States are hurting Canadian soybean prices. The combination of the relatively small crop and strong exports will cause a sharp reduction in soybean carryover stocks.

Market signals will encourage Canadian farmers to plant slightly more land to soybeans this year, and a recovery in yields should facilitate a significant increase in production. The result likely will be an increase in stocks in 2001-02 and somewhat lower soybean prices.