UPDATE 4-Canadian farmers to plant more wheat than expected

Tue Apr 24, 2012 11:42am EDT

* Canola seen 20.4 mln acres vs trade view 20.6 mln acres

* All-wheat seen 24.3 mln acres vs trade 23.4 mln acres (Adds U.S. analyst's comments)

By Rod Nickel

WINNIPEG, Manitoba, April 24 (Reuters) - Canadian farmers intend to plant nearly a million acres more wheat than the industry expected in the first year of an open grain market, along with a record-large canola crop, Statistics Canada reported Tuesday in its initial forecast of 2012 planting intentions.

Drier-than-normal weather in Western Canada, stretching back to last summer, brought millions of previously flooded acres back into production this spring, lifting plantings of most major crops.

All-wheat plantings may rise 13 percent to 24.3 million acres (9.8 million hectares) from last year's 21.5 million acres, blowing away the average trade estimate of 23.4 million acres in the first year farmers can sell their wheat or barley to buyers other than the Canadian Wheat Board. (Graphic: link.reuters.com/vak77s)

A new Canadian law will end the Wheat Board's 69-year-old marketing monopoly on western wheat and durum for export or human consumption on Aug. 1, allowing farmers to sell their next crops to any buyer, not just the CWB.

Manitoba farmer Doug Chorney, who heads Keystone Agricultural Producers, said farmers' bullishness about wheat is less about the marketing change than high prices.

"I've been able to forward-sell my spring wheat at very good prices. Producers are fairly bullish on wheat this year," he said.

Some farmers who pushed Ottawa for years to create an open wheat market are expanding wheat acres because of the monopoly ending, but others are guided by prices, said Norm Hall, who will plant wheat, flax, canola and peas near Wynyard, Saskatchewan this spring. He is president of the Agricultural Producers Association of Saskatchewan.

Chorney said farmers have to grow some cereal grains for rotational reasons, and he switched all of his cereal seeding plans to spring wheat instead of oats because of better returns.

Canada is the biggest exporter of spring wheat, durum, oats and canola.

Western Canada's wheat acres, like those in the U.S. northern Plains, are getting a boost from a dry spring after two years of severe floods, said Mike Krueger, president of the Money Farm grain marketing advisory service near Fargo, North Dakota.

"They have had big fallow acres for the previous two years because of very wet conditions. So acres did not get planted in 2010 and especially in 2011," he said.

Statistics Canada surveyed 13,432 farmers across the country between March 23 and 30. However, planting has just started in pockets of the Prairies.

"I don't think the numbers will be taken all that seriously yet," said Ken Ball, a commodity broker at Union Securities in Winnipeg. "It's an intentions report, not an acreage report, and farmers continue to make changes to acreage plans all through April."

Durum wheat area looks to span 5.1 million acres, up 27 percent from last year and a big jump from the average trade estimate of 4.5 million acres for the wheat used in making pasta.

The area set for spring wheat, used in baking, looks to expand a more modest 9 percent to 17.2 million acres.

Minneapolis December spring wheat futures were higher in early trading Tuesday, but lagged gains in the winter wheat traded in Chicago and Kansas City.

The U.S. Department of Agriculture said on Monday that U.S. spring wheat plantings were more than half complete, far ahead of the usual pace.

Weather during the next four months will ultimately determine how big Canada's autumn wheat harvest will be, but the jump in acres points toward larger production.

Assuming normal levels of abandoned acres and yields, Canadian all-wheat production could total nearly 27 million tonnes this year, the largest in four years, and about 4 percent of the global wheat harvest.

Canola acres will reach 20.4 million acres, up from last year's record-large area of 18.9 million acres, and in line with the average trade estimate of 20.6 million acres.

It would be the sixth straight year farmers have raised the record planting level.

With canola prices not far off contract highs, the oilseed stands to possibly snatch more acres back from wheat and barley, said Keith Ferley, a commodity trader at RBC Capital Markets.

ICE Canada November new-crop canola futures extended their gains after the report. Strong demand for vegetable oil, the most lucrative use for canola, has driven up demand for the oilseed from Canadian crushers and exporters.

Oat plantings look to be 3.4 million acres, just as traders forecast, and compared to 3.1 million acres a year ago.

Statscan expects farmers to plant 8 million acres of barley, up by nearly one-quarter from last year, and higher than trade expectations for 7.7 million acres.

(Reporting by Rod Nickel in Winnipeg, Alex Paterson in Ottawa and Julie Ingwersen in Chicago; Editing by John Picinich and Marguerita Choy)