CALGARY — Heavy rains in Western Canada this spring have had a major impact on planting and that will likely result in a 15 to 17 per cent decline in agri-product sales to farmers in fiscal 2010, Viterra Inc. (TSX:VT) said Thursday.
The Calgary-based global grain handler and agribusiness company said seeded acreage in the region will be between 50 million and 52 million acres (20 million and 21 million hectares), well below the average of 60 million acres (24 million hectares) over the last five years.
“The estimated decline in acreage is a result of weather-related planting constraints due to unprecedented rainfall in May and June, the primary seeding period for Prairie growers,” Viterra said in a statement.
“Approximately eight million acres went unseeded, and additionally, about two million seeded acres were lost to excess rains,” it said.
Statistics Canada is scheduled to release its seeded acreage estimates Aug. 20.
Viterra estimates that farmers in Western Canada typically spend between $70 and $110 per acre depending on the types of crops grown and the areas in which they are seeded, with agri-product sales in the region typically totalling about $4.6 billion annually.
“With the loss of acreage this year, the company expects industry sales to decline by 15 to 17 per cent in fiscal 2010, with the largest declines in fertilizer and chemical sales,” it said.
The impact on Viterra in its third quarter “will be reflective of the company’s market share,” which is currently about 32 per cent, it said.
“Weather conditions this year have been extremely difficult for our farm customers and we have done what we can to support them,” said Doug Wonnacott, Viterra’s senior vice-president, agri-products.
While the impact on Viterra’s operations will be felt in the third quarter, Wonnacott said full-year results will depend on fall field activity.
“Should we have good harvest conditions and farmers are able to participate in post-harvest work, we expect them to maximize their application of nutrients given the significant erosion of nitrogen resulting from excess moisture. Additionally, we expect significant weed growth, which will require the application of herbicides in the fall to prepare the land for the following growing season.”
With respect to fiscal 2011, the impact on grain production is more difficult to predict. Western Canadian production of the six major grains averages 49 million to 50 million tonnes. Viterra currently estimates total Western Canadian production at 42 million to 44 million tonnes.
“While the reduced acreage will affect the amount of grain produced by approximately 800,000 tonnes per one million acres, it is the company’s view that the estimated six million tonnes of on-farm carry-over stocks, coupled with yield potential on acreage unaffected by the weather, could somewhat offset the impact of unseeded acreage.
Bob Miller, senior vice-president of North American Grain, said it is “difficult to predict with certainty how much grain production will ultimately be available” in 2011.
“Our estimate is based on what we know today and assumes positive harvest conditions,” Miller said. “Our South Australia business, on the other hand, is experiencing good seeding conditions and sufficient moisture, a positive signal for crop development from that region.”
“Our strategy to diversify into the Southern Hemisphere mitigates our risk, and could pay off this year, as it will lessen the impact, to some extent, of the effects of weather conditions in North America,” Miller said.
Viterra shares were off eight cents to $7.10 in late afternoon trading Thursday on the Toronto Stock Exchange.
The company is the biggest agribusiness in Canada, with more than 3,400 employees last year, and operations in grain handling and marketing, oat milling, malting, and the retailing of seeds, fertilizer, crop protection products, and agricultural equipment such as storage bins.
In addition to its country grain elevator systems in western Canada, the former Saskatchewan Wheat Pool owns terminal grain elevators at the ports of Thunder Bay, Ont. and Vancouver and has control of a a grain export terminal at the port of Prince Rupert, B.C.
Viterra is also a player in the livestock feed business.