June 15, 2010

The Canadian Wheat Board (CWB) estimates only 19.2 million acres of land in western Canada got seeded this spring, the lowest total since 1971 and an 18% drop from the previous year.

Between 8.3 million and 12.5 million acres of farmland will go unseeded across the prairies this year, the CWB warned.

Keith Carpenter with Canaccord Genuity called it a "dire situation" and has cut his price target for Viterra Inc. to US$11 from US$11.75 on the news. Shares in the company promptly plunged, down 7% to as low as US$7.50 before recovering slightly to US$7.66 at 3 p.m.

"The report was quite bearish, and at odds with what the CWB discussed with us just a week ago and with most industry expectations," he said. Carpenter noted that Viterra had estimated in a conference call just a week ago that only five million acres would be unseeded.

"[This] highlights the potential risk fro further negative planting news over the next two weeks and we have become more conservative in our expectations as a result. We have lowered expectations for the upcoming harvest, and the resulting volumes that Viterra will move through its Canadian system in the coming year," he said. He now estimates volumes will be down about 15%, to 13 million tonnes from 15.2 million tonnes.

The research team at Northern Securities meanwhile observed that the situation is especially dire in Saskatchewan, where 36% of the crop is still unseeded and prospects for more seeding are "limited." Overall, seeding is 78% complete, but farmers should've been done by now.

The group also questioned the USDA's forecast for wheat production in 2010 of 668.5 million tonnes, the third largest on record, saying it does not account for the problems in Canada.