What U.S. flooding could mean for Canada's Prairie farmers

Flooding acrossthe U.S. agriculturalbelt continues to thwarttheplanting of key crops in that country something thatcould help someCanadian farmers fetch better commodity prices.

New datathis week revealed several states are wellbehind schedule for planting thanks to weeks of rain,with more wet weather in the forecast for some regions.

Some of thegreatest concern is over corn and soybeans.

As the week began, only 49 per cent of corn crops in 18 key states had been planted when more typically it might be 80 per cent. Less than a fifthof soybeans had been plantedwhen it might normally be closer to half, according to the United States Department of Agriculture.

While it's still too early to tell if the poor conditions will persist orexactly how cropyields will be affected, one analystsays the impact of the flooding is already ripplinginto the market.

"In the last couple of weeks,we sort of have a market that's ... almost maybe woken up to some of the weather threats here that were building," said Jonathon Driedger, a seniormarket analyst with FarmLink in Winnipeg.

Corn and soybeans arekey to the American farm sector.

Cornis widely used in grocery products, animal feed and fuel. Soybeans are a leading agricultural export in the U.S., worth $22 billion US in 2017.

Though the outlook for both crops could improve in the coming weeks if weather improves, the poor conditionsin the U.S. havetraders considering what the supply picture might look like later in theyear.

For example, the Wall Street Journal reported this week that the July contractfor U.S. corn recently climbed by 13per cent in just seven sessions.

"The U.S. corn crop is so integral to the world markets that, you know, they get a sniffle and weallget pneumonia," said Barry Prentice, a professorofsupply chain management at the University of Manitoba.

Canadaexports only a fraction of the corn and soybeans thatits southern neighbourdoes, though they're still important crops for a number of Canadian farmers.

More broadly, asDriedgerexplains,farmers on the Prairies could benefit from what he callsthe"spillover" effect.

While poor weather has had an adverse effect in parts of Ontario,Driedgersaid that, generally,seeding progress in Western Canada has not been far outside what farmers might expect at this time of year.

"Corn is so influential on pricing, soybeans are influential on pricing, that as those prices rise for those crops, it sort of helps elevate other crops as well," Driedgersaid.

For example, the price of barley could also climb with corn as it is a direct substitute intolivestock feed, he said.

"That's sort of the domino effects thatI think traders are trying to assess and process right now, because at this stage of the game, in terms of the production side, we're still playing a game of 'what if,'" Driedgersaid.

Where there may be a more direct impact for Canadian farmers is on wheat, headded. There are concerns about the impactheavy rain has had on the U.S. winter wheat crop and the planting of spring wheat, he said.

He said wheat prices have been improving inWestern Canada over the last couple of weeks.

Derek Brewin, head of the department of agricultural economicsat the University of Manitoba, said wheat prices also move up and down with corn because some gradesof wheat competewith corn as livestock feed.

"And then there's the higher quality wheat," Brewin added."If there is a shortage of that, the difference between the high quality and the low quality gets wider. They get really good prices."

Some believe canola prices could get a smalllift if soybean prices rise.

Canadian canola farmers are alreadyfeeling pressure because of China's boycott of the crop. If soybean prices improve, it could also drag canola prices up "a little bit,"Driedger said.

However, Prentice thinkspoor U.S. weather could ultimately be a drag on canola prices. He said if American farmers switch from planting corn to soybeans, which takeless time grow, that could affect oilseed prices.

"If the Americans grow more soybeans, that means that we're likely to see lower prices for canola," Prentice said.

It will take weeks or even months forthe situationto unfold as farmers, traders and analysts get a clearer picture of the impact on the number of acres planted and the health of those crops,Driedger said.

"Maybe we wake up six weeks from now and all the weather cleared, the crop got in a little bit late but conditions were excellent, and so maybe that so-called scareisn't somuch of a scare," he said.

"Or, you know, things [could]get progressively worse."