What we’re watching this week:
- Crop quality is the largest concern for the Prairie crop as yet another week of rain and cool weather slows the harvest.
- Diesel prices continued to move higher last week as limited global supplies push prices higher.
- U.S. trade war continued with the U.S. banning some Canadian goods for importation. The new rules take effect on Sept. 29.
Editorial
El Niño continues to strengthen
In their recent update on the status of El Niño, NOAA indicated that not only do El Niño conditions exist, but they are expected to strengthen to a very strong El Niño by the end of October. Sea surface anomalies in the eastern Pacific reached +3C for most August. There is 98 per cent chance of a “very strong” El Niño existing in the October-through-December period. Current models forecast the strong El Niño to transition into a neutral phase by the April-through-June period in 2027.
The Bureau of Meteorology in Australia concurs with the NOAA assessment. The Bureau forecasts a peak Nino 3.4 index of 3.8 C in December 2026. The index is expected to decline to 2.3 C by March 2027.
Temperatures across Australia are expected to remain at above-average levels from October through December. The above-normal temperatures are a concern for the filling winter cereal and oilseed crops in Australia. This will be especially important for crops in the eastern growing areas of the country.
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Agriweek
The long-term forecast is calling for drier than normal conditions to persist across eastern Australia in October through December. The nearby forecast is calling for below precipitation to fall in eastern Australia during October. This is consistent with the current El Niño forecast.
El Niño does not typically impact the weather in Western Australia, and the long-term models are indicating that there is better than a 50 per cent chance of above-normal rainfall in the region. This will partially offset the damage caused by the drought in the eastern growing areas.
In the most recent ABARES report, El Niño was not expected to have a significant impact on crop output. The favourable conditions in Western Australia and parts of eastern Australia (mostly in South Australia) at the beginning of the month will largely offset the El Niño drought conditions in northeastern Australia.
The weather has been dry since the report was issued, and the winter cereal crops in the eastern half of the country are likely to see below-normal rainfall through the end of October. This will impact the wheat, canola and barley yields in eastern Australia.
Wheat production is expected to drop by 12 per cent to 29.9 million tonnes, which is still above the ten-year average. ABARES estimates canola production to drop by five per cent to 7.3 million tonnes. Barley output is forecast to drop by only three per cent to 16.4 million tonnes. The main reason for the small drops in production is a reduction in crop yields.
Although this “Super El Niño” is having a significant impact on crops across southcentral and southeastern Asia, Australia will see only a limited impact on the 2026 crop. This is one of the surprises that the 2026 El Niño is bringing to agricultural markets. When the 2026 El Niño forecasts were first made at the beginning of this year, markets would have expected that the most significant impact in Australian production.
This week’s top story
Borrowing costs expected to head higher
The cost of borrowing is likely going up, according to an economist with a major lending institution.
Graeme Crosbie, senior economist with Farm Credit Canada, said short-term lending rates are heavily influenced by the Bank of Canada’s overnight rate. That rate is at 2.25 and has been for a while because the central bank is taking a wait-and-see approach.
In June, FCC was forecasting that the rate would stay at 2.25 per cent for the remainder of 2026 and all through 2027.
However, that was before the recent spike in fuel prices and before the Canada-United States-Mexico Agreement talks broke down and a trade war erupted between Canada and the U.S., wrote Sean Pratt for the Western Producer.
Why It Matters
Borrowing costs are on the rise due to higher input and equipment costs, so any interest rate hike would be unwelcome.
Crosbie said financial markets are now pricing in a rate hike as early as this December. FCC thinks that sounds about right.
Long-term rates, such as Government of Canada bonds ranging from two to 10 years, are not as dependent on the overnight rate. They are more heavily influenced by U.S. bond market dynamics, inflation expectations and the growth in gross domestic product.
Rates have been climbing steadily since 2021 to combat inflation in markets such as Canada, the U.S., the United Kingdom and Japan. Crosbie doesn’t see that trend ending anytime soon.
“Those are going to continue to grind higher and higher and higher in the short-term,” he told delegates attending the 2026 Pulse and Special Crops Convention.
The Government of Canada’s five-year bond has found a new floor of three per cent and was approaching 3.5 per cent at the time of his presentation. Bond yields form the foundation of fixed rate loans.
“As those yields grind higher, fixed rate borrowing costs are also grinding higher,” said Crosbie.
That means higher fixed rates for residential mortgages, farm loans and corporate financing. Higher borrowing costs will lead to slower economic growth, which means lower tax revenues for the government.
Government funding becomes more expensive because tax revenues are lower than budgeted, forcing governments to borrow more money in higher priced markets. That financial dilemma is even more pronounced for countries with shorter debt maturity profiles such as Canada and the U.S.
Crosbie was asked if farmers are better off choosing variable rate over fixed rate loans. He said that is the top question FCC receives and the answer is that it depends on the farm operation, the capital structure already in place, renewal dates and many other factors.
“Whether it is fixed or variable, the signals are there that both are going to kind of grind higher,” said Crosbie.
Commentary
When we look at the current escalation in input costs it is important to distinguish between temporary and long-term moves by the market. The increases in fertilizer and diesel costs would fit into the first category—that is, unless you believe that the conflicts in Middle East and Black Sea are going to be a permanent feature of the geopolitical landscape. Prices for these commodities are likely to move lower from current levels when these conflicts are resolved.
What should be more concerning to farmers is interest rate costs. I would place this in the long-term category for costs. The reason is that the demand for capital is increasing rapidly from both private and government sources. The demand is raising both short and long-term interest rates.
Demand from the private sector is mostly for the AI boom, which should be temporary as the data centre build out is completed. Unfortunately, the demand from government does not appear to be waning.
The largest culprit is the U.S., which is running large deficits with no apparent appetite to curb spending. Canada and the European Union are also relying on deficit spending to build out defense infrastructure. The problem is that the increased debt levels result in rising interest costs for the government to service. This is a negative feedback loop, which increases the deficit and debt, compounding the problem.
Farmers should be prepared for increased mortgage rates on farmland along with higher operating loan costs. This situation only changes when governments rein in spending.
This Week in Agriculture
Egypt diversifies wheat imports away from Russia and Ukraine, minister quoted as saying
Egypt is diversifying its source of wheat imports towards France and other European suppliers, moving away from Ukraine and Russia where supplies have been disrupted, Supply Minister Sherif Farouk was quoted as saying on Sept. 20.
Why It Matters
Egypt is usually one of the largest wheat importers in the world. The availability of cheap Russian wheat has boosted Egyptian imports from the Black Sea region.
As Reuters reported, Egypt has increased its engagement with Bulgaria and Romania and is boosting its focus on France, which is emerging as a key supply partner, Farouk was quoted as saying. Cairo has a 50,000-tonne wheat shipment en route from France, with shipments from that country continuing, according to the comments.
Egypt’s wheat reserves are sufficient for more than six months of strategic consumption, Farouk was quoted as saying.
Trump supports diesel export ban as fuel prices hit records
U.S. president Donald Trump said on Sept. 22 he backed a ban on diesel exports, as Republican candidates in some of the tightest election races in November called for the measure as a way to curb record fuel prices.
Why It Matters
The U.S. is a substantial exporter of petroleum products including diesel fuel. The banning of exports is not good news for countries depending on U.S. exports, including parts of Eastern Canada.
Diesel prices have shot to record highs in the U.S. and Europe as wars in Iran and Ukraine sharply cut exports from some of the biggest producers such as Russia, Saudi Arabia and the United Arab Emirates.
The U.S. Department of Agriculture last week urged the White House to take action on diesel prices, according to two sources familiar with the matter. Agriculture Secretary Brooke Rollins said on Sept. 21 that she had spoken with Trump about the issue, calling high prices “a real concern,” according to Politico.
Trump’s backing of a diesel export ban puts him at odds with his own energy officials, who warn it could raise fuel prices on the coasts and tighten supplies for European allies. Energy Secretary Chris Wright said a ban would lead to a glut of diesel in the Gulf Coast and prompt U.S. refiners to cut production rates, which would quickly reduce gasoline production.
Canada looks abroad for ideas on future of wheat breeding
When the House of Commons agriculture committee examined agricultural research earlier this year, Canadian Agri-Food Policy Institute managing director Tyler McCann pointed to Australia’s crop research model as one worth considering.
He’s not alone. Producer groups, breeders and the seed sector are looking outward for alternatives as Agriculture Canada shifts away from late-stage variety development work, as Don Norman reported for Grainews.
In February, the Canadian Wheat Research Coalition (CWRC) released a review of Canada’s wheat breeding system, and in May, an industry-wide joint memo called for a new vision for that system.
Why It Matters
As policy-makers debate a new wheat breeding model, farmers could see changes in what they pay, how research is funded and who sets breeding priorities.
“We recently looked at the Australian model, as well as European models,” said CWRC chair Jocelyn Velestuk.
She added that examining international models is part of the process of determining what a farmer-led Canadian system could look like. Australia is perhaps the most obvious comparison because producers and government jointly finance agricultural research through a formal matching system.
“If you look at the grain sector in Australia and the way their model works, you’ll see that the sector invests check-off dollars and royalty dollars that are matched by government,” McCann said during his testimony on Parliament Hill in February.
Australia’s Grains Research and Development Corp. is funded primarily through grower levies and matching contributions from the Australian government.
Grower levies are collected at the first point of sale as a percentage of farmgate value, while government contributions are matched up to a legislated ceiling tied to the gross value of production.
Australia did not always look this way. Historically, wheat breeding was largely public.
The Australian experience therefore offers more than a funding formula. It shows how producer money, public investment and intellectual property rules can work together, and how a system once dominated by public breeding can evolve toward a more distributed model.
Crop Reports
Manitoba:
The Manitoba harvest still hadn’t hit the halfway mark as the end of the month approached, according to the province’s Sept. 22 crop report. The province reported that 43 per cent of harvest operations were complete as of Sept. 21.
Winter wheat and fall rye harvests were finished, and the field pea harvest was 96 per cent complete, but the rest of the crops still had a way to go. Barley and spring wheat harvests were at 76 and 71 per cent completion, respectively, while oats were at 66 per cent.
The canola harvest was 43 per cent finished, while potatoes were at 30 per cent, dry beans were at 16 per cent and silage corn was at 10 per cent finished. Soybeans were beginning to come off the ground in the central and eastern regions.
Saskatchewan:
Harvest progress is picking up across Saskatchewan, according to the latest provincial crop report. However, rainfall, high humidity and wet field conditions slowed progress in the eastern part of the province and delayed harvest operations in the west. Wet conditions and high humidity are also affecting crop quality in some areas, with cereal and pulse crops still in the field experiencing poor quality and sprouting.
Provincial harvest progress is 41 per cent complete, behind the five-year average of 82 per cent and the 10-year average of 73 per cent. The southwest continues to lead in harvest progress at 67 per cent, followed by the west-central region at 45 per cent complete. The southeast and east-central areas are 38 per cent and 29 per cent complete, respectively. The northwest sits at 26 per cent complete while the northeast sits at 24 per cent complete.
Alberta:
Precipitation and cool weather continued to delay combining progress in Alberta, as major crop harvest progressed only five per cent provincially. The most progress was in the central region, up seven per cent, while the least progress was in the northeast, up just three per cent. Provincial crop harvest is now 23 per cent complete, 35 per cent behind the five-year average and 21 per cent behind the 10-year average. Some areas in the south, central and northeast regions reported little to no progress, as showers were frequent over the week.
Regionally, combining is at 46 per cent complete in the south, 29 per cent in central, eight per cent in the northeast, nine per cent in the northwest and 13 per cent in the Peace. Dry pea harvest is furthest ahead at 83 per cent combined, compared to the five-year average of 97 per cent, followed by barley at 40 per cent. Canola has the least progress at five per cent combined, compared to its five-year average of 28 per cent.
Miscellany
General Mills beats quarterly results estimates on resilient demand for pantry staples
General Mills beat first-quarter sales and profit estimates on Sept. 23 and reaffirmed its annual forecast, as price increases and resilient demand for at-home food helped partially offset higher input costs.
Like several packaged food and beverage companies, General Mills has been raising prices to make up for a rise in raw-material costs due to U.S. import tariffs, especially of metals like aluminum and steel that are used for packaging, Reuters reported.
Feeder cattle market sets defensive tone
Western Canadian feeder cattle markets were mixed during the week ending Sept. 19, trading $10 lower to $10 per hundredweight higher compared to seven days earlier.
Southern Alberta feedlot operators reflected a cautious tone with the weaker deferred live cattle futures. After two months of negative margins, buyers are thinking twice about extending ownership at the current levels, as analyst Jerry Klassen wrote for the Glacier FarmMedia network.
Russia’s Port Murmansk to ship grain
Port Murmansk, Russia’s fourth-largest port, will start shipping grain for the first time as early as next month as Black Sea shipping routes are closed due to Ukrainian drone attacks, Reuters reported.
The port is located on the Barents Sea near northern Finland and can be approached from neutral waters. Russian grain exports are expected to be cut in half between July and September due to port closures on the Black Sea and the Sea of Azov.
Government to go ahead with research centre cuts despite agriculture committee report
The federal government will continue with its plan to close seven agricultural research centres and satellite farms, according to its response to an all-party committee report that recommended otherwise.
The response acknowledged the recommendation to “pause and reverse” the closures in Lacombe, Alta., Indian Head and Scott, Sask., Portage la Prairie, Man., Guelph, Ont., Quebec City and Nappan, N.S. but insisted research would continue at other locations. The Saskatchewan government has signed a memorandum of understanding to keep its two farms operating with industry support, as Karen Briere reported for the Western Producer.
China returns as big buyer of Canadian peas
Chinese demand for Canadian peas is expected to remain strong over the next year amid thawing trade tensions, reported Sean Pratt of the Western Producer from the annual Pulse and Special Crops Convention in Halifax.
“The demand for plant-based and healthy food is growing with big potential in the future,” said Cao Derong, president of the China Chamber of Commerce for Import and Export of Foodstuffs, Native Produce and Animal By-Products. Derong said China and Canada were currently negotiating market access for Canadian chickpeas, fababeans and lentils.
AI is changing how Americans choose snacks, says Conagra
Americans are increasingly asking AI what to snack on, according to Conagra Brands, a shift the brand says is helping fuel demand for higher-protein foods, bold flavours and products tailored to specific health goals.
Driven partly by the rapid rise of weight-loss drugs, consumers are seeking healthier food options more than ever, Reuters reported. Consumers are also increasingly using AI tools to guide purchasing decisions, Conagra said. Rather than searching for a specific product, shoppers are asking for snacks that meet particular needs, such as higher protein or fibre content.
Weekly Markets
Crude oil prices dropped this past week as the east-west pipeline in Saudi Arabia. Nearby WTI futures closed the week just above the US$95 per barrel level.
Soyoil followed crude oil prices lower and dropped by 1.86 cents per pound. Soybean futures closed slightly lower during the week and lost three cents per bushel. Soymeal ended the week higher and rose US$14.20 per short tonne. The strength in soybean meal is supporting protein values, including cash pea prices, which were up by C$8.28 per tonne.
ICE canola futures dropped this week with November canola lower by C$1.80 per tonne during the week. Cash canola prices followed suit and moved lower by C$1.47 to C$2.40 per tonne on the week.
Minneapolis futures fell this past week and posted losses of 27 cents per bushel. Chicago soft wheat futures were down by 23 cents per bushel. Kansas City HRW wheat futures were down by 28 cents per bushel on the week. Spring wheat cash prices in Western Canada were modestly lower by C$3.62 to C$5.78 per tonne.
September corn futures lost five cents per bushel during the week. Oats futures gained three cents per bushel in Chicago, while cash oat prices in central Saskatchewan were higher by C$0.79 per tonne.
Live cattle futures continued to rally last week by gaining US$2.48 per hundredweight. Feeder cattle futures rose during the past seven days with nearby futures up by US$3.68 per cwt. during the past week. Nearby hog futures gained US$1.20 cents on the week.
Charts and tables
Weekly Chicago Sept Corn Futures
Weekly Chicago Sept Wheat Futures
Weekly Minneapolis Sept Wheat Futures
Weekly Kansas City Sept Wheat Futures
Weekly Chicago Soybeans Nov Futures
Weekly ICE Canola Nov Futures
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By Bruce BurnettJuly 10, 2026
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