Canada Markets

Likely just days ahead of Agriculture and Agri-Food Canada's monthly supply and demand release, USDA penciled in Statistics Canada's most recent 2017 production estimates, with impacts to both North American and global markets expected. One tweet from south of the border said "blame Canada" given the higher-than-expected wheat carryout in both U.S. domestic and global markets. Indeed, Canada came up 11 times in USDA's December report preamble for grains.

USDA revised its production estimate for Canada's all-wheat (wheat and durum) by 3 million metric tons (mmt) to 30 mmt, in line with Statistics Canada's latest estimates. Along with this came an upward revision in Canada's all-wheat exports by 1 mmt to 22 mmt, up 9% from 2016/17, with USDA noting heightened competition from Canadian exports. At the same time, this has contributed to a 25 million bushel (mb) reduction (680,383 metric tons) in the forecast for U.S. exports in 2017/18.

USDA also bumped up its forecast for Canadian domestic use by 600,000 mt to 8.7 mmt given increased supplies available, although this is still less than the over 10 mmt domestic disappearance achieved in 2016/17.

Canada's ending wheat stocks are estimated at 6.64 mmt, up 26% from last month and down just 200,000 mt, or 2.9%, from the current 2016/17 estimate. This level of stocks would be slightly lower than the previous five-year average at 6.92 mmt.

USDA could be viewed as optimistic in its estimate of Canada's canola production, bumping its estimate to 21.5 mmt as seen in this month's Oilseeds: World Markets and Trade, even higher than the current Statistics Canada estimate for a record 21.3-mmt production. This has triggered an increase in USDA's export forecast for Canadian canola, which was revised 500,000 mt higher to 11.5 mmt. Domestic consumption was reduced only slightly. Canada's ending stocks for canola was revised sharply higher to 2.2 mmt from the 1.1 mmt reported in November, and as expected, are poised to rise for the first time in four crop years. This level would be slightly higher than the five-year average.

While it is early in the crop year, cumulative exports are slightly behind the pace needed to achieve the previous 11 mmt export target, while DTN contributors have recently reported on rumblings from the trade that exports may be poised to slow, perhaps making the revised export estimate a challenge. There also exists some skepticism among producers in the drier areas of the prairies that may be struggling with the latest estimates, which they feel will be proven wrong in time. Tuesday's November canola contract ended with a modest $0.70/mt drop, still holding in a range-bound trading pattern, despite USDA doubling its 2017/18 ending stocks figure, which in turn adds to 2018/19 supplies.

The Oilseeds: World Markets and Trade also points to an expected 200,000-mt drop in Canada's soybean production to 8 mmt, which remains higher than the Statistics Canada estimate of 7.7 mmt. As a result, Canada's export potential was revised 300,000 mt lower to 5.5 mmt. This is below the current AAFC estimate of 6.1 mmt, and is partially attributed to a "weaker pace of early season trade," as has been previously discussed in this space. USDA also hiked its forecast for soybean imports from 380,000 mt to 480,000 mt given "a stronger pace of imports through October." This volume is close to double the current AAFC estimate, which may be revised this month and would be equal to 2017/18 Canadian soybean imports.

Tuesday's December report left the U.S. potential for both wheat and oat imports unchanged from last month, which can be viewed as positive for Canada's export movement.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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