Canada Markets

AAFC Releases First Look at 2019-20

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Given Agriculture and Agri-Food Canada's first look at 2019-20 supply and demand for various crops, the blue bars represent the year-over-year percent change in 2018-19 stocks, while the brown bars represent the forecast year-over-year change for 2019-20. Of the selected grains, only stocks of flax, soybeans and lentils are forecast to see stocks fall in both 2018-19 and in 2019-20, while 2019-20 stocks of wheat and barley are expected to grow larger. (DTN graphic by Cliff Jamieson)

Agriculture and Agri-Food Canada's first look at 2019-20, as reported in their January Canada: Outlook for Principal Field Crops, points to continued pressure on global grain markets in the crop year ahead. Meanwhile the weaker Canadian dollar trade is expected to result in increased acres seeded in 2019 made possible by a drop in summerfallow acres.

The area planted to all major crops is expected to increase 0.7% to 78.2 million acres, made possible by a further drop forecast for summerfallow acres. Statistics Canada estimated summerfallow acres at 1.781 million acres in 2018, the lowest on record in data dating back to 1913, while current seeded acres point to this area falling closer to 1 million acres in 2019.

Looking at seeded acre estimates for selected crops, an increase in acres dedicated to wheat, barley, corn, oats, canola and flax is forecast to be partially offset by a drop in durum, soybeans, peas and lentils. The largest year-over-year increase is seen in wheat acres, which are forecast to increase by 9% or 1.7 million acres to 20.4 million acres, the largest acreage dedicated to wheat in six years. The next largest change is seen in barley acres, forecast to increase 425,012 acres or 6.5% to 6.9 million acres, the largest area seeded to barley in six years.

Other crops where area expects to expand are corn up 6.3% to a record 3.855 million acres, oats up 5.3% to 3.212 million acres, the highest in four years, canola up 1.3% to a record 23.1 million acres, and flax up 15.3% to 988,400 acres, the largest acreage in two years.

The largest drop in acres is forecast for durum, which are forecast to fall by 1.5 million acres or 24.9% to 4.645 million acres, which would be the lowest acreage seeded in seven years. Other crops where acreage is expected to fall is soybeans which are expected to fall 205,093 acres or 3.2% to 6.1 million acres, the smallest area planted in three years, as well as pulses such as peas and lentils. Dry pea acres are forecast to fall by 0.2% to 3.6 million acres, the smallest area seeded in six years, while lentil acres are forecast to fall by 11.5% to 3.3 million acres, the smallest area in five years.

Given the assumptions made, average yields for all principal field crops will increase slightly, while production is expected to increase by 2.6% to 95 million metric tons and total supplies are expected to increase 682,000 mt or 0.6% to 111.6 mmt. Demand for all principal field crops is forecast to fall by a modest 152,000 mt year-over-year, with a slight 0.7% increase in forecast exports off-set by a forecast 1.1% drop in domestic demand.

The attached chart shows how AAFC's tables affect forecasts for ending stocks, with the percent change from 2017-18 to 2018-19 shown in blue, and from 2018-19 to 2019-20 in brown. As can be seen, stocks for the majority of grains are forecast to remain steady to lower in the upcoming crop year, although the stocks are expected to grow in 2019-20 for both wheat, up 1.5 million metric tons and barley, by 250,000 mt.

Of the selected grains, two crops that are expected to see back-to-back drops in ending stocks are soybeans, expected to fall to 325,000 mt in 2019-20, as well as lentils, forecast to fall to 535,000 mt.

There are a lot of moving pieces involved in these forecasts and one could view these as a starting point only. Looking back at the January report when compared to final estimates for the following crop year, we see there has been a tendency for stocks of most grains to end higher than volumes shown in the January report prior to the start of the crop year. For example, over the past three years (2015-16 through 2017-18), the ending stocks estimate for wheat averaged 49.8% higher than the estimate released in the January report prior to the crop year.

Of the selected crops, the three-year average percent change from the initial January estimate to the final estimate for the following crop year, showed an increase in carryout for seven crops, with four of the seven crops showing an increase in stocks for each of the three years, including wheat, corn, canola and soybeans.

Three other crops show a three-year average which points to a drop in stocks from the initial January report to the end of the following crop year. This includes durum, where a drop in stocks was noted in two of the three years, while stocks of both dry peas and lentils were overstated in the initial January estimates in each of the three years. Final stocks for peas averaged 48% below the January estimate, while final stocks for lentils averaged 39% lower than the January estimate.

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