Canada Markets

Stocks of all principal field crops combined were reported by Statistics Canada to fall by 3 million metric tons (mmt), or 4.4%, as of Dec. 31. Statistics Canada notes a combination of smaller 2018 production along with increased exports for many commodities behind the results. Tuesday's report saw a number of 2017-18 revisions made, with ending stocks for Canada's 2017-18 all-wheat decreased by 260,000 metric tons (mt), while ending stocks of canola were increased by 108,000 mt.

Stocks found on farm and in commercial storage were shown to diverge in this report's estimates, with farm stocks falling by 5.9% year over year as of Dec. 31 while commercial stocks increased by 4%.

Canada's wheat stocks (excluding durum) were estimated at 17.905 mmt, down 644,000 mt from December 2017. This is the lowest stocks in three years and is 9.6% below the five-year average. Despite increased wheat production in 2018, exports as of Week 21/22, or the week ended Dec. 30, were reported up 1.378 mmt, or 20.8%, contributing to the year-over-year decline in stocks. A look at the 2017-18 January-through-July disappearance as well as the average disappearance based on the past five crop years would point to ending stocks for 2018-19 closer to 3.8 mmt, slightly below the current 4 mmt forecast released by AAFC. However, should exports continue at the current pace, stocks could fall even further. This report could be viewed as moderately bullish for wheat.

Statistics Canada reported durum stocks at 5.328 mmt as of Dec. 31, up 594,000 mt or 12.5%. While still well below the 6.1 mmt reported for December 2016, this volume remains 8.9% higher than the five-year average for this date. A combination of increased production in 2018 and a slower pace of exports is bearish for durum prices. Based on the 2017-18 January-July disappearance, as well as the five-year average for the same period, ending stocks could be projected in the 1.85 mmt to 2 mmt, which compares to the current AAFC estimate of 2 mmt.

When combined, Canada's all-wheat stocks were reported down a modest 50,000 mt from the same period last crop year, the lowest reported in three years, though by a slim margin. Implied domestic demand is running behind the same period in 2017-18, which bears watching given that current AAFC forecasts include a modest year-ove- year increase of 249,000 mt. At the same time, a western broker reported a significant volume of forward wheat sold into the southern Alberta feed market on Tuesday, while tight barley stocks may continue to push wheat into the feed market.

Canola stocks were estimated at a record 14.553 mmt, up 684,000 mt from December 2017 and 9.6% higher than the five-year average. An upward revision to 2017-18 ending stocks to 2.5 mmt, combined with a slowing in 2018-19 exports, offset the near-1-mmt year-over-year decline in 2018 production. Despite the bearish numbers, the market has failed to react in an overly bearish manner, with ICE Canada commentary calling stocks burdensome. January through July disappearance totaled 11.4 mmt in 2017-18 and has averaged 11 mmt over the past five years. This historic pace would point to ending stocks in the 3.2 mmt to 3.6 mmt range as of July 31, well above the current 2.3 mmt forecast by AAFC. Despite this data, supportive commercial buying is seen in this week's trade and bears watching. This projection is shown on the attached graphic, based on the five-year average December-through-July average disappearance.

Tuesday's report shows tight stocks for both barley and oats. Barley stocks were reported at 4.938 mmt, down 1.1 mmt, or 18.2%, while 18.7% below the five-year average. To put this into perspective, January-through-July disappearance in 2017-18 totaled 4.789 mmt, while over the past five years, has averaged 4.483 mmt. This report should be viewed as bullish for barley prices, with stocks potentially on the way to record lows this crop year and well below the 1 mmt carryout currently forecast by AAFC.

Oat stocks were reported at 2.316 mmt, down 567,000 mt, or 19.7%, from Dec. 31, 2017. This volume would represent the tightest stocks reported in six years, while 13% below the five-year average. According to Statistics Canada data, disappearance in the January-through-July period in 2017-18 totaled 2.1 mmt and averaged 1.8 mmt over the past five years, while pointing to the potential for much tighter stocks by the end of July than the 650,000 mt currently forecast by AAFC.

Stocks of dry peas were reported at 2.502 mmt, down 11.4% from the previous December to the lowest volume estimated in three years, while equal to the five-year average. The historic pace of disappearance would point to a tighter carryout in 2018-19 than the 650,000 mt current forecast by AAFC, while the most recent week 26 export statistics shows that bulk movement through licensed facilities is on par with the pace of movement set in 2017-18. Stocks of lentils were forecast at 2.094 mmt, down 0.8% from the previous crop year but still 21.2% higher than the five-year average for this date. Given the historical January-through-July disappearance, ending stocks of lentils are on track to reach the 800,000 mt level current forecast by AAFC, a slight drop from the previous crop year.

Soybean stocks were estimated at 3.994 mmt as of Dec. 31, down 8.5% from the previous crop year but still 15.7% above the five-year average level for this date. January-through-August disappearance totaled 3.7 mmt in 2017-18 while year-to-date exports are more than 500,000 mt ahead of 2017-18 as of December; soybean stocks are on track to tighten from the 400,000 mt currently forecast by AAFC, while this report is viewed as bullish for soybeans.

Stocks of corn were reported at 11.502 mmt, down 7.4% from the previous crop year and the smallest volume reported in three years. This is 1.4% higher than the five-year average. In 2017-18, disappearance was reported at 10 mmt in the January through August period, a pace of demand that could see ending stocks near 1.5 mmt as compared to the 2 mmt currently forecast by AAFC. This report should be viewed as supportive for Canadian corn markets.

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

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