Canada Markets

Today's USDA report saw a hike in the agency's forecast for Canada's 2020-21 all-wheat exports (wheat plus durum) by 500,000 metric tons to 27 million metric tons. If achieved, this volume would be 20.1% higher than the five-year average and 26.7% higher than the 10-year average.

As seen on the brown line of the attached chart, measured against the secondary vertical axis, the USDA began forecasting for the 2020-21 crop year in May 2020, when Canada's export potential for all-wheat was reported at 24.5 mmt. Since then, this forecast has been increased four times, including today's March World Agricultural Supply and Demand Estimates (WASDE) report.

At 27 mmt of exports, Canada would surpass the current forecast for the United States at 26.81 mmt, while would be tied with the E.U. for second spot among exporters in 2020-21. According to USDA data, Canada was last seen in second place in the 2014-15 crop year when shipments totaled 24.170 mmt.

The black line on the chart represents monthly data from Agriculture and Agri-Food Canada, also measured against the secondary vertical axis. Over this period of time, AAFC has increased its forecast for Canada's potential exports six times, while lagging the USDA's volume forecast. While demand has been favourable, the railways have also met the challenge, there is increased terminal capacity on the West Coast and favourable weather through the end of January allowed for superior results.

In the USDA's Grain: World Markets and Trade report for March, it directly link the revision in Canada's exports to shipments to China. The March WASDE report also included a 500,000-metric-ton increase in its forecast for China's wheat imports to 10.5 mmt. This volume has risen by 4.5 mmt since the first 2020-21 forecast was release in May 2020, while is the largest Chinese imports seen since the 1995-96 crop year.

The blue line on the attached chart represents the monthly USDA forecast for global wheat exports, as measured against the primary vertical axis. This forecast has risen by 9.71 mmt over the period in question, with the increase in the forecast for China's imports accounting for close to 50% of the increase in global exports, although timing differences can be expected.

Is Canada on track to reach this forecast? As of week 30, or the week ending Feb. 28, durum exports totaled 3.4178 mmt, 24.3% higher than the same period in 2019-20 and roughly 273,500 mt ahead of the steady pace needed to reach the current AAFC forecast of 5.450 mmt.

Cumulative wheat exports though licensed facilities were reported at 11.370 mmt for week 30, up 27.9% from last year while 745,300 mt behind the steady pace needed to reach the current 21 mmt wheat export forecast. At the same time, this volume does not include unlicensed exports and the export of flour. Official Statistics Canada data shows 10.757 mmt shipped in the first six months of the crop year (August to January), while this volume is 673,000 mt higher than reported by the Canadian Grain Commission weekly data as of the end of January, accounting for unlicensed exports. The export of flour will help fill in the remaining gap.

Combined wheat and durum movement for the August-to-January period, or first six months of the crop year, total 13.491 mmt, while exports would have to match this pace in order to reach this forecast.

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

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