Canada Markets

Agriculture Canada released its monthly Canada: Outlook for Principal Field Crops yesterday, which takes into account data from Statistics Canada's final production estimates for 2012 which were released earlier this month.

In this report, estimates as far back as five years were tweaked to force revisions to past supply/demand tables which will affect the outcome for 2012/13. Canada's total increase in 2012 production for the principal field crops was 2.031 million metric tonnes when compared to the November estimate. While both exports and domestic use are forecast higher than the November estimate, carryout stocks are also growing by 246,000, although are still close to record lows.

With the release of the production figures earlier this month, eyes were focused on the canola data. With the crop size falling far short of earlier expectations and this fall's rapid pace of domestic usage, the hope was that Stats Can would increase the crop size, with trade estimates ranging anywhere from 13 mmt to 14.4 mmt. The actual release saw a crop size of 13.310 mmt, or 49,000 mt lower than the previous estimate. Carry-in stocks from 2011/12 were cut by 60,000 mt and production was reduced by 49,000 mt, while domestic usage was reduced by 10,000 mt, with an overall net impact being a reduction of ending stocks from 450,000 mt to an even tighter 350,000 mt, a 3% stocks/use ratio. This compares to last year's 728,000 mt carryout and past views that 1 mmt was bare minimum pipeline stocks.

The need to ration canola stocks has long been discussed, although this has yet to happen with year-to-date exports running behind while YTD domestic crush is well ahead of past years. Total disappearance, as of week 19 data (Dec. 12), was 5.67 mmt, or 40% of total supplies. When visible supplies are included, 48% of 2012/13 supplies are either exported, crushed, or sit in-store licensed facilities. Something must give in the New Year.

Wheat carry-in stocks were revised 43,000 mt lower, while 2012 production was increased by 244,000 mt. Wheat exports are forecast lower than the November estimate by 200,000 mt, while wheat's domestic use is increased by 400,000 mt, with a boost seen in wheat feeding. As of week 19, wheat's total disappearance was .9% behind last year and 4% ahead of the three-year average. Recent signs that major wheat buyers such as Egypt are turning to competitive wheat offers from the United States are encouraging, although not enough to support the market from its downward spiral at present. The overall carryout for the year remains unchanged at 4 mmt, the lowest in five years.

Stats Canada slashed barley production by 579,000 mt, or 6.7 %, earlier this month, which tightens an already tight feed situation in the west. No changes were made to the traditional 2 mmt in exports, although domestic use was cut slightly, leaving ending stocks at 1 mmt, down 33.3% from last month's 1.5 mmt estimate and 20% below last year's ending stocks. The average carryout during the past five years is 1.8 mmt, an indication of the degree of tightness this market will face.

Barley exports may also act to underpin this market, with week 19 exports reported at 686,200 mt, which is 50.5% ahead of last year and 25.3% ahead of the three-year average. This is a number to watch moving forward.

Durum data from past years were adjusted, which increased carry-in stocks by 80,000 mt, while production was increased by 229,000 mt. Exports were nudged 150,000 mt higher to 4.1 mmt, leaving ending stocks slightly higher than November's estimate at 1.3 mmt.

The largest changes in the grains and oilseeds report were found in eastern corn and soybean production, where record production of both were achieved. Corn production was pushed 1.48 mmt or 12.8% higher than the previous estimate and soybean production was raised 650,000 metric tonnes or 15.2%. Surprisingly, the larger production did not lead to higher export potential as released in yesterday's report. Corn exports are forecast to remain steady at 1.2 mmt, with carryout stocks to grow by 500,000 mt to 2 mmt. Soybean exports were increased 200,000 mt to 3.1 mmt, while carryout stocks are forecast to double from 125,000 mt to 250,000 mt.

Oat production in the Stats Canada report was pegged at 2.684 mmt, 255,000 mt lower than the November report, or a drop of 8.7% from earlier estimates. Exports are expected to remain unchanged from the November estimate, while domestic consumption is expected to drop by 84,000 from the November report. Carryout stocks are to fall to 600,000 mt or a 22.6% reduction from the November estimate. Feed oat prices have been well supported by corn prices during the past few months, while the sluggish corn market and the recent steep decline in price may act to slow the demand for alternative feed ingredients.

Pea production was increased by 87,000 mt. Exports are expected to remain steady at 2.3 mmt despite this increase in production, with domestic use increased slightly. As of week 19, Canadian pea exports were 22.5% behind last year and 17.8% behind the three-year average shipments. Note that this data accounts for bulk shipments through terminals only, while data from containerized shipments are not readily available. Carryout stocks were increased 50,000 mt or 25% to 250,000 mt, which continues tight at a 9% stocks/use ratio and the third drop in as many years. Pea prices have been strong across the prairies, with record prices for both yellow and green peas seen over past months. This has been based on export demand from India and China, as well as yield and quality losses in Argentina due to excess rainfall.

The largest adjustment within the special crops came in the dry bean data. Carry-in stocks were raised from 1,000 tonnes to 5,000 tonnes, while production was increased by 57,000 mt or 25.4%. With exports left unchanged and domestic usage increased only slightly, carryout was increased a whopping 600% from the November data, or from 4% stocks/use to 25%. Prices are suggested to remain under pressure due to large North American supplies, with the U.S. also expanding its 2012 production by 60%.

These are just a few of the highlights of this report. While it's encouraging to see even higher production figures, the recent sell-off in U.S. grain and oilseed futures because of weak export data and contract cancelations in the soybean trade is sounding alarms that the demand-driven market that we have seen during past months may be taking a breather, which may have implications for Canada's projected export program.

Cliff can be reached at cliff.jamieson@telventdtn.com

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