Canada Markets

Agriculture and Agri-Food Canada (AAFC) released their monthly grain outlook report for the country on Wednesday, which updated Canadian supply and demand tables utilizing Statistics Canada data from the June 25 Principal field crop areas report along with updated yield and demand estimates.

The report backed up current provincial crop reports as well as recent media reports which are suggesting a big crop is on the way. Production of the Canada's grains and oilseeds is set to rise by 6% to 74.3 million metric tonnes, although ending stocks are set to rise while prices are set to face pressure as production is set to rebound in North America and globally.

Total pulse and special crop production is forecast to rise 1.4% to 5.145 mmt, with carry-out stocks set to rise with prices forecast to vary by commodity.

The June Statistics Canada report lowered the acreage estimate for wheat acreage for 2013/14 from the March intentions report, which led to a drop of 316,300 acres to 21.298 million acres. The average yield estimate for 2013 is 43.6 bushels per acre, which is just slightly below the 44 bu/ac which represents both the three-year and five-year average for Canadian wheat, excluding durum. While it may be early to jump to conclusions, Statistics Canada's Normalized Difference Vegetation Index (NDVI), which represents analysis of vegetative growth based on satellite data, is most recently indicating most of Alberta and Saskatchewan to show "much higher" than normal vegetative growth, supported by the substantial moisture received over most of the prairies. Private forecaster Lanworth from the U.S. also recently upgraded their views on the Canadian crop, based on similar technology.

As we near the end of the crop year on July 31, the government has reduced 2012/13 and 2013/14 exports by 200,000 mt each from the June report. While this may be in the cards for the current crop year, this is perhaps an interesting move given that USDA just increased Canada's all-wheat export potential by 0.5 mmt to 19.5 mmt, while Ag Canada's all wheat exports have fallen by 200,000 mt from their June estimate to 18.7 mmt at a time when media reports suggest China's imports could potentially more than triple from the 3.2 mmt of imports currently forecast for 2012/13 by USDA.

Overall, wheat carry out is forecast to be 4.8 mmt for 2013/14, with prices to remain under pressure from a sharp increase in production in the Black Sea area.

Canola acreage was increased in the June Stats Canada report from the previous March intentions, while the forecast yield for 2013/14 has been dropped slightly, resulting in a 500,000 mt improvement in 2013/14 canola production over the June estimate to 14.6 mmt. Forecast yield is pegged at 33 bu/ac, 19% above last year's 27.7 bu/ac and equal to the three-year average.

Unlike recent media reports suggesting trade estimates of 15 mmt for 2013/14 production, Ag Canada reported an estimated 14.6 mmt, which is a sharp increase of 9.7% over 2012's 13.310 mmt. The Ag Canada forecast came within 8,000 mt of the 14.608 mmt record production reached in 2011/12. Given recent crop ratings, a new record could be achievable. After a few week slide in Saskatchewan's canola crop ratings, a sharp increase in ratings have been announced as of July 15. While July 1 ratings indicated 73% good to excellent, 21% fair and 6% poor to very poor, July 15 ratings have improved to 80% good to excellent, 14% fair and 6% poor to very poor.

Both exports and domestic use have been forecast to grow by approximately 6.2% from last year, although at 7.650 mmt of exports and 6.9 mmt of domestic crush, these volumes continue to fall far short of the record 8.699 mmt of exports and 6.999 mmt of domestic crush set in 2011/12. Given the continued growth in domestic crush, count on a continued fight over stocks between these two sectors. Ending stocks are suggested to grow 50,000 mt to 400,000 mt, while prices are set to remain under pressure given an expansion in global oilseed production. The attached chart shows the 10-year trend for both export and crush activity in Canada.

Corn acres were reduced 168,000 acres in the latest report, as per a reduction in the June Statistics Canada report from their earlier March intentions. Taking into account a slightly better yield then used in June with estimated exports at 600,000 mt, down from the 2012/13 estimate of 1 mmt, the estimated carryout for 2013/14 was reduced by 450,000 mt to 2.550 mt.

2013/14 soybean acres were increased since the June report by 294,000 acres, while estimated yield was reduced slightly, leaving soybean ending stocks 20% higher than both the June forecast and the 2012/13 forecast at 300,000 mt.

Looking at the pulse and special crop supply and demand tables, the situation for pulses saw improvements in the situation for both lentils and dry beans, while the prospects for chickpeas have eroded. Improved exports for lentils has seen both the 2012/13 and 2013/14 carryout stocks tighten, leaving 2012/13 at 300,000 mt, less than half of the 2011/12 of 683,000 mt carryout, which has reduced the stocks/use ratio to 16% from last month's 23%. The stocks/use ratio for 2013/14 has also been reduced to 16% from last month's 22%, while ending stocks have been cut 50,000 mt to 250,000.

Dry beans have seen their stocks use ratio cut to 9% from 11% in 2012/13, while the 2013/14 stocks/use ratio is cut to 4% from 7%, based on a lower seeded acreage. Chickpeas, on the other hand, has seen estimated 2013/14 supplies balloon 16.4% on higher acreage, leaving ending stocks forecast to increase by 50% to 75,000 mt, which represents a 54% stocks/use ratio.

Another crop to watch is canaryseed. Seeded acreage was reduced by almost 25,000 acres from the June report, although the forecast yield has been revised higher. Exports for 2012/13 have been increased 5,000 mt, further tightening supplies. The stocks use ratio for 2012/13 has been reduced by 4% to 8%, while the 2013/14 stocks/use ratio remains at a tight 6%, leaving this market prone to future volatility.

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

(ES)

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