Canada Markets

Agriculture and Agri-Food Canada's most recent Supply and Disposition tables were released yesterday, leaving market watchers scratching their heads.

Perhaps the most interesting data presented in the report is found in the canola supply and demand data. The first thing that jumps out at you is a 300,000 metric tonnes increase in both the 2012/13 carryout (to 650,000 mt), as well as the 2013/14 carryout (to 700,000 mt).

So what changed? In 2012/13, it was domestic crush, increasing 200,000 mt. Wait a minute! Demand goes up, so does the ending stocks, too? The math would point to an 181,000 mt carryout, rather than the 650,000 mt presented.

Another observation with respect to the 2013/14 data is the conservative yield estimate of 33 bu./acre, which is equal to the five-year average yield as reported by Statistics Canada and would represent the second lowest yield seen in the past five years, second only to last year's 27.7 bu/ac. From May to July, Ag Canada's canola yield projection actually fell from 33.2 bu./acre to 33 bu./acre, where it has remained. At the same time, Alberta's most recent crop report suggests the Good to Excellent rating is 87.7% for canola, as compared to the five-year average of 61.3%. Saskatchewan's most recent canola crop rating indicates the crop to be 82% Good to Excellent, which compares to the five-year average of the last rating available each year at 67% Good to Excellent.

Given that trade estimates indicate a potential 34 to 36 bu./acre yield, and also the current Statistics Canada seeded acre estimates, the 33 bu./acre forecast may prove to be a conservative choice, although Mother Nature holds the cards.

The math for the 2013/14 crop year is correct, although data is jeopardized by errors made in the 2012/13 crop year, as indicated earlier. When 2012/13 ending stocks of 650,000 mt are brought forward as beginning stocks for 2013/14, supplies and ending stocks could be overstated by 469,000 mt, which indicates that the current crop year could continue extremely tight, or will a higher-than-forecast yield be used to smooth the results? More questions than answers remain about the data as provided.

Very few changes were made to the cereal grains. Wheat (excluding durum) saw exports increased by 100,000 mt for 2012/13 in this report, which resulted in ending stocks tightening in both 2012/13 and 2013/14 by that same amount. The same can be said for corn, where 2012/13 exports have been increased 150,000 mt, which in turn reduces ending stocks in both 2012/13 and 2013/14.

As with canola, cereal yield projections have not been upgraded to reflect the current crop ratings, as released in both Alberta and Saskatchewan. I suspect it is perhaps policy to stick with average yields until new analysis is provided by Statistics Canada, in this case next week, when the July 2013 Estimates of Production of Principal Field Crops is released on Aug. 21.

The five-year trends for selected crops are shown on the attached chart. Current Ag Canada production estimates are using a durum yield of 36.9 bu./acre, as compared to the five-year average yield of 36.3 bu./acre, as sourced from Statistics Canada data. Current wheat yields of 43.6 bu./acre is also being used to calculate 2013/14 production, with the five-year average at 44 bu./acre. In the case of barley and oats, production estimates are calculated using yields of 59.5 bu./acre and 75.6 bu./acre respectively, which reflect their five-year average yields. Stay tuned for next Wednesday's Stats Can report for further insight into the statisticians' views on the 2013/14 crop.

This most recent release will undoubtedly spark a whole new round of debate about the value of the government's involvement in providing estimates for the world which may not necessarily reflect changes over the growing season, and, in the case of canola, simply do not add up!

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

(ES)

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