Canada Markets

DTN's 360 Poll this past week asked what the major story coming out of Wednesday's Statistics Canada report would be. Fifty-six percent of respondents hit the nail on the head by choosing Canada's crop size gets even bigger. Seventeen percent responded that Canada's crop size would be smaller than previous estimates, while 27% of respondents felt that Canada's overall crop size would be largely unchanged from the September estimate.

There was little conservative data in this report, with production of many crops either at the high of the range of pre-report trade estimates or well above the high. The largest adjustments were made to the country's largest crops of wheat and canola.

Premier Brad Wall of Saskatchewan reported Wednesday morning that the Saskatchewan crop, 40% above 2012 levels at 38.4 mmt, has exceeded the province's 2020 growth target. His tweet referred to the industry as the Saskatchewan economy's rock stars.

Canada's all-wheat production was reported at 37.530 million metric tonnes, above the pre-report range of 33.325 mmt to 35.3 mmt as reported by Dow Jones, while above the September estimate of 33.026 mmt. All-wheat production is 38% above year-ago levels.

On a volume basis, Canadian red spring wheat production showed the largest year-over-year volume increase of 5.767 mmt, a 35% increase, with the average hard red spring wheat yield reported at 51 bpa, which is 9.4 bpa above the last record set in 2011. This report also gave us this year's first glimpse of production of the smaller classes where the production increases on a percentage basis are much greater. Production of the medium quality Canada Prairie Spring in the country increased 975,400 mt or 102% above year ago levels to 1.932 mmt, with the largest increase seen in Alberta. Canada's soft white wheat production increased by 1.258 mmt from year ago levels to 2.217 mmt, a 131% year over year increase. The largest volume increase is seen in Saskatchewan.

The Minneapolis hard red spring future moved lower on the news, with mid-morning trade indicating a fresh contract low of $6.96 1/2/bu has been reached, with current trade down 7 1/2 cents at $6.97/bu.

Canada's canola production was reported at 17.960 mmt, which is at the high end of the Dow Jones pre-report trade estimate which ranged from 16.6 mmt to 18 mmt. Wednesday's number is above the September estimate of 15.963 mmt and 29.5% above year-ago levels. It's interesting to note that Tuesday's Dow Jones reports from Canadian industry sources suggested that producers would tend to under-report production with hopes of supporting price, which makes one wonder if production can even be higher? The average canola yield was reported at 40 bpa, 4.7 bpa above the 2009 record.

Wednesday morning's canola trade was slow to react to the report, although when it moved, the nearby January future moved below the Aug. 6 contract low of $479.60/mt with mid-morning trade reaching a new contract low of $476.60/mt. Current trade is currently down $3.10/mt at $479.30/mt.

Durum production on the prairies surprised the trade, with the November estimate reported at 6.505 mmt, above the pre-report trade estimate of 5.5 mmt to 5.7 mmt. The September estimate was announced at 5.579 mmt, while 2013 production is 40.6% higher than year-ago production. The average yield was reported at 48.4 bpa, 9.4 bpa above the previous record set in 2011.

Canadian barley production was reported at 10.237 mmt, above the range of pre-report trade estimates of 9.4 mmt to 9.475 mmt, as well as above the 9.247 mmt September estimate and 27.8% above yea- ago levels. The average yield was reported at 71.7 bpa, 9.2 bpa above the 2008 record. Canadian oat production was reported at 3.888 mmt, above the pre-report trade estimate range of 3.225 to 3.4 mmt and above the September estimate of 3.163 mmt. 2013 production is 38.3% above 2012 production. The average yield was reported at 92.1 bpa, 14.3 bpa above the record set in 2009.

Canadian corn production was reported at 14.194 mmt, above the September estimate of 12.943 mmt and 8.7% above year ago production. Corn yields were said to average 152.8 bpa, which remains below the 2010 record of 155.4 bpa. Canadian soybean production was reported at 5.198 mmt, above the 4.817 mmt estimate from September and 2.2% above year ago levels. Soybean yields were reported to average 42.5 bpa, which is below the estimated 45 bpa yield in 2012.

Flax production of 712,000 mt was above the September estimate of 664,000 mt and 45.7% above 2012 production. Average yield of 27.5 bpa is 3.7 bpa above the last record set in 2009.

Pulse crops also came in higher than September estimates, although in the case of peas, just slightly below the range of trade estimates. Dry pea production, at 3.849 mmt was just slightly below the range of pre-report trade estimates of 3.9 mmt to 4 mmt, although above the September estimate of 3.781 mmt and 15.2% above year ago levels. Dry pea yields averaged 43.7 bpa, 5.5 bpa above the last record set in 2011. Lentil production at 1.881 mmt was above the September estimate of 1.709 mmt and 22.3% above year ago levels. The lentil crop averaged 1,758 pounds per acre, 343 pounds/acre above the last record set in 2009.

Given Canada's current strained handling and transportation sector, this report will be viewed as bearish and will lead to further cash market weakness for many commodities.

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

(ES)

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