Canada Markets

Agriculture and Agri-Food Canada (AAFC) presented their first projections for the 2014/15 crop in the most recent edition of Canada: Outlook for Principal Field Crops. These projections take into account the expected actions of producers as they react to lower commodity prices, higher input prices along with high carry-in stocks due to a disappointing lack of movement experienced in many crops over the 2013/14 crop year that will undoubtedly linger into the next crop year.

Planted acres for all grains and oilseeds are expected to increase approximately 442,000 acres, while planted acres of pulses and special crops are expected to grow by approximately 455,000 acres. Despite higher seeded acres, production is forecast to fall as yield projections fall back to longer-term averages, while prices are suggested to remain similar to 2013/14, buoyed by Canadian dollar weakness.

The largest shift in acres is expected to be out of the grains such as wheat, durum, barley and corn, while gains in crops such as oats, canola, flax, peas and lentils offset the reduction. Producers are expected to plant approximately 1.1 million acres less wheat (excluding durum) for a total of 20.2 million acres, which represents a 5.1% decrease. As well, producers plan to plant 245,000 less acres of durum for a total of 4.7 million acres, which represents a 4.9% drop from last crop year. This year's adequate global supplies and poor movement off of the Canadian prairies are behind this move.

Wheat production was calculated using a yield of 45.7 bushels per acre, which is consistent with the five-year average from 2009 to 2013. Wheat exports were forecast to be 300,000 mt higher than the 2013/14 crop year at 17.5 mmt, while the estimated carryout is forecast to fall 15% to 7.9 mmt by July 31, 2015. This analysis hinges on a 9.3 mmt wheat carryout in the 2013/14 crop year, which could be in jeopardy given that current exports are over 1 mmt behind the steady pace required to meet the export 2013/14 target even after being reduced by 100,000 mt to 17.2 mmt.

The largest gain in acres is seen in canola, where producers are forecast to increase acres by 8.5% or 1.7 million acres to 21.6 million acres, which is approximately 400,000 acres below the record seeded acreage of 22 ma in 2012. The estimated yield is 33 bpa, which is consistent with the five year average from 2008 to 2012. AAFC sees production of 16 mmt offset with higher exports at 8.5 mmt and higher crush at 7.5 mmt, leaving the 2014/15 carryout unchanged at 3 mmt. This analysis hinges on a 3 mmt carryout at the end of 2013/14 crop year, while current exports and crush are behind the steady pace needed to meet this target by over 800,000 mt which could jeopardize the forward projections.

The largest gain in acres on a percentage basis is seen in flax, where the percent change over 2013 acres is 19.3%, with acreage reaching 1.24 ma. This would be the highest planted acreage seen since 2009 when close to 1.7 million acres were planted. Favorable return prospects are making flax a popular choice. Projections for 2014/15 would see ending stocks remain unchanged at 150,000 mt.

Pulse crops are expected to draw producer interest, with the dry pea acreage forecast at 3.6 ma, up 9.1% from year-ago levels. With the average pea yield expected to be 36.3 bpa, which is consistent with the five year 2009 through 2013 average, while exports are forecast to be 50,000 mt lower, ending stocks are forecast to be 450,000 mt or 50,000 mt lower than the 2013/14 estimate.

Lentil acres are also set to benefit from the move out of cereals, with areas increasing 3.3% to 2.5 ma. Carryout stocks are estimated to fall slightly to 275,000 mt by the end of the 2014/15 crop year.

According to AAFC data, acreage for dry beans, canary seed and sunflower seed will increase, although with lower yields expected, ending stocks are set to remain unchanged in the next crop year at a minimal 5,000 mt for each grain.

While private forecasts in the U.S. indicate a significant shift from corn to soybeans, this trend was not suggested in Canadian data, which bears watching. Corn acres are estimated to fall approximately 106,000 acres or 2.9% to 3.6 ma. Meanwhile, soybean acres are expected to also fall close to 10,000 acres or 0.2% to 4.5 million acres.

This is an early stab at the government's modeling of the 2014/15 crop year which will undoubtedly lead to debate. I'd be interested in your thoughts. I can be reached at cliff.jamieson@dtn.com.

(ES)

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