Canada Markets

Statistics Canada released the September estimates of production of principal field crops today. It's important to note that the farm surveys were conducted between September 4 and September 14, while Saskatchewan's harvest was only 23% complete on Sept 15 and Alberta's harvest was 26% complete on the Sept 16, which could suggest this data originates from early harvest activity and there may be further revisions to come.

Canada's all-wheat production estimate was released at 27.481 million metric tonnes, more than 10 mmt below the country's banner year in 2013. This is lower than the 27.704 mmt estimated released in July and also below the range of trade estimates where a 27.7 mmt to 29 mmt crop was expected as indicated by a Dow Jones poll. This will have little or no impact on the overall market, with a record global crop of close to 720 mmt expected.

The largest adjustment made to wheat is seen with durum, with production expected to reach 4.756 mmt, down slightly from last month's 4.953 mmt and well below the 6.5 mmt produced last year. This is near the lower end of trade expectations, with Dow Jones reporting trade estimates ranging from 4.5 mmt to 5.5 mmt. Lower revisions come as an expected drop in both yield and seeded acres since the July estimates. Quality will become an even larger issue than production levels, with durum bids for premium product reaching the mid-teens on the prairies loaded railcar with U.S. mill bids suggested to be above $20 U.S.

Perhaps one of the most watched numbers was the canola production estimate. After last year's record 17.9 mmt, any number released today would result in a tight stocks situation by the end of this crop year. While pre-report trade estimates were looking for a 14 mmt to 14.9 mmt crop to be announced today according to Dow Jones, Stats Can disappointed with a marginal increase from July to 14.079 mmt.

There was a modest reaction in the canola market upon the release of the report, although the market remains subdued to the bearishness of the U.S. and global soybean crop potential. Morning trade did move above short-term resistance pegged at $400/mt and $403/mt, although recent trade has since slipped below $403/mt. Spreads have narrowed this week suggesting a growing concern over supplies, although past researched has shown that Stats Can tends to under estimate canola production so an increase in December's final estimates will likely be expected.

Looking at the special crops, both the lentil crop and the mustard crop faced reductions in production estimates. Lentil production is estimated at 1.756 mmt, 174,300 mt below the July estimate and 19.2% below year ago production. This production is equal to the five year average and given current projections, will result in stocks to be drawn to critically tight levels by the end of the crop year.

Canadian mustard production was lowered almost 20% from the July estimates to 178,700 metric tonnes, 15.7% above last year and also above the five-year average. Given AAFC's current demand projection, the stocks/use ratio for mustard could be pulled below 10% for the second straight year.

Most crops saw production levels in-line with July estimates reported on August 21.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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