Canada Markets

On Dec. 4, Statistics Canada will release its final estimates of the Canadian crop. According to pre-report trade estimates reported by Commodity News Service, Canadian crop production will likely be boosted higher in Thursday's report from the September estimates reported Oct. 3. At the same time, all crops will remain well below year-ago levels.

There are a number of indicators pointing towards a production hike tomorrow. First is the historical bias towards a conservative report in the early fall. Previous research has shown that in the past five years, the production estimate for the major crops has grown anywhere from 2.7% to 10.1% on average between the October and December reports, pointing to a conservative approach early in the fall. Only one of the major crops, barley, has seen the size of the crop smaller in the December report on average over the past five years.

Also of interest is the fact that production in British Columbia and the Maritimes is not included in the October release but will be included in December. Stats Canada suggests this volume represents 2 to 4% of the total crop. This will also add to the crop size.

Last of all is the timing of the report. Data for the September estimates was collected between Sept. 4 and 14 at a time when harvest was behind normal pace. As of Sept. 15, Saskatchewan Agriculture reported that the crop in that province was 23% harvested, well behind the five-year average of 43%. As well, Alberta Agriculture reported on Sept. 16 that 26% of the crop was harvested.

As the harvest advanced past this date, so did the estimated yields. Yields estimated by both Sask. Ag and Alberta Ag at the end of harvest were mostly higher than earlier estimates released by Statistics Canada. The wild card in tomorrow's report could be harvested acres, which could lead to unexpected results.

A few crops that can least afford a surprise in tomorrow's report is canola, barley, dry peas and lentils. Current estimates suggest that canola production will be reported between 14 and 14.9 million metric tonnes, which compares to the September estimate of 14.079 mmt. Current AAFC estimates suggest that the canola carryout for 2014/15 will be 900,000 mt, which is well below the five-year average of 1.7 mmt. This would be the third-lowest carryout seen in the past three years, given current projections, resulting in a tight stocks/use ratio of 5.7%. This number is made possible by a 700,000 mt reduction in export demand from the 9.1 mmt exported in 2013/14.

Despite expectations for an increase in production, spreads continue to indicate bullish commercial behavior and concern on the part of commercial traders.

Barley is another crop with a tight supply/demand balance. With acres and production at record lows already, any surprise that could result in lower production would lead to increased market volatility. Given current estimates, ending stocks for 2014/15 are forecast at 700,000 mt, a tight 8.4% of 2014/15 demand and well below the five year average of 1.6 mmt. The September estimates released in October showed barley production at 7.119 mmt, a record low, while pre-report estimates are pegging tomorrow's report at 7 mmt to 7.4 mmt.

Peas and lentils are two other crops that cannot afford any surprises in the December data. The current dry pea supply and demand table released by AAFC is pointing towards a 125,000 mt carryout this crop year, well below the five-year average of 438,600 metric tonnes and a tight 3% stocks/use ratio.

Current lentil supply and demand tables indicate a 50,000 mt lentil carryout in 2014/15, just a fraction of the five-year average of 441,200 mt according to Stats Canada data. Current estimates also reflect a tight 3% stocks/use ratio.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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