Canada Markets

AAFC Revises Demand Outlook Higher

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Agriculture and Agri-Food Canada made few changes in its monthly supply and demand outlook, as found in the November Canada: Outlook for Principal Field Crops. In many ways, this report could soon be viewed as outdated as Statistics Canada is to release updated production estimates on Dec. 4, with increased production estimates expected for some crops.

Given the most recent Statistics Canada estimates, the largest changes in the November report were seen in a boost in export demand, crush demand and feed/waste dockage disappearance of canola along with a substantial increase in export demand for lentils.

Canada's canola export potential was increased by 500,000 mt from the October report to 8 million metric tons. This level would be 12.6% lower than 2014/15 and the lowest volume seen since 2012/13, although close to the five-year average of 8.271 mmt. As of week 15, year-to-date exports of canola are 168,000 mt or 6.3% ahead of the same date last year at 2.8365 mmt (licensed exports only). Also as of week 15, or the week ending Nov. 15 which accounts for roughly 29% of the crop year, exports are more than 500,000 mt above the cumulative pace needed to reach the newly revised 8 mmt target, suggesting more upward revisions to exports could be expected.

The country's domestic crush was also increased by 50,000 metric tons to 7.4 mmt for the 2015/16 crop year. This would be a record crush, understandable given the increase in crush capacity, but only a .6% increase over volumes crushed in 2014/15. As of Nov. 18 COPA data, year-to-date crush of 2.324 mmt is roughly 47,260 mt above the cumulative volume needed to stay on track to reach the newly revised target of 7.4 mmt. Should this pace continue, further upward revisions will be made to 2015/16 crush.

The spoiler-alert in the canola market is that despite estimated demand increasing by 600,000 mt in this report(including an upward revision of 50,000 mt to feed/waste and dockage), there exists a school of thought that 2015 production could be as high as 16 mmt, which would require a 1.7 mmt upward revision to existing production estimates. This column mentioned the possibility last week based on conversations with industry, while AAFC also mentioned the possibility.

The other major shift in demand was seen with a 300,000 mt increase in lentil exports. This would represent a similar volume shipped in 2014/15 and the possibility of record export volumes.

Cumulative data to the end of September reported by Statistics Canada shows a total of nearly 415,000 mt shipped in the first two months of this crop year, 40% higher than the same period last year and 48% above the average pace of the past three years.

This volume is also higher than the steady pace needed to reach the 2.2 mmt target. Ending stocks have been revised lower to 100,000 mt, just 4% of expected use, while Saskatchewan Agriculture has estimated lentil yield slightly higher than current Stats Can projections. This suggests that upward revisions of 2015 production could be expected on Dec. 4, which may add to year-end stocks depending on the pace of exports.

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