Canada Markets

AAFC Tweaks Canadian Grain Supply and Demand Tables

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The blue bars represent Canada's year-end July 31 carryout of wheat (excluding durum) since 1980. The orange bar represents the AAFC estimate for 2015/16 of 3 million metric tons while the yellow bar represents the estimate for 2016/17 at 2.5 mmt. The red line represents the year-end stocks as a percentage of annual demand, as measured against the secondary vertical axis on the right. (DTN graphic by Nick Scalise)

Agriculture and Agri-Food Canada's March Canada: Outlook for Principal Field Crops report saw a tweaking of data which tightened the carryout of the major grains and oilseeds for both 2015/16 and 2016/17, while pulse and special crop forecasts were left unchanged.

2015/16 exports of grains and oilseeds were increased 275,000 metric tons since February estimates, consisting of a 100,000 mt boost to durum exports to 4.5 million metric tons, a 25,000 mt increase in barley exports to 1.8 mmt and a 150,000 mt increase in corn exports to 900,000 mt.

Durum ending stocks have been trimmed 100,000 mt to an even one million tonnes, consistent with recent work in this space suggesting that durum stocks are poised to slip back below 1 mmt for the second straight year. As of week 32 CGC data, cumulative exports of 2.977 mmt for the week ending March 13 are over 200,000 mt ahead of the cumulative pace needed to reach the newly revised export estimate of 4.5 mmt.

As of the last Statistics Canada Merchandise Trade data, corn exports as of the end of January totaled 368,061 mt, 108% higher than the same five-month period in 2014/15, with Canadian dollar weakness to date leading to increased movement into the United States. This increased movement is expected to result in a 2 mmt carryout at the end of 2015/16, a 42.6% increase from 2014/15 and the largest seen since 2005/06.

Partially offsetting the overall increase in exports of grains and oilseeds is a 100,000 mt reduction in Canada's expected canola crush to 8.1 mmt. As of March 16 COPA data, the cumulative crush was 5.126 mmt, just slightly behind the cumulative pace needed to reach the new 8.1 mmt target. The impact of this move is a 100,000 mt increase in the 2015/16 ending stocks to 1.85 mmt, a 20% reduction from the previous year.

Perhaps one of the most interesting projections is seen in the forecasts for wheat ending stocks (excluding durum). At a projected 3 mmt carryout for 2015/16, ending stocks are already reported to be the lowest since the 1930s. This month's report saw the new-crop seeded acre estimate trimmed slightly, resulting in a lowering of projected production and ending stocks by 300,000 mt from last month to 2.5 mmt. The attached chart shows the trend in Canada's wheat carryout and stocks/use ratio, both expected to fall for the third consecutive year in 2016/17.

While this data may have little impact on the global market given the record carryout expected globally, it will be watched closely in Canada. AAFC may continue to remain conservative in its estimate for 2016/17 pea and lentil acres seeded at 8.6 million acres, one million acres or a 13% increase from 2015/16, although this is still below one industry estimate of 10 mmt which could suggest even more acres switched from wheat to pulse crops. As well, production prospects will be watched closely given prospects for dry weather on the Prairies over the upcoming months.

Looking at price projections, the following changes are seen in the March report:

-- The 2016/17 corn price range is estimated to fall by $5/mt from the February estimate, as well as from the 2015/16 estimate to a range of $165/mt to $195/mt.

-- The price range for oats, representing the U.S. No. 2 CBOT nearby futures, was trimmed by $5/mt for 2015/16 to $190 to $220/mt while the estimated range for 2016/17 range was adjusted $10/mt lower to $195 to $225/mt, indicating only a modest price recovery expected for next crop year.

-- The estimated price range for canola in 2015/16 was reduced $10/mt to a range of $485 to $515/mt, reflecting the track Vancouver price. The new-crop price range was reduced by $30/mt since last month to a range of $480 to $520/mt, a slightly wider range than reported for the current crop year. Uncertainty surrounding China's import quality demands are likely to weigh on next crop year's price potential.

-- The lower-end of the flax price range, basis in store Saskatoon, was lowered $10/mt to a range of $440 to $480/mt for the current crop year. The new-crop price estimate suggests weaker prospects, with the range trimmed by $20/mt from last month to $440 to $480/mt, unchanged from the current crop year.

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