Canada Markets

AAFC's 2016/17 Supply and Demand Update

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The blue bars represent Agriculture and Agri-Food Canada's year-over-year change in expected carry-out for selected crops, with durum and dry peas showing the largest potential build in stocks. The brown bars represent the difference between the estimated 2016/17 carryout and the respective five-year average. (DTN graphic by Nick Scalise)

Agriculture and Agri-Food Canada's September Canada: Outlook for Principal Field Crops report updates Canada's supply and demand tables utilizing Statistics Canada's recent crop production estimates. Note that this report relies on AAFC estimates of 2015/16 carryout, with Statistics Canada to release official estimates on Sept. 7.

The improved yield estimates released by Statistics Canada in August resulted in a 3.572 million metric tons increase in expected production of all principal field crops in 2016 from the July report, which is also 3.289 mmt or a 3.9% increase from estimated 2015/16 production. The year-over-year increase for all grains and oilseeds is expected to climb by 1.1% or 889,000 metric tons to 78.485 mmt, while the year-over-year increase in pulses and special crops is estimated to climb by 2.4 mmt, or 38.4%, to 8.657 mmt.

Given a lower crop carry-over from the 2015/16 crop year, AAFC estimates total supplies of principal crops are estimated to fall .8%, to 99.9 mmt, a result of a 2.4 mmt drop in grain and oilseed supplies along with a 1.6 mmt increase in pulse and special crop supplies. As a result, overall exports are expected to be 1.403 mmt lower than seen in 2015/16, with lower exports of grains and oilseeds partially offset by higher year-over-year exports of pulses and special crops. Domestic use of all principal field crops in 2016/17 is expected to be only slightly lower than seen in 2015/16.

Ending stocks of all principal field crops is expected to climb 8.1%, to 11.485 mmt, with a marginal drop in combined grains and oilseeds ending stocks offset by growing ending stocks of pulses and special crops. This would be the first increase in Canadian principal field crop stocks seen in three years, although remains close to the recent low of 9.6 mmt seen as of July 31 2013.

A further breakdown of ending stocks by selected crops is shown on the attached chart, which compares the current 2016/17 ending stocks estimate in relation to the previous crop year (blue lines), while the gold lines compare expected 2016/17 ending stocks to the five-year average (2012 through 2016). Note that official Statistics Canada July 31 ending stocks estimates will be released Sept. 7, while this study relies on current AAFC estimates.

As indicated by the blue lines, the largest year-over-year increases in stocks are seen in lentils (300,000 mt), dry peas (700,000 mt), barley (300,000 mt) and durum (700,000 mt). Despite demand expected to increase year-over-year for each of these crops, these increases are no match for the expected increased production.

Expected ending stocks for both soybeans and canola are shown to be virtually unchanged over the upcoming year. Any future increases in production will likely be matched by increased demand, which I assume will happen. Statistics Canada has a tendency to release conservative production estimates in August, which will likely be increased in time. As well, AAFC is utilizing a 2015/16 carryout of 950,000 mt for canola, while the week 52 CGC statistics showed commercial stocks of 876,100 mt, plus grain in transit. Farmers delivered 173,400 mt in week 1 and a further 188,300 mt in week 2. All combined, there seems a need to make 2015/16 revisions.

Also seen on the attached charts, the largest year-over-year declines in stocks of the selected grains are seen in oats and corn (blue bars). Despite a cut in acres seeded to oats, exports are estimated slightly higher than achieved in 2015/16. Ending stocks are forecast at 475,000 mt, approaching the 446,000 mt reported in 2012/13 which was the lowest seen since July 2002.

Lower estimated production of corn in Ontario is estimated to lead to a 650,000 mt reduction in corn ending stocks to 1.3 mmt, which would be also 273,200 mt lower than the five-year average. This number may remain hotly contested, as private estimates are suggesting that Statistics Canada may have overstated the province's yield potential.

Price projections released by AAFC are pointing to lower price potential for almost all crops in 2016/17. These estimates will prove to be a moving target based on the overall quality of the crop and the potential seen in other countries such as India when pulses are harvested in the winter Rabi crop. Expected returns for Canadian soybeans are curiously higher in 2016/17, reported to range from $460 to $500/mt in the upcoming crop year as compared to a $440/mt average in the previous crop year.

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