Friday's Statistics Canada Dec. 31 stocks report attempted to shed light on stocks held on farm and in commercial hands. This follows the uncertainty of final production numbers released in December that included acres in the western Prairies where harvest was pending, given the challenging weather conditions faced last fall.
When the last Saskatchewan Crop Report was released Nov. 21, 95% of the crop was estimated to be harvested, while the last Alberta Crop Report Nov. 29 provided an estimate of 90% of the crop harvested. The survey for the final production estimates took place between Oct. 21 and Nov. 13.
As of Dec. 31, wheat stocks (excluding durum) increased 5.4% to 18.130 million metric tons, a two-year high and below the five-year average of 19.250 mmt. Statistics Canada noted the increase tied to the 15% increase in production in 2016, while weak demand remains an issue. The late harvest, lower quality and a competitive global marketplace points to August-through-December implied disappearance of 9.997 mmt, which is a six-year low. Projecting January-through-July disappearance utilizing the five-year average January-through-July disappearance of 13.8 mmt would imply ending stocks could be closer to 4 mmt, which is higher than the current 3.5 mmt estimated by AAFC.
The most disappointing data found in today's report is in durum stocks, increasing 63.1%, to 6.901 mmt. This is a record level of stocks for this date and well above the five-year average of 4.3 mmt. Implied disappearance totals 1.972 mmt, which is below the 2.264 mmt five-year average. The five-year average disappearance in the January-through-July period is 3 mmt, which would imply a 2016/17 carryout close to 4 mmt as compared to AAFC's current 2.6 mmt estimate and the five-year average of 1.3 mmt. While bearish for durum overall, the carryout will largely consist of lower-quality stocks.
As seen on the attached chart, canola stocks at the end of December are estimated at 12.159 mmt, down 9.6% from last year and the lowest in four years. Implied disappearance in the August-through-December period, given current estimates of 2016/17 supplies is a record 8.380 mmt. In 2015/16, January through July disappearance is estimated at 11.436 mmt, a pace that would lead to a bullish sub- 1 mmt carryout in 2016/17 as compared to the 2 mmt estimate released by AAFC. The uncertainty will continue surrounding how much spring harvest is yet to take place, how substantial will the yield losses be and the overall quality of the crop.
While the canola market has failed to show a significant response to this morning's data, the activity seen in futures spreads may be key to what commercial traders are thinking. The nearby March/May spread has weakened this week to minus $7.50/mt (May trading over the March) showing an increasing bearish sentiment on the front-end, while the May/July spread has narrowed to minus $3.00/mt this week, suggesting a less bearish or even bullish view of fundamentals later in the crop year.
Oat stocks, as of Dec. 31, fell by 5.3% to 2.371 mmt, a four-year low and just slightly below the five-year average. Implied disappearance in the August through December period is 1.724 mmt given current estimates, the largest in eight years. Given the five-year average disappearance seen in the January through July period, ending stocks could be in the 700,000 mt range, just slightly higher than current AAFC estimates.
Ending stocks for barley were also viewed as bearish, up 11.7% from December 2016 to 6.352 mmt. This is a three-year high and above the 5.738 mmt five-year average. Implied disappearance in the August-through-December period is virtually unchanged from the previous crop year as well as the five-year average. Average January-through-July disappearance would lead to ending stocks close to 2 mmt, as is currently estimated by AAFC, although fierce competition from the massive supplies of lower grade durum should have a negative impact on barley consumption for the remainder of the crop year.
Lentil stocks were estimated at 1.764 mmt, a three-year high, up 48.7% from the previous year and above the five-year average of 1,615 mmt. Implied disappearance in the August-through-December period is calculated at 1.657 mmt, just slightly behind last year's pace of demand. January-through-August disappearance both in 2015/16 and on average over the past five years is 1.1 mmt, which would imply a 2016/17 carryout of 664,000 mt, just slightly higher than the current AAFC estimate.
Dry pea stocks were estimated at 2.687 mmt, up 13.2% from last year, a seven-year high and above the five-year average of 2.150 mmt. Given current estimates, implied disappearance in the first five months of the crop year is a record 2.349 mmt, while should the January-through-July disappearance match last year's pace, ending stocks could be close to the 500,000 mt level, still well above the 176,000 mt estimate from 2015/16 although well below AAFC's current 875,000 mt estimate.
Switching to row crops, stocks of corn were estimated at 11.650 mmt as of Dec. 31, up 3% from the previous. This is roughly 1.2 mmt higher than the five-year average for this period, while is a record high for Dec. 31. Implied disappearance given current estimates suggest 4.972 mmt either exported, fed or turned into ethanol in the first four months of the crop year (September-through-December), a three-year low and just slightly higher than the five-year average. The five-year average disappearance in the January-through-August period is calculated at 8.860 mmt, a pace of demand that would imply a 2.8 mmt carryout in 2016/17, well above the current 2.2 mmt estimate released by AAFC.
Soybean stocks as of Dec. 31 were estimated to fall by 4.3% to a two-year low of 3.393 mmt. This compares to the 3 mmt five-year average for this date. Current estimates point to an implied record 3.7 mmt of disappearance in the first four months of the crop year, well ahead of the five-year average. The January-through-August disappearance in 2015/16 totaled 3.153 mmt, which suggests that stocks will be extremely tight by the end of the crop year given current estimates, as forecast by AAFC.
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