Agriculture and Agri-Food Canada's December estimates have called for Canada's all-wheat (including durum) ending stocks to dip to 6.1 million metric tons in the 2017/18 crop year, down 735,000 metric tons from the previous crop year and 17% below the previous four-year average.
At the same time, USDA analysis has resulted in a higher carryout of 6.635 mmt in their January WASDE report (viewed as the official estimates) while the USDA's Foreign Advisory Service Canada: Grain and Feed Update released today hiked this number even higher to 7.1 mmt. This represents a volume that is 1 mmt higher than the most recent AAFC estimate and could rival the largest ending stocks seen in four years. This is shown by the brown, green and red bars as seen on the attached chart, measured against the primary vertical axis.
The brown line with markers also shows the trend in the all-wheat stocks/use ratio given the three studies. Current AAFC estimates would suggest the stocks/use would dip below 20% for only the third time over the period shown, while more recent U.S. estimates suggest that this could instead push higher above the 20% mark.
The rationale presented in the Thursday release of the USDA's FAS report is based on limited feed wheat supplies given this year's quality crop and the import of corn into prairie feed markets which is capping the upside potential of feed prices and limiting the use of feed wheat. Latest reports from Alberta Agriculture point to feed wheat prices topping out at $225/metric ton over the past two weeks delivered into southern Alberta, a level equal to the top bids on barley, with both prices capped given the movement of both Manitoba and U.S. corn.
We should soon see AAFC's January estimates, but estimates released by our neighbors to the south may point to an increasingly bearish cash market for wheat should stocks grow as forecast.
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Cliff Jamieson can be reached at email@example.com
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