Trade in November canola in the past two days has failed to reflect the bullishness of Friday's Statistics Canada report that estimated canola acres to be planted in 2018 at 21.4 million acres, down 7% from the previous year. This follows an early 2018 estimate from Agriculture and Agri-Food Canada at 24 million acres, months of discussion surrounding the prospects of higher acres and a Commodity News Service range of pre-report estimates suggesting that acres would be reported in a range from 23.7 ma to 24.3 ma, an increase from the 22.997 ma planted in 2017.
In an unscientific poll of producers mostly conducted in advance of the report, the question was asked about the views of the accuracy of the Statistics Canada report, given that it is based on surveys conducted in March, well ahead of this year's planting. The largest response, or 50% of the total, replied that there may be a problem with accuracy and that the respondent is always cautious in accepting survey findings. A further 25% of respondents replied that accuracy would be a problem given the slow start to this spring. A further 17% responded that they place more faith on survey findings released in June, while 8% responded that they did not know.
It seems that caution in accepting March findings for canola should always be exercised. Over the past five years (2013-2017), the principal field crop areas report based on surveys conducted in late May and early June resulted in the estimate for acres seeded to canola to be revised higher each year from the estimates based on March surveys and released in April, ranging from roughly 400,000 to 700,000 acres, averaging 500,000 acres. Following the report released in late June, further upward revisions were made each year that averaged roughly 682,000 acres. Producers are well-accustomed to acreage estimates being revised higher following the first estimate.
Friday's report itself was incredibly bullish for canola. If Statistics Canada's acreage estimate is plugged into the current AAFC supply and demand table, utilizing their yield estimate of 39.8 bushels/acre, total production would be the smallest in three years. Even 2017/18 estimated demand levels in the year ahead would pull ending stocks sharply lower to below 600,000 metric tons, nearing levels last seen in 2012/13.
A $1.20/mt gain since the release of the report, the continued sideways move in momentum indicators along with weakness in new-crop futures spreads are all signs that the market is struggling with the reported data.
DTN 360 Poll
This week's poll asks what you found to be the biggest surprise in Statistics Canada's March intentions planting report. You can find this poll at the lower right side of your DTN Canada Home Page. We thank you for your input!
Cliff Jamieson can be reached at firstname.lastname@example.org
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