Canada Markets

A Look at AAFC's Supply and Demand Estimates

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart shows the year-over-year change in Canada's ending stocks of selected grains (2018-19 to 2019-20) as shown in Agriculture and Agri-Food Canada's forecasts. The blue bars represent the change in volume, measured against the primary vertical axis, while the black line represents the percent change, as measured against the secondary vertical axis. (DTN graphic by Cliff Jamieson)

The May release of Agriculture and Agri-Food Canada's supply and demand tables includes the most recent Statistics Canada estimates for seeded acres, based on the March intentions obtained from producer surveys and released on April 27, along with the March 31 stocks estimates that were released on May 7.

There's a great deal of moving parts in any forecast, with weather and trade issues just two major factors creating uncertainty in this year's forecasts, which could be viewed as best guesses at a time when the crop is just beginning to emerge.

Looking back at historical AAFC reports, stocks of grains and oilseeds are expected to grow for the second straight year in 2019-20, while stocks of pulses and special crops are forecast to fall for a second straight year. Overall stocks are expected to grow, with the attached chart pointing to significant increases in both wheat and canola as the largest contributors, although for different reasons.

AAFC increased its forecast for 2018-19 wheat exports by 100,000 metric tons to 18.8 million metric tons this month, tightening carry-out for the current crop year to 3.9 mmt, which AAFC reports as 32% lower than the five-year average while is approaching the 3.6 mmt carryout realized in the 2007-08 crop year.

Despite the tight carryout, a 12% increase in acres seeded to spring wheat and a 2.2% increase in winter wheat acres, along with a forecast for an average yield equal to last year is forecast to lead to a 6.9% increase in 2019-20 supplies to 32.7 mmt. Both domestic demand and export demand are forecast to rise only slightly, with ending stocks for 2019-20 forecast to rise by 1.7 mmt, or 43.6%, to 5.6 mmt, or 20.7% of annual use. This is still far tighter than the 56.4% for the United States based on the USDA's May WASDE and the 38.6% based on the USDA's global forecast. The USDA has forecast Canada's export potential for all-wheat at 24 mmt, 350,000 mt higher than AAFC's forecasts. AAFC forecasts a continued weak Canadian dollar to support prices, with producers to receive an average $220 to $250/mt, down $20/mt to unchanged from the current crop year, based on average prices received by Saskatchewan producers.

Despite Statistics Canada's 18.8% drop in area planted to durum this crop year, a higher average yield is forecast, along with a significant jump in 2018-19 ending stocks, to lead to crop year supplies that are only slightly lower than estimated for the 2018-19 crop year. Exports are forecast to rise to 4.650 mmt, which would be the highest in five years, and would lead to a 21% drop in ending stocks to 1.5 mmt in 2019-20. Producer price is forecast to rise to $230 to $260/mt, up $5/mt to $25/mt, based on the average of Saskatchewan producer returns.

The most bearish forecasts are reserved for the canola market, although caution comes into play as the length of Canada's trade impasse with China is an unknown. AAFC decreased its estimate for 2018-19 canola exports from 9.8 mmt to 9.3 mmt, in line with previous DTN estimates, while boosting crop-year ending-stocks to a record 3.9 mmt. Despite a 6.6% reduction in acres seeded to canola forecast for 2019, an average yield similar to last crop year is expected to result in 2019-20 crop year supplies that are only 67,000 mt lower than the previous crop year.

Exports of canola are forecast to plunge to 8 mmt in 2019-20, which would be the lowest in seven years as exporters scramble to replace lost sales to China due to a combination of the China's import ban along with reduced demand due to the African Swine Fever. Ending stocks of canola are forecast to swell to 5.3 mmt, more than doubling over a two-year period, which would represent 30.1% of annual use. The range of track Vancouver cash prices is forecast to fall to $460-$500/mt, down $15/mt to down $5/mt from the current crop year. Of all the forecasts, a stroke of a pen could have the largest effects on the canola data should Canada find a way to return to normalized trade with China.

The May AAFC estimates included a 300,000 mt reduction in the country's soybean export potential to 5.2 mmt for 2018-19, due to a rapid drop in movement to China since December. Imports were also increased by 350,000 mt, to 1 mmt, although may still not account for the actual movement of soybeans into Canada, with close to 776,000 mt imported in the September-through-March period. Ending stocks of soybeans for 2018-19 were revised 120,000 mt higher, to 670,000 mt, which would be a record level.

Canada's soybean stocks are forecast to fall only 50,000 metric tons in the crop year ahead to 620,000 mt, with 2019-20 exports to fall by 700,000 mt to 4.5 mmt, close to the same volume drop forecast in production, with the 2019 seeded area forecast to fall for the second straight year to 5.646 million acres, below the five-year average.

The May forecast saw AAFC revising its estimate of corn imports higher by 300,000 mt to 2.5 mmt for the 2018-19 crop year, with close to 1.7 mmt imported in the September through March period. At the same time, the export potential was increased by 100,000 mt to 2.1 mmt, which resulted in a boost of 200,000 mt in ending stocks to 2.2 mmt. While 2019 production is expected to increase due to an expected 4.6% increase in seeded acres along with a slightly higher yield than realized in 2018. Total supplies are forecast to fall by 720,000 mt largely due to lower imports, while combined with lower exports, ending stocks are forecast to fall by 200,000 mt, to 2 mmt.

A 10.2% increase in acres seeded to barley is poised to offset lower ending stocks this crop year, with crop year supplies forecast to grow by 6.5% to 10.3 mmt, the largest in three years while also close to the largest supplies in six years. Export potential is forecast to fall slightly to 2.750 mmt, while ending stocks are forecast to increase by 61% to 1.450 mmt, or the largest in three years.

According to Statistics Canada surveys, acres seeded to oats are forecast to increase by 7.8%, although the forecast increase in production will fail to offset the reduction in stocks forecast for the current crop year. The supply and demand table for oats for 2019-20 appears a carbon-copy of the current crop year, with ending stocks forecast to end unchanged from the current year at 500,000 mt, little consolation for oat buyers and leaving little room for anything to go wrong.

Ending stocks of dry peas are forecast to increase 33% in 2019-20 given an expected 11.6% increase in seeded acres, with an increase in production set to offset a drop in 2018-19 carryout, given 2019-20 exports that are forecast slightly lower than the current crop year.

Acres seeded to lentils are forecast to fall for the third straight year in Canada with a 9.6% drop forecast, while 2019 production is forecast only slightly lower than 2018 due to a slightly higher yield estimated. Combined with a drop in 2018-19 carryout, total supplies are forecast close to 200,000 mt lower, while with exports unchanged from 2018-19, ending stocks are forecast to fall to 500,000 mt, or the lowest in three years.


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