Canada Markets

Uncertainty surrounding the available supplies of various crops is due to continue following the release of Statistics Canada's Production of principal field crops report on Dec. 6. During the Oct. 9 through Nov. 17 survey period, producers were asked to provide "their best estimates of yield and production for all area harvested or to be harvested for the 2019-20 crop year." Some crop was harvested after this survey period, while harvest in some areas will continue into spring.

As of Nov. 12, Manitoba Agriculture estimated 91% of the province's crop was harvested, as of Nov. 18, 93% of Saskatchewan's crop was estimated harvested and as of Nov. 13, 89.1% of Alberta's total crop was reported as harvested, indicating that millions of acres were yet to come off as of the end of the survey period.

Statistics Canada revised lower its production estimate for Canada's all-wheat production since the model-based estimates were released in September, but by a small amount of 143,000 metric tons, to 32.3 million metric tons. This level of production would be 0.5% higher than 2018-19, while 6.5% higher than the five-year average.

While all-classes were revised lower since the September estimates were released, it was a year-over-year rebound in spring wheat production that drove wheat production higher overall.

Durum production was estimated to fall by 13.4% to 4.977 mmt, with a year-over-year increase in yield unable to offset a 22.6% decline in harvested acres.

Spring wheat production is forecast to rise by 7.2%, to 25.670 mmt, which would be the largest spring wheat crop in six years. Canada's harvested acres are estimated 6.5% higher than 2018, while average yield of 51.7 bushels per acre is 0.3 bpa higher than the previous year. Estimated yields are expected to fall year-over-year in Manitoba and Saskatchewan, while are expected to rise in Alberta. Canada western red spring makes up 86.4% of all spring wheat produced, up from 83.7% in 2018/19, while above both the five- and 10-year averages.

The small revisions made in wheat production since the September estimates will have little effect on current AAFC supply and demand forecasts, although the stocks reports over the balance of the year may play a larger role than normal in determining the direction of this market.

Of the principal field crops, the estimate for canola production saw the largest revision since the September estimates, dropping by 708,500 mt to 18.649 mmt, down 8.3% from last crop year and the smallest canola crop realized in four years, or 2.9% below the five-year average. As of the final crop reports for the three prairie provinces, more than two million acres of canola were unharvested which leads to uncertainty surrounding today's estimates.

While Saskatchewan's average yield was estimated unchanged from 2018 at 39.3 bpa, an increase in average yield for Alberta offset a year-over-year drop in Manitoba, with the national average yield increasing by 0.2 bpa, to 40 bpa, above the five-year average of 39.4 bpa.

When today's production estimate is plugged into current AAFC supply and demand tables, ending stocks for 2019-20 would be closer to 4 mmt based on current demand forecast and similar to the volume carried out of 2018-19. At the time of writing, the ICE Canada contract for January delivery is up $4.50/mt, which would be the biggest one-day move higher since Sept. 30, although price is down from the session's high and there is spill-over buying seen from gains in soybean oil and palm oil trade.

Statistics Canada's estimate for lentil production was revised down 352,600 mt since September to 2.167 mmt, up 3.6% from 2018. This is 12.24% below the five-year average, while supportive for prices. When current AAFC supply and demand models are considered, 2019-20 should see ending stocks fall to the tightest levels seen in at least three years, while any uptick in global demand could lead to a very tight supply situation.

Dry pea production was revised 435,500 mt lower than reported in September to 4.237 mmt, up 18.3% from 2018. While production is estimated up 8.4% from the five-year average, the current pace of exports may lead to a tight stocks situation, with exports through licensed terminals up 50% from 2018-19 as of week 17.

Production estimates for both barley and oats were revised higher from the estimates released earlier in the fall, with barley production estimated at 10.383 mmt, up 23.9% from 2018 and 28.2% above the five-year average. This report is viewed as bearish for barley, with AAFC forecasts indicating that stocks will double year-over-year.

Oat production was revised higher to 4.157 mmt, up 21% from last crop year and 23.7% above the five-year average. Given current demand estimates, stocks are forecast to rise slightly year-over-year.

Statistics Canada revised the country's soybean production lower to a volume last seen in 2014, with an estimated 6.045 mmt produced, down 18.5% from 2018 and 11.7% below the five-year average. The estimated harvested acres in Canada fell by 10.6% overall, with a drop seen in Quebec, Manitoba and Saskatchewan while Ontario acres increased slightly. The average national yield fell by 3.8 bpa, to 39.6 bpa, with drops seen across major production provinces except for Saskatchewan.

Current AAFC forecasts combined with today's lower production would suggest that carryout stocks will be tight in 2019-20, although the current pace of exports remains a concern and demand estimates may be trimmed, while a return of Chinese business would lead to an even tighter balance sheet. Current AAFC forecasts show imports to fall from 1.1 mmt in 2018-19 to 400,000 mt in 2019-20, while this forecast is likely to be revised higher.

Today's corn production estimate was 705,700 mt lower than estimated in September at 13.404 mmt, down 3.5% from 2018 and just 0.2% below the five-year average. Estimated harvested acres were up 1.4% in 2019, with increases reported for both Ontario and Manitoba. The national average yield, however, fell by 7.4 bpa to 147.2 bpa, with lower yields reported in Quebec, Ontario and Manitoba.

Current AAFC supply and demand tables indicate a slight drop in ending stocks in 2019-20, while today's lower production level could result in stocks approaching the 1.1 mmt level, which is a volume last seen in the 2003-04 crop year and bears watching.

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