Canada Markets

Agriculture and Agri-Food Canada's December Canada: Outlook for Principal Field Crops includes the November production estimates released by Statistics Canada on Dec. 6. This report indicates that producers were asked to provide their best estimates of what they have harvested or intend to harvest in surveys conducted from Oct. 9 to Nov. 17. Both Statistics Canada and AAFC acknowledge unharvested acres, which are estimated to total 4 million acres in the West, with corn acres in Ontario also remaining.

At a glance, AAFC's tables for all principal field crops appear as a carbon copy of the 2018-19 crop year, with total production estimated at 93.291 million metric tons, just 7,000 metric tons lower than the 2018-19 crop year. An estimated drop in grain and oilseed production is estimated to come close to being offset by a gain in pulse and special crop production due to surge in seeded acres along with higher yields.

Ending stocks of all principal field crops are estimated to remain close to unchanged, down 78,000 mt to 15.370 mt. A drop in pulse and special crop stocks is forecast to offset a modest increase in the stocks of grains and oilseeds.

As seen on the attached chart, the most bearish move in ending stocks is seen for barley, with a forecast year-over-year increase in ending stocks of 101.6% to 1.8 mmt. This would be the largest stocks in three years, representing 18.9% of use. This is despite an estimated hike in domestic use to 6.5 mmt, which would be the highest in six years as barley use increases in the ration at the expense of corn.

Another large estimated increase in stocks is seen in oat data, forecast to increase by 57.8% year-over-year. Despite a tight carryout in 2018-19, a combination of increased harvested acres and yields has led to higher production that is partially offset by higher exports of 2.6 mmt. Ending stocks are forecast to increase to 650,000 mt, which remains 8.7% below the five-year average, the second-lowest stocks realized in seven years.

The next largest year-over-year increase forecast, on a percentage basis, is a 22.7% increase in dry pea stocks to 400,000 mt, just slightly below the five-year average. This month's AAFC forecasts included a lower revision for production, along with domestic use, while export demand was left unchanged at 3.4 mmt. Export demand bears watching, with week 19 shipments of bulk peas through licensed terminals up 48.7% year over year, with unlicensed shipments over and above this volume.

Stocks of wheat (excluding durum), were left unchanged in this month's AAFC estimates, while are expected to climb by 19.9% to 5 mmt, close to the five-year average of 4.920 mt. Current forecasts include a year-over-year drop in exports of 4.9% or close to 1 mmt, with the December estimates revising exports a further 200,000 mt lower to 18.8 mmt. This bears watching, with cumulative exports through licensed facilities as of week 19 running 12.2% behind the year-ago volume.

The remaining five selected crops are forecast to see stocks fall year-over-year. The largest drop on a percentage basis is seen for durum, with stocks forecast to fall by 49.3% to 850,000 mt as of July 2020, the lowest seen since the 2007-08 crop year and 39% below the five-year average. This month's AAFC forecast included a 100,000 mt upward revision in exports to 4.8 mmt, while domestic disappearance was hiked by a smaller amount. This is another crop that bears watching, with current AAFC forecasts pointing to a 6% increase in exports year-over-year, while the most recent week 19 statistics shows exports up 56% from the same period in 2018-19.

Soybean stocks are forecast to fall by 42.9% year-over-year to 400,000 mt, which would be the lowest in three years and would be 21.4% below the five-year average. This month's forecasts include a lower revision for 2019 production, while exports were revised 300,000 mt lower to 4.4 mmt, down 22% from the previous crop year. This too bears watching, with the CGC reporting Sept/Oct/Nov exports totaling 1.6438 mmt through licensed terminals, which is down 32% from the same period in 2018-19.

AAFC reduced its estimate for canola stocks from 4.7 mmt in November to 3.5 mmt in December, which would be down 14.5% from 2018-19, although still 38.9% higher than the five-year average. A significant lower revision in 2019 production was largely behind the move, as indicated by Statistics Canada's most recent estimates, while the forecast for domestic use saw a sharp revision higher to 10.2 mmt and export demand was trimmed slightly to 9.1 mmt this month.

As noted by AAFC, estimates for unharvested canola ranges from 1-2 mmt, which could result in a surprise on the supply side, while a return by China to the market could lead to a surprise on the demand side. Given that canola has failed to keep pace with competing oilseeds and vegetable oil markets, this market should remain supported and market signals will be key.

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