The USDA's Grain and Feed Update for Canada released this week painted a gloomier picture for Canadian wheat for 2019-20, pointing to the quality issues linked to the late harvest, the 7% of the crop that remains unharvested and the highly competitive nature of the global market as factors affecting crop movement.
The USDA's attache report has forecast Canada's all-wheat exports at 22.2 million metric tons for 2019-20, 9% lower than 2018-19, below their August estimate of 24.4 mmt, below the USDA's official estimate of 24 mmt as well as Agriculture and Agri-Food Canada's January estimate of 23.4 mmt. As of the most recent week 25 statistics, Canada's all-wheat exports are down 7.9%, while this USDA forecast would suggest that exports could slow further this crop year.
The agency has estimated feed demand at 5 mmt due to low-grade availability, which is 440,000 metric tons higher than AAFC's estimate, while representing a 23.4% year-over-year increase in feed use over AAFC's estimate for 2018-19. AAFC's current estimate of 4.560 mmt is up 12.5% from 2018-19, while the week 25 domestic disappearance volume reported by the Canadian Grain Commission is reported at 2 mmt, lagging the pace to achieve this forecast, close to representing the first half of the crop year.
The USDA attache report has estimated Canada's all-wheat carryout at 6.166 mmt, well above the official USDA estimate of 5.366 mmt and the 5.850 mmt estimated for 2018-19 by AAFC. This would reflect a bearish 19% of annual demand, up from AAFC's estimate of 18% released in January.
The USDA noted the CGC's sample program that shows 74% of the roughly 5,000 samples graded were reported in the top two grades, equal to the percentage reported for 2018-19, but below the five-year average. Of course, this has to be viewed as an indication only as the CGC stated that the results do not reflect the true distribution of grades across the Prairies.
The attached chart shows the distribution of CWRS grades assessed on unloads of CWRS unloads at Canada's export terminals through the first 25 weeks of this crop year. As of week 25, or the week-ending Jan. 26, 92.5% of all terminal unloads were graded as No. 1 or No. 2 CWRS. This is down from the 93.2% reported for the same period in 2018-19, while above the five-year average of 91%. Estimates of a below-average crop quality are not yet seen in these cumulative unloads, although the average quality will fall over time as we move into the spring harvest.
Despite quality holding up well over the first half of the crop year, a late start to selling last fall due to the delayed harvest, the possibility of low falling number along with heightened global competition are factors challenging Canada's export volumes this crop year.
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