Canada Markets

A Look at the Trend in AAFC's Wheat/Canola Export Forecast

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The blue line represents the monthly export forecast for Canada's wheat exports (excluding durum) for 2019-20 from AAFC, starting with the first forecast released in January, 2019, measured against the primary vertical axis. The brown line represents this trend for forecast canola exports, measured against the secondary vertical axis. (DTN graphic by Cliff Jamieson)

Agriculture and Agri-Food Canada reduced its forecast for Canada's export of principal field crops by 600,000 metric tons for 2019-20, which includes a 200,000 metric tons of wheat (excluding durum), 100,000 mt of canola and 300,000 mt of corn. The current forecast for Canada's principal crop exports is 50 million metric tons, down close to 3 mmt from 2018-19.

As seen on the attached chart, the forecast for Canada's wheat exports has been revised 200,000 mt lower each month for four straight months to 18.2 mmt in this week's March forecast (measured against the primary vertical axis on the left), while this month saw an equivalent increase in forecast feed demand to leave ending stocks unchanged at 5 mmt. AAFC based the drop in the export forecast on movement realized over the first seven months of the crop year. Here we will look at export forecasts based on the seasonality of the export flow.

The Canadian Grain Commission's most recent grain handling statistics reports 9.3766 mmt of wheat exported as of week 32, or the week ending March 15. This volume is down 14.2% from last crop year and 3.5% below the five-year average for this week. At the same time, this pace remains well-behind the pace needed to reach the revised forecast released this week.

Over the past five years, an average of 54.6% of total crop year exports of wheat were reported as of the CGC's week 32 report, a volume that projects forward to approximately 17.2 mmt of total exports. The slowest pace of movement over this period was seen in 2016-17, when 52.2% of crop year exports were reported as of week 32, a pace that would project forward to crop year exports of close to 18 mmt. The five-year average is 17.785 mmt.

The brown line on the chart represents the trend in AAFC's forecast for canola exports. Wild swings were seen in forecasts for 2019-20 early in 2019 when news broke of China's ban on Canadian canola exports. Since June, this forecast has revolved over a narrow 250,000 mt range from 9 mmt to 9.250 mmt. This month's forecast included a 100,000 mt reduction to 9 mmt, the lowest export volume forecast in seven months. This compares to the five-year average of 10.081 mmt and would rival the lowest exports reported in the past six years.

Week 32 saw 226,300 mt of canola exported, the third straight week that exports exceeded the volume needed for the week in order to stay on track to reach the most recent AAFC export forecast. Cumulative exports total 5.7781 mmt, down only 1.8% from the same period in 2018-19 and 2.8% below the five-year average.

Over the past five years, an average of 59% of the annual total canola exports were achieved as of week 32. This pace projects forward to crop year exports of 9.799 mmt, well above the revised 9 mmt forecast released this month. At the same time, 2018-19 stands out as an anomaly given the trade barriers erected by China, with 64.4% of total crop year exports realized as of week 32. This pace would reflect exports of 9 mmt, equal to the current AAFC forecast.

The March canola revision resulted in an upward revision in forecast stocks by 100,000 mt to 3.3 mmt, down 531,000 mt from the previous crop year.

This month, AAFC also revised lower its export forecast for corn exports by 300,000 mt to 1 mmt. This is down sharply from the 1.9 mmt forecast in September, or the first month of the row-crop crop year and would be the lowest volume of exports seen in five years. The five-year average volume of exports is 1.351 mmt. As of January's CGC Exports of Canadian Grain and Wheat Flour report, cumulative corn exports through licensed facilities are shown at 12,500 mt to Ireland, down from total exports of 811,800 mt for the same period in 2018-19. The majority of this decline is seen in exports to six countries listed in the European Union.

At the same time, the current supply-demand balance has been left unchanged, with ending stocks expected to remain steady at 1.8 mmt. AAFC has reduced forecast imports to achieve this balance.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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