Canada Markets

A Look at AAFC's 2020-21 Forecasts

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Based on AAFC's latest forecasts, the blue bars and brown bars represent the change in Canada's ending grain stocks from 2019-20 to 2020-21, as measured against the primary vertical axis. The black line with markers represents the percent change from the five-year average stocks to the 2020-21 forecast, as plotted against the secondary vertical axis. (DTN graphic by Cliff Jamieson)

The September supply and demand tables from Agriculture and Agri-Food Canada (AAFC) are revised to include the latest production estimates from Statistics Canada along with the official July 31 stocks report from Statistics Canada for all crops except for corn and soybeans, which should be released in the near future.

A summary of total production estimates for all principal field crops in 2020-21 points to a year-over-year increase of 3.803 million metric tons, or 4%, to 98.127 mmt. This is split between a 2.837 mmt increase in production of the major grains and oilseeds to 89.742 mmt, while a smaller increase of 966,000 metric tons is forecast for pulses and special crops to 8.385 mmt.

Total supplies of grain are down slightly year-over-year due to lower ending stocks in 2019-20, with supplies of grains and oilseeds down 594,000 metric tons, to 103.552 mmt, and supplies of pulses and special crops up 284,000 mt year-over-year to 9.456 mmt, for a total year-over-year decrease of 311,000 mt, to 113.007 mmt.

Current forecasts point to exports of all grains falling by a modest 528,000 mt year-over-year, to 52.790 mmt, which includes a 177,000 mt drop in the export of grains and oilseeds, along with a 351,000 mt year-over-year decline in the export of pulses and special crops.

Total domestic use is forecast to fall by 1.035 mmt for all grains.

Based on current estimates, 2020-21 ending stocks of grains and oilseeds are forecast to rise by 687,000 mt while stocks of pulses and special crops are to rise by 557,000 mt, or a total of 1.244 mmt across all crops to 13.735 mmt.

These forecasts are very likely to be challenged over time, on both the supply and demand sides.

Here are just a few things to watch on the supply side:

-- Varying forecasts and how they relate to actual harvest data. In Ontario, two private crop tours found much-higher yield potential for row crops than forecast in Statistics Canada's official data. Another large discrepancy lies in canola yields, with Statistics Canada estimating Saskatchewan's average yield at 39.6 bushels per acre, as compared to Saskatchewan Agriculture's 35 bpa estimate. The size of the crop is far from settled.

-- The manner in how data was collected. The July estimates are normally based on producer surveys but were switched to a model-based approach based on July data due to COVID-19. Two weeks later, another model-based report was released based on August data. For the first time, Statistics Canada was not able to use the two methodologies in tandem in order to generate forecasts.

-- The Sept. 7-8 frost event. Statistics Canada's estimates based on August data were unable to capture this event and its potential to limit production.

On the demand side, the country is off to a solid start to the crop year, with exports up 1 mmt from the 2019-20 crop year over the first seven weeks of the crop year, according to CGC data.

As of week 7, Canada's wheat exports (excluding durum) through licensed facilities are up 30.3% year-over-year, while all-wheat exports (including durum) are 12.9% above last year. Canola exports are up 31.2% year-over-year and dry pea exports are up 58.3%. Oat exports are up 38.6% year-over-year and barley is up 204.8%. Domestic demand is also favourable, with disappearance of wheat up 38.3% year-over-year and today's Statistics Canada canola crush was the highest August crush on record, the first month of the crop year.

India's recent move to lower import tariffs on lentils until Oct. 31 will be an opportunity for shippers, while in advance of competition from Australia's winter crop production.

A further COVID-19 lockdown would have varying effects on grains, negatively affecting corn demand into ethanol plants while demand for grains such as wheat could increase as people under lockdown spend more time in the home kitchen.

Two major factors watched by DTN meteorologists are dryness in central Brazil, that is delaying soybean planting, while dryness in southern Russia is having the same effect on winter wheat planting. (See…) These events remain close to the centre of the radar given the significance of production from these regions, while having an effect on Canada's export potential.

DTN has recently pointed to an evolving La Nina event, which typically leads to dryness in the Southern Plains of the U.S., along with the potential for dry conditions in Brazil and Argentina. (See… and…)


DTN 360 Poll

This week's poll asks what you think of the most recent Statistics Canada model-based production estimates. You can weigh in with your thoughts on this topic on the poll, found on the lower-right side of your DTN Home Page. We thank you for your input!

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