When Statistics Canada released their first production estimate on Aug. 30, based on July models, pre-report estimates were pointing to a range of estimates from 11.5 million metric tons (mmt) to 16 mmt. The government statisticians estimated production at 14.749 mmt, close to the unofficial estimate of 15 mmt released by Agriculture and Agri-Food Canada and the 16 mmt estimate used by the USDA.
The Sept. 14 report, based on Statistics Canada model, result in the estimate being pared by 1.967 mmt to 12.782 mmt. This is only the second time that the forecast has been reduced from the August-released report based on July estimates to the September-released report based on the August models. In 2020, the second forecast was reduced by a mere 10,000 mt, while from 2015 to 2019, the second forecast was revised higher in a range from 905,000 mt to as high as a 1.8 mmt increase, averaging 1.3 mmt higher over these five years.
A number of producers who called for a much smaller crop right from the start are taking credit for their early observations, while further reductions may lie ahead. This week's Manitoba Crop Report points to yield in the Interlakes Region of the province ranging from zero to 30 bushels per acre (bpa), with crops under 5 bpa being taken off as silage. Current Statistics data shows that 99% of Canada's canola acres seeded will be harvested in 2021, a percentage equal to 2020 and slightly higher than the five-year average of 98.9%. This data will not be adjusted until the final estimates are released in December.
The November future closed $10.60/metric ton higher in Tuesday's session, but ended in the lower one-third of the session's range. A further move of $7.50/mt was realized in Sept. 15 trade, with the close landing in the lower one-half of the session's range.
Stochastic indicators have formed a bullish cross-over and are signaling a shift higher, although prices were not in over-sold territory when this cross-over took place, which is not viewed as the most bullish of reversals which are reserved for a cross-over while in over-sold territory.
The cash market also took this report in stride. According to daily pdqinfo price data, Sept. 14 bids increased from $9.41/mt to $10.68/mt, averaging $10.26/mt, close to the $10.60/mt gain seen in the November contract.
Across the nine prairie regions monitored by pdqinfo, the basis reported for northern Alberta strengthened or narrowed $0.08/mt on Sept. 14 following the report, the basis for the Peace Region and northeast Saskatchewan remained unchanged and basis for the remaining six regions weakened from $0.02 to $1.19/mt, despite reports that point to crop year supplies for 2021-22 that have been reduced by an additional 2 mmt on paper. The data release failed to stimulate the commercial side, who have long since formed an opinion on the state of the crop.
Another indication of this is seen in the Nov/Jan futures spread. On Sept. 3, this spread reached a high of $17.30/mt (Nov. trading over the Jan. contract), while closing at $8/mt on Sept 15, including a weakening of $1.30/mt during the session, while showing weakness in six of the past seven sessions. This is signaling a less-bullish approach to trade on the part of the commercial trade.
One-more reason why the market seemed prepared for this week's report is that both Saskatchewan and Manitoba provincial government yield estimates are below this week's Statistics Canada estimates. The current Saskatchewan estimate is 1.2 bpa below Statistics Canada, while Alberta's dryland yield estimate is 2.6 bpa below Statistics Canada. Across the estimated harvested acres for these two provinces, the provincial estimates would lead to production that is a further 718,736 mt below this week's official estimate.
Cliff Jamieson can be reached at email@example.com
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