Market Matters Blog
StatsCan Reports Canadian Production to fall Below Expectations
Editor's Note: DTN Canadian Grains Analyst Cliff Jamieson, who usually blogs for DTN's Canada Grains Pro site, wrote today on Statistics Canada releasing its first report of expected 2014 production levels for Canadian crops. The report was based on results from a survey of 12,850 producers during the July 23 to Aug. 4 period. We're sharing the comments with U.S. customers interested in how Canada's harvest might affect world grain and oilseed stocks.
Statistics Canada released its first report of expected 2014 production levels for Canadian crops today, basing results on a survey of 12,850 producers during the July 23 to Aug. 4 period.
It was a given that this year's production would be well off the record production levels set for many crops in 2013. The major challenge faced in estimating 2014 production centers around the excessive rains seen in eastern Saskatchewan and western Manitoba: determining the impact to the planted crop as well as estimating the total acres left unseeded. As stated in a recent Canada Markets blog, this report has a tendency to be conservative in nature and tends to underestimate production for almost all crops when compared to the final production estimates released in December.
At first glance, what jumps out from this report are estimated production levels which are below even the lowest of trade estimates. Durum wheat production, the all-wheat production, oats, barley and canola production forecasts for 2014 were all reported to be lower than the lowest of the pre-report estimates reported by Commodity News Service.
Canada's all-wheat production is estimated at 27.704 million metric tons, just below the range of estimates from 27.8 mmt to 29.9 mmt. This would reflect a decrease of 26% from last year's record 37.530 mmt crop. The reduction comes as a result of a reduction of all-wheat acres planted of 7.6% while the overall all-wheat yield is pegged at 44 bushels per acre, down 17.6% from last year.
Spring wheat yields in Canada are pegged at an average of 43.6 bpa, down from 53 bpa last year, but comparable to the five-year average of 43.8 bpa. The recent CWB crop tour pegged the average Prairie crop at 43.1 bpa, while the yield estimate for spring wheat derived from Statistics Canada's experimental Crop Condition Assessment Program (CCAP), using satellite data, came in at 40.6 bpa for Western Canada. Year-over-year drops in spring wheat yield ranged from 16.4% in Alberta to 20.6% in Manitoba. On average over the past five years, the final spring wheat production estimate has been 8.5% higher than the July estimate, suggesting the tendency for a conservative release in this report.
Durum production for 2014/15 was pegged at 4.953 mmt, well below the 6.5 mmt produced last year and also just below the range of trade estimates of 5 to 6 mmt. Overall durum acres are estimated to be 3.8% below year-ago levels and just slightly below the June estimate. The overall durum yield is estimated to be 39 bpa, down 19.4% from last year's 48.4 bpa, although there is a wide range of expectations for this year's durum crop. Just weeks ago the CWB crop tour reported an average yield of 48.1 bpa, just slightly below last year, while the recent CCAP release suggested an average yield of 36.6 bpa. Lower-than-expected production on the Prairies will see durum buyers take note, as durum prices have firmed in recent weeks largely based on production challenges in Europe.
At 13.908 mmt, the canola crop came in well below expectations of a 14.75 mmt to 15 mmt crop as indicated by a Commodity New Service poll of trade analysts. Other forecasts had suggested this year's crop would reach 14.5 mmt. The current forecast would see production equal 2012 levels and a full 4 mmt or 22.6% below last year's production level. Seeded acres on the Prairies are estimated to be just slightly higher than last year at 20 million acres while the determining factor in this year's crop is an expected 20% drop in yield to 32 bpa. Estimated yield reductions are somewhat consistent across the Prairies, with an approximated 21% drop in Saskatchewan and Manitoba and 18.8% drop in Alberta.
StatsCan's estimated canola yield is slightly lower than the 34 bpa reported from the CWB crop tour, while the recent CCAP estimate was 34.5 bpa. As discussed in a recent Canada markets blog, the final December report saw canola production increased by 9.8% from the July estimate on average over the past five years, which suggests that the trend is towards a conservative July estimate. Despite the much tighter supplies this crop year, canola's potential is tempered by what's expected to be a record U.S. soybean crop, as well as a record global oilseed crop. Futures spreads in today's trade continue to reflect a bearish approach from the commercial trade, while uncertainty over the 2013/14 carryout will continue to stir debate.
Production of oats and barley are estimated below the range of trade estimates. Oat production is estimated to be 2.639 mmt, below the 2.76 mmt to 3.1 mmt range of pre-report estimates. This reflects a sharp decline of 1.25 mmt or 32% from last year's final production estimate and would be the smallest crop since 2010. Canadian oat ending stocks will end very tight in 2014/15, while the December oat contract has broken above trendline resistance today, resistance which has been in place since the last week of February as seen on the weekly chart. Yesterday's Canada Markets blog discussed bullish signals seen in the oat market leading up to today's report.
Barley production for 2014 was estimated at 7.164 mmt, well below the range of estimates between 7.5 mmt to 8.2 mmt. This marks a 30% reduction in production from the 10.2 mmt crop produced in 2013. Barley ending stocks are set to move to very tight levels in the upcoming year which will leave barley prices high compared to corn prices, barring a weather event which could result in larger-than-expected feed wheat supplies on the Prairies.
Soybean production in Canada came in slightly lower than expected, with expectations that production could come in above 6 mmt for the first time in history. Today's estimate suggests a 5.9 mmt crop, which would still reflect a record production and 13.5% above 2013 levels. The largest volume increase is seen in Ontario, where production is expected to increase 487,000 mt to 3.565 mmt, while the largest percentage increase is seen in Saskatchewan where estimated production is suggested to increase 54% to 182,300 mt, only the second year that records have been kept for this province.
Corn production in Canada is estimated to fall by 19.5% to 11.4 mmt from last year's 14.2 mmt, which would make it the smallest crop since 2011. Production in both Ontario and Manitoba have fallen back from year-ago levels, while DTN correspondent and Ontario producer Phillip Shaw states that corn yield estimates for that province remain too high, which could mean further revisions in time.
A 30.8% increase in seeded acres to 3.130 million acres combined with an expected 15.7% reduction in estimated yield is reported to see the lentil crop increase slightly in size to 1.930 mmt. This remains just below the record 2 mmt production achieved in 2010. This level of production is slightly lower than a previous estimate by AAFC and would continue to suggest tight ending stocks and a stocks/use ratio below 10% for the current crop year.
A 19.5% increase in seeded acres of dry peas to 3.925 mmt along with a reduction in yield of 18% to an estimated 35.7 bpa is suggested to lead to an overall 7.6% reduction in production to 3.558 mmt. This would see the 2014 crop be the third largest in history, after last year's record production of 3.849 mmt and the 3.565 mmt produced in 2008. This would also act to tighten the balance sheet for 2014/15 and likely result in a stocks/use ratio below 10%.
One crop whose production did come in above expectations was flax, with an estimated 908,000 mt production level just above the 800,000 to 900,000 mt trade estimate. This would represent a 27.5% increase from last year and the largest crop since 2009.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow Cliff Jamieson on Twitter @CliffJamieson
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