Canada Markets
AAFC Finally Increased its Canola Export Forecast, But How This was Done is Important
Agriculture and Agri-Food Canada (AAFC) released its latest Outlook for Principal Field Crops on Wednesday with a few surprises in store. The most interesting data point was the way it finally supplied the 1 million metric ton (mmt) increase in canola exports that was needed (to 8.5 mmt, given its previous 7.5 mmt was already exceeded). As you can see in the accompanying chart, AAFC took 1 mmt out of Feed, Waste & Dockage (FWD), leaving the total at an unacceptable negative 609,000 metric tons (mt).
The rationale is that FWD is always a balancing total where any errors in estimates are accumulated, making the significant totals work out. In this case, the AAFC analyst goes as far as suggesting Statistics Canada must have underestimated past production and suggests it will have to revise it higher. Stating "canola exports is revised up 1.0 (mmt) from last month to 8.5 (mmt) forcing feed, waste and dockage (residual) into a negative 0.61 (mmt). This is expected to be updated, pending revisions from (Statistics Canada) in upcoming releases."
The problem with that theory is the extremely tight March 31 canola stocks report. See more details at https://www.dtnpf.com/…. If past production was in fact overstated, March 31 stocks should have been more comfortable, instead of the second lowest since 2013, barely above the tight supplies following the drought of 2021.
So, what if it's AAFC that has to do the revisions? The most likely is it will be forced to add something more than 609,000 mt back to FWD to get it at least slightly positive and take a similar amount out of carryover. That would mean ending stocks falling roughly in half from the current 1.3 mmt estimate and more in line with market price and basis strength.
It is also worth noting that even with the new export estimate of 8.5 mmt, given 8.01 mmt was already exported as of week 40 (May 11), exports can only average 40,800 mt per week for the remaining 12 weeks of the marketing year, or that will still be too low. Week 40 remained over three times that at 130,000 mt (down from 184,500 mt from the previous week).
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
Sticking with the oilseeds, AAFC cut soybean ending stocks by 120,000 mt compared to last month's estimates by reducing imports by the same amount and cutting 200,000 mt from exports to allow for an equal increase in FWD use.
Turning to the grains, wheat (excluding durum) ending stocks were left unchanged at an already tight 3.8 mmt but exports were increased by 250,000 mt, supplied by a matching reduction in FWD use.
Durum ending stocks were pared back 50,000 mt from last month's estimate, thanks to a similar increase in exports. That takes the latter to 5.05 mmt for the 2024-25 crop year (3.549 mmt in 2023-24), while total exports to date are already 4.62 mmt (as of week 40 or May 11) compared to just 2.82 mmt at the same point last year.
Barley figures were juggled quite a bit, given the relatively small net change. Carryover was increased 15,000 mt, thanks to an increase in imports of 50,000 mt, an increase in exports of 60,000 mt and a cut in FWD use of 25,000 mt.
Corn witnessed a much larger change in ending stocks -- a reduction of 400,000 mt in this case -- thanks to reduced imports (-100,000 mt), increased exports (+300,000 mt), increased food and industrial use (+150,000 mt) and reduced FWD (-150,000 mt). The tight global supply of corn in exporting countries is really showing up even in Canada with a sharp reduction in imports (2 mmt for 2024-25 versus 2.979 mmt last year) and exports remaining strong amid tight supplies (2.7 mmt versus 2.112 mmt last year).
And last, but not least, oats witnessed a 50,000-mt cut to carryover, thanks to higher exports (+100,000 mt) offset by lower food and industrial use (-15,000 mt) and FWD (-35,000 mt). That will leave ending stocks uncomfortably close to the 2021-22 level of 332,600 mt when prices in Southern Manitoba topped out more than $11/bushel on short contract buybacks. At 350,000 mt carryover for both 2024-25 and 2025-26, markets will be highly volatile based on weather risks. Watch for cash premiums as much as futures market action for marketing opportunities.
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