Canada Markets

Statistics Canada released their estimated Dec. 31 stocks report today which contained a stark reminder of tightening stocks within the Canadian industry. The biggest drop in stocks from the previous year was canola with a 23.6% drop and oats, with a 19.8% drop.

With a razor-thin carry-out of 350,000 metric tonne forecast for canola for the end of this crop year, the canola market could ill-afford a shock in today's data. Dec. 31 stocks came in at 7.4 million metric tonnes, which was the lowest December stocks level since 2006 when levels reached 7.2 mmt. At 7.4 mmt, the December 2012 stocks figure was at the lower end of industry estimates prior to the report. While there was no surprise with the canola number, this industry which has either exported or crushed an average of 290,000 mt per week over the first half of this crop year will undoubtedly be challenged in the coming months.

Total all-wheat stocks were 0.7% lower than last year. The largest move was seen in durum stocks, which were 4.1% lower than last year and 14.3% below the average of the previous three years. Despite an estimated 11% increase in production this crop year, durum's rapid rate of movement this crop year is a success story and has led to tighter stocks. Current Canadian exports are 36% ahead of last year and 34.6% ahead of the three-year average.

Tightening oat stocks are a direct result of reduced oat plantings, which led to an overall 15% reduction in 2012 production. Oat stocks tightened to 1.9 mmt, 19.8% lower than last December and 27% below the three-year average. As of week 26, the half-way period for the crop marketing year, oat exports were 16.6% below last year while 3.8% ahead of the three-year average. A large increase in U.S. oat production this past growing season has curbed Canada's export potential to the U.S.

Barley stocks remain a concern. Dec. 31 stocks, at 5.1 mmt, are 7.2% below December 2011, even though 2012 production was slightly higher than the previous year. The attached chart indicates Dec. 31 stocks for barley falling for four consecutive years, although this was the lowest level found in data going back to 1980. Exports of barley, with feed barley being the driver, are up 30% over last year as of week 26 data, while 13.2% over the 30-year average. This pace of movement has prompted Agriculture Canada to recently increase their forecast for barley exports by 300,000 mt to 2.3 mmt, which will heighten competition for stocks. The prairie feedlot industry will be kept on their toes to source supplies through to new crop in August. Lethbridge barley prices increase $8/mt today, suggesting an immediate challenge in sourcing barley.

While soybean production in Canada gained 14.7% in 2012 to 4.93 mmt, December 31 stocks were 6.7% lower than the same date in 2011 at 2.4 mmt. This data reflects the appetite for beans into domestic crush and export channels, with data showing a large upward swing in commercial stocks with a sharp decline in farm stocks. The inverted soybean market will ensure that old crop stocks continue to be aggressively marketed prior to the arrival of new crop.

At 10.4 mmt, corn stocks increased 9.8% over last year and 14% above the average stocks level for the past three years. In fact, this stock level reached a record high, which is consistent with the record production level of production at 13.060 mmt.

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

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