Canada Markets

I first posted this analysis March 15 to conclude that Canadian exports of wheat at the time were just slightly behind the pace required to meet Agriculture and Agri-Food Canada's (AAFC) projection of 14.6 million tonnes of wheat (excluding durum) exports for the 2012/13 crop year. This may or may not have been the case at the time, as AAFC wheat analyst Stan Skrypetz kindly pointed out that my analysis overlooked the fact that the 14.6 mmt projection by AAFC also includes wheat flour exports, in wheat equivalents, as well as shipments from unlicensed facilities, which are not available in weekly GCG data.

This analysis is used by DTN to track export performance in the United States based on weekly export data and USDA export projections, which are released in monthly reports. Analysts the world over watch these weekly numbers for signs of changes in demand while considering the implications for inventory levels which ultimately impact commodity prices. A deviance in actual exports from projected exports could perhaps point to an inaccurate forecast, but could also be a result of myriad of reasons, such as weather, pipeline capacity constraints or slowdowns in critical rail service. Regardless of the reason, an ongoing trend which sees actual movement deviate away from the forecast can eventually lead to a shift in the forecast with the potential to affect price levels.

I'm sure I'm not the first and won't be the last to express concern regarding the manner in which Canadian data is presented. Here's the challenge. Weekly Canadian Grain Commission data includes shipments of wheat from licensed facilities only. The first missing piece of the puzzle is flour exports. The latest data for flour exports, in grain equivalents, was released by Statistics Canada April 15 and included crop year data up to the end of February, resulting in a multi-week lag time on the release date. Flour exports have roughly ranged from 13,000 mt to 15,500 mt per month over the August through February period.

The next missing piece of the puzzle which complicates this analysis is exports to the United States from unlicensed facilities. This information is provided by AAFC and is based on Statistics Canada's Canadian International Merchandise Trade. The most recent week 37 Grain Statistics Weekly from the CGC indicates in Explanatory Note 4 that in addition to the weekly data posted, Statistics Canada has also reported 372,900 mt of exports to the U.S. from unlicensed facilities between August and December of 2012. This number can perhaps be estimated up to the end of February by calculating the difference between Statistics Canada's exports to the end of February and the closest YTD CGC export data from the Grain Statistics Weekly, but in the process you run the challenge of matching weekly data with monthly data that fail to line up.

So, in summary, we have weekly CGC wheat export data. We have monthly flour export data, the most recent data from February. There is also unlicensed exports to the U.S., which Statistics Canada obtains from Agriculture Canada calculations, with data taken from another Statistics Canada report which is also weeks behind.

For the purposes of the attached chart, I've spread monthly flour export data evenly over each month while adding this tonnage to the weekly CGC data. This is done up to week 30 only, or roughly the end of February. While this chart would indicate that current exports are slightly behind the pace required to meet the annual export target, with the red line below the black line, this analysis does not include unlicensed shipments.

What is known for sure regarding export pace is that at the end of February, the most recent Statistics Canada Exports of grains by final destination report suggests a total YTD exports of 8.438 mmt of wheat shipped as well as total exports of 98,093 mt of flour, for a total of 8.536 mmt. If the 14.6 mmt target was shipped equally over the crop-year, the February target would be 8.517 mmt. Movement is in fact slightly higher than the target pace, as of the end of February.

A recent tweet from a U.S. source suggested that Canada's wheat export movement shows seasonal strength in the final months of the crop year. This is in fact the case. Over the five previous crop years, from 2007/08 to 2011/12, the CGC's Grain Statistics Weekly indicate the volume moved over the last four months of the crop year ranged from a low of 31.93% of the year's total exports in 2011/12 to a high of 44.5% of the year's total exports in the 2007/2008 crop year. The average is 37.5%. This would suggest that in all likelihood wheat exports will increase in pace through the end of July and may exceed the current annual forecast.

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

(AG)

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