Canada Markets

Industry Estimates Indicate a Large Canadian Crop on the Way

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart compares the average of the range of estimates reported in the Dow Jones pre-report trade estimates for Canadian production (purple bars) to 2012 production (blue bars), the five-year average production (red bars) and the 10-year average production (green bars) for selected Canadian crops. Tomorrow's Stats Canada report should confirm a large crop is on the way. Data comes from Dow Jones 2013 estimates and Statistics Canada. (DTN graphic by Nick Scalise)

Statistics Canada will issue its latest Field Crop Reporting Series, the Production of principal field crop report, on Aug. 21. This will update both planted and harvested acres, as well as production potential on those acres.

Trade estimates indicate the potential for a huge crop which may prove to be a market-mover tomorrow for some crops, although it will be the weather between now and harvest that will tell the real story. First frost dates will be watched closely for the potential effects to later-seeded crops, which may be 10 days to two weeks late in certain areas.

After last season's reduced canola crop of 13.3 million metric tonnes, the trade is largely expecting a crop to exceed the 2011 record of 14.608 mmt. The purple bar on the attached chart represents the average of the range of estimates from the Dow Jones trade survey, at 15.1 mmt, with the actual range from 14.2 mmt to 16 mmt. Agriculture and Agri-Food Canada has recently pegged production at 14.6 mmt, while the USDA has estimated the Canadian crop at 15.3 mmt. The 15.1 mmt average compares to the five-year average of 13.25 mmt and the 10 year average of 10.879 mmt.

Despite the large production potential, total supplies for 2013/14 will undoubtedly be below the 16.891 mmt of supplies seen in the 2011/12 crop year, when approximately 8.7 mmt of exports and 7 mmt of domestic crush left ending stocks at 707,000 mt. Domestic crush has since expanded, while depending on the export potential, commercial users may continue to chase supplies. Minor strength in forward futures spreads is pointing towards the fact that commercial users remain wary of this fact.

The average of the all-wheat trade estimates is 29.65 mmt, with the range between 29 mmt and 30.300 mmt. This compares to the 2012 production of 27.205 mmt, the five-year average of 26.272 mmt and the 10-year average of 25.031 mmt. All-wheat production in Canada exceeded 28 mmt only once in the past 10 years, when production totaled 28.619 mmt in 2008. The last time that production exceeded 29 mmt was in 1996, while should production exceed the 30 mmt level, it would be 1991 at 31.946 mmt since that level of production has been achieved. The record all-wheat production (including durum) was set in 1990 when 32.098 mmt was produced.

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Despite the fact that tomorrow's report may show an increase in wheat production, the numbers should be already well accepted in the market. Ag Canada used an all wheat production figure of 29.2 mmt in their latest supply and demand tables, while the USDA's latest monthly WASDE report recently increased Canada's production 500,000 mt to 29.5 mmt.

The mid-point of the range of estimates for durum production is 4.95 mmt, with the actual range from 4.6 mmt to 5.3 mmt. This compares to the 2012 production of 4.627 mmt, while the five-year average is 4.549 mmt and the 10-year average was 4.470 mmt. While even the average of the range of estimates will lead to a higher-than-average crop size, the crop should remain below the large 5.4 and 5.5 mmt crops seen in 2008 and 2009.

The average of the range of estimates for barley production is 8.6 mmt, with the actual range of estimates from 8.2 mmt to 9 mmt. In recent weeks, I have built a case for a 9 mmt-sized crop based on superior crop ratings, while I have seen one trade estimate as high as 9.2 mmt. This compares to the 2012 crop of 8.012 mmt, while production continues to lag the 5-year average of 8.969 mmt and the 10-year average of 10.173 mmt. The Lethbridge barley market is trading at $195/mt today as compared to $260 on August 1 and close to $300 earlier this spring, with the barley market currently seeking a bottom.

The average of the range of estimates for Canadian oat production in 2013 is 3.25 mmt, with the actual range of estimates between 3.1 to 3.4 mmt. This is well above last year's 2.684 mmt production due to higher seeded acres, while the five-year average is 3.096 mmt while the 10-year average is 3.408 mmt. Given Ag Canada's projection for lower 2013/14 export potential, this forecast would see Canada build oat stocks over the upcoming year which will ultimately have a negative impact on price.

The range of trade estimates for 2013/14 flax production is 550,000 to 650,000 mt, with the average at 600,000 mt. This is directly in-line with Ag Canada's current production pegged at 610,000 mt. This level of production compares to 2012 production of 489,000, while the 5-year average is 616,600 mt and the 10-year average is 696,800 mt. Current Canadian supply and demand tables indicate this level of production will leave ending stocks relatively tight, but may increase ending stocks slightly.

Tomorrow's Statistics Canada release is set for 8:30 AM Eastern time. Note that comments have been made that given the timing of the data collection in July, tomorrow's report may understate yields given the improved outlook since.


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

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