With so many signs pointing towards a large Canadian crop, an increase in ending stocks across many of the grains and oilseeds was no surprise. Agriculture and Agri-Food Canada released its latest round of supply and demand tables, updated with Statistics Canada yield data from the July Estimates of Principal Field Crops, as well as the Stocks of Principal Field Crops which reported stocks as of July 31, the crop year end, used to update beginning supplies for the 2013/14 crop year.
Canada's wheat excluding durum supplies are expected to grow 9.1% or 2.5 million metric tonnes to 29.536 mmt based on a combination of larger seeded acres and higher yields than 2012. A number of adjustments were made to the 2012/13 balance sheet to result in a 206,000 mt increase in ending stocks to 3.906 mmt, which became 2013/14 beginning supplies. Exports are forecast to grow 2% to 15.5 mmt, while domestic use is expected to 2.2% to 8.136 mmt. Total carryout is expected to grow 51% to 5.9 mmt. This would be the highest carryout since July 2006 when carryout stocks totaled 6.424 mmt. The five-year average is 4.698 mmt.
Production may still be ratcheted higher with the completion of harvest. Using Saskatchewan Agriculture's latest yield estimates as a proxy, Statistics Canada reported an average yield of 38.2 bpa for Saskatchewan, while the simple average of the Saskatchewan yield estimates as of September 9 was 42.8 bpa. Manitoba's latest crop report is suggesting yields ranging from 30 to 85 bpa in the spring wheat crop.
Demand may be a wild card, but will be largely dependent on the overall protein level of the crop. The North Dakota Gold report from the North Dakota Wheat Commission, reports that the "low to very low" protein levels in the U.S. spring wheat crop will require focus on non-traditional markets in order to clear inventory, which may be a similar situation in Canada. The HRS/HRW spread closed at 6 1/2 cents today (HRS above HRW) after trading at a $1.08 1/4 premium in late June. This is due to the increasing supplies of lower protein wheat on both sides of the border which may pose a challenge for North American marketers. The Dakota Gold report expects sales activity to increase as the move to lower quality markets is made.
Durum supplies are also expected to grow, also due to higher planted acres combined with a higher yield. 2012/13 ending stocks were also increased since the August report. Total supplies are expected to grow 2.4% to 6.297 mmt. Exports are expected to grow 2.5% to 4.350 mmt, with carryout stocks expected to grow 4.9% to 1.2 mmt. This would be the second lowest carryout since July 2008. The five-year average is pegged at 1.712 mmt by Statistics Canada.
As with wheat, final yields should prove to be higher than yields estimated by StatsCan. While the average yield is pegged at 38.2 bpa for Canada by Statistics Canada, Saskatchewan Agriculture's latest crop estimates resulted in a 40 bpa simple average across the four southern durum growing areas. Southern Alberta's most recent rating for the durum crop is 87.7% Good to Excellent, which would also suggest higher-than-average yields.
The International Grains Council has increased the size of the global crop of durum by 2.3% in 2013 to 35.924 mmt. Higher production in Morocco and sharply higher production in Canada are behind the increase. The Dakota gold newsletter refers to the USDA's forecast of 51 mb (1.388 mmt) of durum imports in the upcoming year as a surprise, which would largely come from Canada. The estimate for 2012/13 imports is 36 mb, or close to 980,000 mt. This would reflect a 42% increase over last year's imports. This will be an important trend to watch.
Canadian barley stocks have been increased 51,000 mt for 2012/13 as of the recent Stats Canada release, after adjustments were made to both exports and domestic use and when combined with a lower estimated seeded acres and higher yields, supplies are expected to grow 6.2% to 9.810 mmt. Despite slightly higher exports and domestic use, ending stocks are expected to grow nearly 50% to 1.2 mmt. This remains well below the five-year average carryout of 1.946 mmt. The 63.9 bpa yield estimate compares to Saskatchewan yields as of Sept. 9 which averaged at 66 bpa across the six crop regions, while Manitoba yields were reported in the 65 to 110 bpa range and Alberta's barley crop was rated at 88.3% Good to Excellent as of Aug. 27.
Adjustments to the canola supply and demand tables for 2012/13 included an increase in seeded acres as well as in yield in order to boost supplies by 561,000 mt, which fixed the mathematical errors that presented themselves in the August report. Ending stocks for 2012/13 were reduced by 42,000 mt to 608,000 mt.
Canola's lower seeded acres for 2013/14 combined with a sharply higher estimated yield result in total supplies which are 5.5% higher than last year, at 15.513 mmt. A 7.4% increase in exports combined with a 2.6% increase in domestic use are suggested to lead to a 15% increase in ending stocks, reaching 700,000 mt. This remains relatively tight compared to the average 1.81 mmt carryout over the past five years.
Concerns remain surrounding the level of ending stocks reported for 2012/13. The estimated 200,000 mt of farm inventory estimated by Stats Canada as of July 31 would suggest that little more than bin bottoms would exist across the Prairies, yet deliveries in the first three weeks of August remained surprisingly strong at 237,400 mt, leading one to believe that ending stocks are under-estimated. Also, the 14.78 mmt production figure is well below trade estimates that can range anywhere from 15 to 16 mmt and even higher. While this situation may grow increasingly bearish as new data is presented, price direction will continue to follow the lead of the soybean market which is a much larger price determinant in the world vegetable oil complex.
Look for production figures to continue to grow on paper in time. This will be one big crop that will get bigger in time.
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Cliff Jamieson can be reached at firstname.lastname@example.org
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