Today's release of the Canada: Outlook for Principal Field Crops pretty much sums up the challenges ahead for the Canadian industry. Based on the use of the most recent Stats Canada production data, production of the principal field crops is estimated to increase 14% from 2012 to 80.8 million metric tonnes, with record production levels reached in several crops.
At the same time, the estimate for exports is expected to increase only 1.3% to 42.295 mmt, while domestic disappearance is expected to grow 2.8% to reach 39.516 mmt. The end result is a 66% increase in estimated ending stocks of the principal field crops, to 15.735 mmt.
There will undoubtedly be winners and losers across the grains as they jockey for position in the cue. Current movement can be as much as two weeks behind in some instances, as producers attempt to find country elevator space to deal with grain which may currently be piled on the ground due to lack of bin space. Meanwhile, railways juggle the ongoing escalation of oil movement by rail, while unrest at CN rail could lead to a potential strike as early as October 29.
As a result, cash markets remain weak as producer selling out-strips available capacity in many cases. As seen on the attached chart, the average cash basis for 1 CWRS on the Prairies widened to $1.12/bu. ($41.15/mt) which results in an average price of $6.31/bu. ($231.85/mt) given Wednesday's close of $7.42 1/2/bu. AAFC's current supply and demand tables would indicate a 79% increase in the carryout of wheat to 7 mmt (excluding durum) which indicates that this market could be under pressure for some time to come.
The average Prairies-wide basis for canola closed at $31.86/mt under the November, which reflects an average price of $451.84/mt or $10.25/bu. given Wednesday's November close of $483.70/mt. Since September's supply and demand tables were released by AAFC, Canadian exports have been increased 200,000 mt to 8 mmt, while domestic disappearance has been increased 300,000 mt to 7.2 mmt. Despite the 500,000 mt increase in disappearance, ending stocks have been increased 130.3% to 1.4 mmt.
In addition to logistical challenges, the Western Canada harvest also dealt a wider array of wheat grades combined with an overall lower protein crop, which will also add challenge to the industry.
Cliff Jamieson can be reached at firstname.lastname@example.org
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