Canada Markets

When a recent DTN 360 poll asked what the No. 1 challenge for Canadian agriculture would be in 2014, the majority -- 49% --responded that the issue of large Canadian grain carryout continuing to depress prices remains a concern.

The next largest response, 22%, suggested that increasing input prices would be the No. 1 issue. Any barriers experienced in clearing inventory from the Prairies can only further exacerbate the concerns of growers as indicated in this poll.

With railway movement weeks behind on the Prairies, a draw-down in West Coast terminal stocks is perhaps to be expected, although that may make it difficult to play catch-up with a few months of winter weather ahead of us. The last two years have seen West Coast terminals positioned with higher stocks to meet sales as of week 22 data.

The blue bars on the attached chart indicate the Vancouver terminal stocks of wheat, canola, barley and peas, as of week 22, reported in the Grain Statistics Weekly. Current stocks are well below levels seen in the same week in 2013, noted by the red bars, and also in 2012, as indicated by the green bars.

As of week 22, primary elevator shipments of wheat total 7.311 mmt, well above last year's 6.491 mmt as of the same week. Despite aggressive wheat movement, primary elevator stocks of wheat are well ahead of year-ago levels at 1.686 mmt, contributing towards the lack of interest in spot purchases on the part of line companies, as seen in either exceptionally wide basis levels or a lack of a spot bid.

As of week 22, primary elevator shipments of canola totaled 4.113 mmt, below last year's 4.582 mmt shipments at the same point in time. Primary elevator stocks in week 22 are reported at 628,200 mt, 52% above year-ago levels. This situation continues to weigh on canola basis in the country, despite a recent pop in cash basis on the West Coast from $11/mt over the March to $30 over the March contract in recent days.

Data obtained from the CN Rail site indicates that the average September car shortfall averaged 1,394 cars per week, with an average of 4,991 cars deemed spotted which compares to the average weekly demand of 6,385 cars. This also compares to the five-year average of 3,928 cars spotted weekly. This shortfall narrowed to 575 cars/week in October, then began to increase to 907 cars/week in November and 1,008 cars/week in December. The December car spots averaging 3,381 cars/week are actually 355 cars/week below the five-year average for the month of December.

CN's data suggests the August-through-December shortfall is roughly 17,200 cars which equates to a conservative 1.5 mmt. Another chart for the current shipping week, week 24, indicates that 3,870 cars are planned to be spotted this week, above the five-year average, with outstanding or future orders totaling 17,000 cars, an indication that the current backlog in movement is far from over. The five-year history would indicate that CN's average car spots have increased from 3,654/week in January to a high of 4,259/week in May.

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

(ES)

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