Canada Markets

The three-day CWB Crop Tour of the Canadian prairies wrapped up on Thursday, with results released in a public forum in Regina on Friday morning. This data comes on the heels of estimates released by Agriculture and Agri-Food Canada earlier this week with production estimates updated using Statistics Canada's June acreage estimates. AAFC does acknowledge that further production cuts may be necessary should drought conditions continue.

Results from the CWB's crop tour suggest an average yield of 29.3 bushels per acre for canola, down 14.8% from last year's 34.4 bpa and below the 33.06 bpa 10-year average. Total production is pegged at 12.5 million metric tons, roughly 3 mmt below the 15.555 mmt produced in 2014, according to Statistics Canada data.

This estimate is slightly higher than a 12.18 mmt production estimate that the CWB had released and was circulated on Thursday, with one comment made indicating the CWB had underestimated the crop potential in the eastern prairies. At the same time, this estimate is well below the 14.3 mmt estimate released by AAFC earlier in the week.

Should production dip as low as the 12.5 mmt estimate, this would be the lowest production achieved since 2007 when production was pegged at 9.6 mmt. This should be viewed as troubling given that demand has reached levels over 16 mmt in 2011/12, in 2013/14 and again in the 2014/15 crop year.

Implications are significant given the expansion of the domestic crush capacity on the prairies over the past year along with new export facilities added to the mix and new ownership taking control of the CWB. AAFC's projections show the exporters taking it on the chin in the upcoming year, with domestic crush forecast to hold steady while exports are projected to fall by 17%. Note again that this projection is based on production which is 1.8 mmt higher than the CWB released Friday. The other interesting note is that AAFC pegged year-end stocks at 500,000 mt for 2015/16, which would be the tightest seen since 1997/98, while Friday's much tighter production estimate might suggest that ending stocks may not get much tighter but the fight over supplies will intensify.

Durum yields across the prairies are estimated at 27.8 bpa, 32% below last year's final yield estimate of 40.9 bpa and below the 10-year average of 37.11 bpa. Total production is pegged at 4.2 mmt, slightly higher than the 4 mmt estimate released earlier by the CWB. Estimated production is 19% lower than estimated for 2014/15 despite higher acres, roughly equal to the 10-year average and would represent the lowest production achieved since 2011/12.

The crop tour's production estimate is 1 mmt higher than released by AAFC earlier in the week. AAFC supply and demand projections suggest 5.2 mmt production will allow for an 8% cut to exports to 4.5 mmt while resulting in an 800,000 mt carryout, similar to the 809,000 mt carried out of the 2007/08 crop year. Should production be cut by 1 mmt from this level, rationing will be required while ending stocks are bound to be among the lowest on record.

On Thursday, the CWB increased their Pool Return Outlook for durum for the fourth time in three months, a move that has seen the PRO for the Annual Pool increase 24% to $410/mt in store St. Lawrence or the west coast, with reduced supplies in Canada as well as Europe supporting prices along with Canadian dollar weakness.

Canada's all-wheat production is estimated at 23.1 mmt, down 21% from last year and the smallest annual production seen since 2007. Once again, this is higher than earlier estimates with good crops in eastern Saskatchewan and Manitoba offsetting the drought-stricken areas of the western prairies.

Spring wheat yields are estimated at 38.9 bpa, down 14.9% from the 45.7 bpa yield recorded for 2014 while also below the 41.7 bpa 10-year average.

The tour's estimate for wheat production is 4 mmt below the 27.1 mmt all-wheat estimate released by AAFC earlier this week. While AAFC's estimate is 1 mmt higher for durum, it is also looking for a wheat crop that is 3 mmt higher than estimated on the tour. Current supply and demand tables released earlier in the week suggest an 8% cut to 2015/16 wheat exports to 16.5 mmt which is to lead to a 3.5 mmt carryout at the end of July 2016. This is already the lowest wheat (excluding durum) on Statistics Canada records going back to 1986, while the situation could get a whole lot tighter given Friday's data.

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Due to summer vacation, the Canada Markets Blog will not be updated until Tuesday, Aug. 4.

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

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