Canada Markets

Statistics Canada rolled out their first look at Canada's 2015 production estimates this morning, which may be viewed as a worst-case scenario given that late-summer moisture may have continued to improve some crops beyond the July 22 to August 3 survey period.

Canada's all-wheat production was estimated at 24.6 million metric tons, down 15.9% from 2014 and slightly below the Commodity News Service pre-report estimates ranging from 24.8 mmt to 27.1 mmt. This compares to the five-year average of 28.5 mmt. Prairie durum production is estimated to fall for the second straight year to 4.467 mmt, down 20.2% from last year and roughly equal to the lower-end of pre-report estimates ranging from 4.5 mmt to 5.2 mmt. Durum demand will be rationed in the upcoming crop year, with current July Agriculture and Agri-Food estimates suggesting production at 5.2 mmt, 700,000 metric tons higher than today's estimate while resulting in an 800,000 mt carryout.

Perhaps one of the most anticipated numbers in this report was the canola estimate, given the tight fundamental situation facing both the domestic and global canola/rapeseed markets. There was a wide range of opinions on the crop, with pre-report estimates suggesting production would be reported in a range between 12.5 and 14.5 mmt. Canola production was estimated at 13.343 mmt in today's report, down 14.2% from last year's 15.555 mmt and below the five-year average of 14.957 mmt.

The situation for canola continues to be bullish with this year's total supplies expected to fall well below total demand exceeding 16 mmt while domestic crush capacity continues to grow, although the situation has been tempered by weakness in the global oilseed markets. Forward spreads have weakened over the week, a sign that the commercial trade is becoming more comfortable with the prospects for the upcoming year. Note that current Agriculture and Agri-Food Canada supply and demand tables suggest 14.3 mmt of production and 14.8 mmt of demand versus 16.4 mmt in the current crop year, while showing ending stocks of just 500,000 mt. Current estimates suggest and even tighter balance sheet and crusher and exporter competition could be something to watch over the upcoming year.

Feed users and maltsters will breathe a sigh of relief with barley production estimated at 7.305 mmt, above the pre-report estimates ranging from 6.9 to 7.2 mmt. This volume could be 2.6% higher than last year's record low, but remains below the five-year average production of 8.177 mmt. A combination of this higher-than-expected production along with declining feed demand due to shrinking cattle numbers may result in a 2015/16 carryout which is similar to the current year, currently indicated at 1 mmt.

Canadian oat production was estimated at 3.312 mmt, up 13.9% from last year and near the upper-end of the 3.05 mmt to 3.435 mmt pre-report range of estimates. This volume is just slightly higher than the 3.047 mmt five-year average production and will see stocks grow over the upcoming year.

Dry pea production was estimated at 2.921 mmt, down 15.2% from last year and below the range of pre-report estimates, where a range of 3.15 mmt to 3.25 mmt was expected. This would be the smallest production since 2011 and compares to the 3.253 mmt five-year average. There have been many reports of pea yields falling below expectations due to this summer's drought, while the upcoming year could prove interesting for this market. Current AAFC supply and demand tables suggest a 3.25 mmt production allowing for an export program of 2.7 mmt and resulting in a 50,000 mt carryout, just 2% of total demand. Supplies will be rationed further over the balance of the crop year.

Lentil production was pegged at 2.083 mmt, up 4.8% from 2014 and above the 1.458 mmt five-year average. Current AAFC estimates suggest that 2015/16 demand will remain steady at 1.8 mmt, which should suggest that lentil stocks at the end of 2015/16 could remain at similar levels to 2014/15 which is 50,000 or just 2% of total demand. This should remain supportive for prices through the crop year.

Canada's soybean production is expected to fall for the first time in eight years, with today's report pegging total production at 5.857 mmt, down 3.2% from last year although above the five-year average of 5.081 mmt. While the western provinces continue to increase acreage seeded to soybeans, Ontario is estimated to have reduced acreage by 140,000 acres or 4.6%. This production is in line with current AAFC estimates, which indicates Canadian stocks tightening slightly in the 2015/16 crop year.

Statistics Canada's corn production for 2015 was estimated at 12.312 mmt, up 7.2% from 2014, as Ontario growers increased their seeded acres while Manitoba growers reduced their corn acres. This volume is just slightly lower than the five-year average of 12.429 mmt while current AAFC projections would suggest that corn stocks will tighten slightly in the 2015/16 crop year.

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

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