Today's Statistics Canada report could be of more interest than normal to many for a couple of reasons. First, March stocks for many grains were sharply lower than past years, with carryout estimates for some grains going into today's report signaling the potential for extremely tight stocks for some crops as of July 31.
One example of this is lentils, with Agriculture and Agri-Food Canada projecting a mere 50,000 metric ton carryout as recently as their July 21. Secondly, this year's forecast for a smaller prairie crop has placed focus on 2014/15 ending stocks which in turn become 2015/16 beginning stocks necessary contributions to this crop year's supplies.
Thursday's report perhaps surprised many market watchers, with revisions to prior-year stocks leading to stocks of many grains to be at the higher side of pre-report estimates or in one case, well above them.
Canada's all-wheat estimate was reported at 7.108 million metric tons, down 32% from 2014 and just 3% below the five-year average. This volume was at the high end of pre-report trade estimates reported by Commodity News Service, with traders expecting a range of 5.1 mmt to 7.1 mmt. This volume represents a two-year low and represents a partial retracement to the 5.137 mmt reported for July 2013, with today's report indicating a slight upward revision to both 2013 and 2014 ending stocks.
Perhaps the wheat market was slow to react to this news, although at the time of writing the MGEX December contract is 7 1/2 cents lower, reaching a fresh contract low of $4.98 3/4/bushel, the lowest level traded since June 2010 on the continuous active chart. The USDA's August 2015/16 estimates reported Canada's 2014/15 ending stocks at 4.8 mmt, 2.3 mmt below today's estimate, while estimating global wheat production and carryout for 2015/16 at record levels. Today's data, along with the potential for an increase in Canada's production potential for 2015, adds to an already bearish global wheat situation.
Canada's July 31 durum stocks were reported at 982,000 metric tons, down 44.8% from last year and also 43.4% below the five-year average stocks reported for July 31. This volume is within the pre-report estimates ranging from 800,000 mt to 1.2 mmt, while would be the lowest level of stocks seen since 2008. Previous DTN analysis called for a sub-one-million ton carryout for durum, only the third time this has happened in the past 20 years.
The largest surprise on Thursday may revolve around Statistics Canada's view of canola stocks. Leading up to the report, pre-report estimates pegged ending stocks in a wide range between 800,000 mt and 1.7 mmt, with July stocks reported today at 2.322 mmt, 36.5% above the highest estimate. This surprise was achieved by a radical upward revision of 570,000 mt to July 31 2014 stocks to result in a 3.008 mmt 2014 ending stocks figure, with 2015 stocks down 22.8% from this newly revised 2014 figure. The five-year average stocks (2010 to 2014) are pegged at 1.85 mmt, leaving this year's carryout over 25% above the five-year average.
The canola market has traded lower on this report, down $8.50/mt at the time of writing to $457.30/mt and is currently trading below the November contract's 200-day moving average. Perhaps the market has been signaling this higher level of stocks for some time, with the November 2015/July 2016 spread moving from a bullish $18.50/mt inverse (November trading above the July) as of June 22 to the current $11.10/mt carry (July trading over the November, a signal of a weakening in the bullish sentiment held by commercial traders.)
A recent Canada Markets Blog focused on whether 2015/16 canola would be impacted more by restricted supply or by weekending demand. Given that 2015 production could still be revised higher, it is likely that demand will be the limiting factor in this year's markets given current forecasts of a well-supplied global vegetable oil market along with ongoing turmoil in China's economy.
Prior year adjustments were also most noticeable in the pulse markets, with the largest changes made in the lentil data. July 31 lentil stocks were reported at 365,000 mt, a five-year low which is down 53.6% from 2014 and 39% below the five-year average. This level of stocks was made possible with a 622,000 mt increase in the July 31 2014 stocks and a 170,000 mt increase to the July 31 2013 stocks, or in other words, they found almost 800,000 mt from prior years. Leading up to this report, AAFC had forecast ending stocks at an extremely tight 50,000 mt as recent as July 21.
Dry pea stocks were reported at 429,000 mt as of July 31, a four-year high which is up 30.4% from 2014 and 3% below the five-year average. Ending stocks for 2013/14 were boosted by 20,000 mt for a modest impact to today's results. AAFC's July 21 estimates called for a much more bullish estimate of 100,000 mt as of July 31 2015.
With demand for pulses for the upcoming year still an unknown as is the variability of this year's prairie crop, today's report could weigh on pulse markets as we move into the crop year.
Barley stocks were reported at 1.217 mmt, slightly above the range of pre-report estimates which called for a range of estimates between 650,000 mt and 1.2 mmt. This volume is 37.6% below last year and also 25% below the five-year average. This volume is slightly higher than the current AAFC estimate of 1 mmt carried out of the 2014/15 crop year. Statistics Canada's July estimate for 2015/16 barley suggests production of 7.305 mmt for 2015, likely to be under-stated given late summer rains which improved crop prospects, which would leave total supplies for 2015/16 at a minimum of 8.5 mmt, the lowest supplies on record.
Oat stocks as of July 31 were reported at 681,000 mt, a two-year low and within the range of estimates which suggested stocks of 550,000 mt to 1 mmt. This also involved fiddling with prior year reports (revising past years both higher and lower) and is 35.4% below last year and 19% below the five-year average.
Flax stocks were reported at 97,000 mt, closer to the high side of the 80,000 mt to 100,000 mt range of pre-report estimates. This volume is 5.4% higher than July 2014 stocks, one of only two crops reported to show a year/year increase in stocks with yet another slight increase to 2014 stocks. Year-end stocks are at a three-year high, while 37.9% below the five-year average.
DTN 360 Poll
This week's poll asks what you think of Statistics Canada's July 31 production estimates for all crops; have they under- or over-estimated the crop? DTN thanks all those who have responded to past polls and look forward to your contributions in the future!
Cliff Jamieson can be reached at firstname.lastname@example.org
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