Canada Markets

In Wednesday's annual Small Grains 2015 Summary, U.S. all-wheat production was reported to be below previous estimates as well as below the average of pre-report estimates. At the same time, the only class of wheat which was estimated to be higher than the averages of pre-report estimates was durum, with production estimated at 82.5 million bushels (2.245 million metric tons) as compared to the average of pre-report estimates at 78 mb (2.123 mmt).

This production level is 52.6% higher than last year given an estimated increase in acres of 41%. This level of production would also indicate production reaching a five-year high, narrowly edging above 2012/13 production levels. It would be 9.5% above the average production level achieved in the previous 10 years.

The U.S. Quarterly Stocks report as of Sept. 1 was also released on Wednesday, showing the Sept. 1 stocks of all wheat to be below the average of pre-report estimates for the end of the first quarter of the U.S. crop year for wheat. Durum stocks were reported at 73.842 mb, up 28% from 2014 and the highest Sept. 1 stocks level in five years. What is interesting is that USDA states that this estimated level of stocks would indicate a first quarter (June through August) disappearance of 34.3 mb, which is 93% higher than last year and also calculated to be 37% higher than the five-year average usage for this three-month period.

At first look, the higher-than-expected production could be expected to have negative implications for U.S. imports of Canadian durum. The September USDA supply and demand report estimated imports at 40 mb (1.1 mmt) for 2015/16, which is down from 50 mb (1.36 mmt) imported in the previous crop year. This level would also be slightly below the 41.2 mb five-year average imports and would also represent the first year/year decline in imports seen in five years. At the same time, should disappearance continue at current levels, U.S. imports may be affected less than expected.

Friday's Statistics Canada report has led to pre-report estimates suggesting we'll see production range from 4.5 mmt to 5.1 mmt, which ranges from close to the initial August estimate of 4.467 mmt to close to the 2014/15 production level of 5.193 mmt. Just weeks ago, Statistics Canada released their first-ever model-based estimates, with production estimated at 4.779 mmt, higher than the August survey-based estimate.

DTN's National Durum Index based on U.S. cash bids closed up 4 cents on Wednesday to $6.19/bu following the report. Since Aug. 20, this index has been reported in a narrow range between $6.08/bu and $6.19/bu. Canadian prairie bids, according to pdqinfo.ca range from $322.99/mt to $335.37/mt ($8.79/bu to $9.13/bu) for 1 CWAD 13% protein.

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

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