The industry expected a higher crop production figure in today's report. As indicated in previous Canada Markets blogs, there is a tendency for Statistics Canada to release a conservative outlook in its September estimates released in early October, only to revise higher in December.
As well, the survey period for the September estimates is reported to be between Sept. 3 and Sept. 13, a time when the Saskatchewan crop was roughly 52% harvested while the Alberta crop was roughly 37% harvested, which added further uncertainty. Since the October report, both Saskatchewan and Alberta governments continued to reveal increasing yields as harvest progressed.
Friday's Production of Principal Field Crops could be viewed as bearish, with only two of the country's largest crops, wheat and dry peas, failing to realize production levels higher than achieved in 2014. Production for the major grains, oilseeds, pulses and special crops is reported at 83.687 million metric tons, 2.561 mmt or 3.2% higher than the latest estimates for 2014.
Harvested acres for all-wheat increased 1% in 2015, although production is estimated to fall by 6.2% from 2014 to 27.594 mmt. Pre-report estimates called for all-wheat production to range from 26.1 mmt to 27.6 mmt, with the actual estimate coming in at the higher-end of the expected range. This marks a 1.533 mmt increase in all-wheat production from the September estimates released in October, of which 645,000 mt is durum and 888,000 mt represents wheat.
While production in Manitoba was estimated to be 11.1% above 2014 levels, Saskatchewan production fell 7.9% and Alberta production was reported to fall by 11.3%, indicating that wheat production failed to recover from the early season dryness faced in the western Prairies, as did some other crops.
Today's report gave us a first look at production broken down by class, with hard red spring wheat production down 4.9% from 2014, but 4.4% above the 10-year average at 16.868 mmt.
Durum production for 2015 was reported at 5.389 mmt, above the range of pre-report estimates which hinted at production ranging from 4.7 mmt to 5.2 mmt. After a poor start in the first half of the growing season, production is estimated to be 3.8% higher than 2014 and 13.7% higher than the 10-year average. As of week 17, Canada's cumulative durum exports through licensed channels are running 28% behind year-ago levels with the upward revision adding further weight on the market.
The increased wheat production failed to affect markets, with commercial buying interest in the most active SRW market leading wheat markets higher. March HRS ended 3 1/2 cents higher at $5.15 1/2/bu.
The largest surprise was seen in today's canola estimate of 17.2 mmt, much higher than the range of pre-report estimates from 14.5 mmt to 16.2 mmt, as reported by Commodity News Service. The average trade estimate seemed to be in the 15.5 mmt range. Note that this comes after an early-season frost which led to reseeding of May crops along with drought conditions in western Saskatchewan and Alberta in May and June. An early-season industry estimate of 12.5 mmt comes to mind, followed by Statistics Canada's first estimate of 13.3 mmt and its September estimate at 14.3 mmt.
The market reacted as one would expect given the bearish news of a 2.9 mmt hike in production, although recovered from early lows with the January contract ending down only $1.10/mt after trading in positive territory within an hour of the close. The March contract ended unchanged and the May and July contracts ended higher. Demand continues to remain strong, with exports through licensed facilities 11.8% above year-ago volumes as of Nov. 29 (licensed exports only), while domestic crush is running 10.6% above the year-ago pace. This continued pace will be essential to deal with this crop year's increased production which may lead to record supplies this crop year.
Canadian barley production rose 15.5% from 2014 to 8.226 mmt, recovering from the 2014/15 record low of 7.119 mmt. A combination of increased harvested acres as well as higher yields was behind the estimate, which was well above the range of pre-trade estimates from 7.3 to 7.8 mmt. While encouraging for feed users, this level still remains 12.8% below the 10-year average.
Canadian oat production was reported at 3.428 mmt, 15.1% below 2014 and only slightly higher than the 10-year average production. Oat futures seemed to take this news in stride, closing slightly higher on Friday despite this higher production and a solid rally in the U.S. dollar.
Today's report resulted in mixed results for Canadian pulse markets. Dry pea production was reported at 3.201 mmt, up slightly from the October estimate, roughly equal to the 10-year average, but down 16% from last year. Harvested acres were reported to fall by 7.4% to 3.632 million acres while average yield fell from 35.7 bushels per acre to 32.4 bushels/acre or the lowest yield in five years. Friday's monthly merchandise trade from Statistics Canada shows Canada's dry pea exports for the first three months of this crop year (August through October) to be at 1.173 mmt, up 22% from last year's pace and 18% higher than the three-year average for this period. Exports are well ahead of the pace needed to reach the current 2.9 mmt export target reported by AAFC and pea stocks will be tight this crop year.
At the same time, Stats Can hiked the expected lentil production on the Prairies to 2.373 mmt, a record level of production which is 19.4% above 2014 and 63.3% above the 10-year average. Despite the average yield falling 8.4% from 2014 to 1,333 lbs/acre, slightly below the 10-year average, harvested acres are estimated to have jumped 30.5% to 3.926 million acres from 2014. Friday's Statistics Canada merchandise trade report shows 634,997 metric tons exported in October, likely the highest volume shipped in any single month ever, with year-to-date exports at 1.05 mmt, up 75% from 2014 and 118% above the five-year average. Lentil prices remain at or near record levels and this increased production may have little impact on the market.
Today's report also showed significant increases in both corn and soybean production. Corn production was increased to 13.559 mmt, up 18% from 2014 and 20.5% above the 10-year average. This is the second-highest annual production in the country, next to the 14.2 mmt produced in 2013. Harvested acres increased in both Quebec and Ontario from 2014, while Manitoba acres were unchanged from 2014 at 245,000 acres. The national average yield increased by 10.4% to record 164.7 bushels/acre, with a yield record of 164.6 bpa in Quebec, a record 170.6 bpa in Ontario and the Manitoba's second highest yield of 126.5 bpa, next to 128 bpa reached in 2013.
Despite earlier estimates suggesting that Canada's soybean production could fall for the first time in eight years, an increase in Quebec, Saskatchewan and Manitoba production along with a slight year-over-year drop in Ontario resulted in the seventh consecutive record crop for the country with production at 6.235 mmt. The country's harvested acres fell 2.2% overall with the average yield increasing 2.2 bpa to 42.4 bpa. Ontario is reported to have harvested 160,000 fewer acres in 2015 with yield unchanged from last year at 45.5 bpa, while Manitoba saw harvested acres jump by 120,000 to 1.380 million acres while yield jumped 14.6% or 4.7 bpa to 37 bpa. Quebec harvested 160,000 fewer acres while the average yield jumped 22% to 47.3 bpa.
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