Agriculture and Agri-Food Canada's January Canada: Grains and Oilseeds Supply and Disposition tables indicate that Canadian producers will seed 2.1 million more acres in the upcoming year, split close to evenly between more grains and oilseeds and more pulses and special crops.
Of the grains and oilseeds, the biggest expected jump in acres is forecast for canola with an expected 748,713 acre jump -- or 3.7% -- to 20.8 million acres, roughly back to the area seeded in 2014. A smaller projected crop in 2016 combined with smaller carry-in stocks has led to lower supplies, while an expected 700,000 mt cut in demand for 2016/17 (500,000 mt of exports and 200,000 mt of crush)is expected to result in ending stocks falling for the third consecutive year to 1.2 million metric tons. The range of canola prices paid to producers is expected to be $15 to $25/mt higher than the range estimated for the current crop year, with an expected range of $510 to $550/mt. The new-crop November contract closed at $491.70/mt, with recent resistance at $500/mt, while today's average Prairie September delivery basis is calculated at $26.75/mt under the November. Given this price forecast, something has to give in the way of higher futures or stronger basis.
Wheat acres (excluding durum) are expected to dip slightly despite producer returns which are expected to remain constant from the current crop year. Given smaller carry-in stocks from 2015/16, exports are expected to be lower while ending stocks are expected to fall in 2016/17 for the third consecutive crop year to 2.8 mmt, the smallest carryout seen in Statistics Canada data going back to 1980. A combination of moves in both wheat futures and the Canadian dollar is expected to keep returns unchanged from the current crop year. Wheat acres are expected to be lost to durum, canola and pulse crops.
Durum acres are forecast to be 1.9% higher, with previous writing in this space indicating how durum's premium to wheat continues to favor durum. Roughly 5.9 million acres are expected to be seeded, the largest area since 2008. This is despite ending stocks expected to end higher for the second consecutive year in 2016/17 and government forecasts that suggest producer returns will dip as much as 12.5% to a top end of close to $7.50/bu.
AAFC is projecting a 3.8% cut in corn acres along with a 3.9% boost in the country's soybean crop. This move could be viewed as counter to current estimates that suggest more corn and more soybeans will be planted in the U.S. in 2016, while agrimoney.com reports that Dupont is expecting corn acres in the U.S. to increase at the expense of soybeans, according to current seed sales. Time will tell, although an estimated 48% increase in Ontario's winter wheat acres to Statistics Canada's estimate of 1 million acres has taken acres away from row crops. Ending stocks for both crops are expected to fall in 2016/17, while producer returns for corn are expected to remain steady while soybean returns are expected to slip slightly from 2015/16.
Increased interest in special crops and pulses has led to forecasts which include a 14.2% hike in dry pea acres to 4.2 million acres, a 12.7% hike in lentil acres to 4.4 million acre, a 10% hike in chickpeas to 135,905 acres and a 17.9% increase in mustard acres to 407,715 acres.
Tight ending stocks expected to be carried out of 2015/16 for many of the special crops and pulses will help keep total supplies in check next crop year, although current projections indicate producer returns for both peas and lentils dipping from the current year while ending stocks are expected to grow 136% for peas and 400% for lentil given current demand projections for 2016/17. Planting seed could be a limiting factor given the large increase in pulse acres, with some Prairie forecasts indicating that as much as 5 million acres could be planted.
AAFC's tables shows few crops showing a decline in acres. Producers are expected to seed 185,325 fewer acres of oats, 123,550 fewer acres of corn and roughly 62,000 fewer acres of wheat (excluding durum). Summerfallow acres, reported at a record low of 2.560 million acres in 2015, could fall sharply to meet AAFC's cropping forecast.
This report may lead to debate, while there is a great deal of time for market signals to present opportunities prior to spring.
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