Canada Markets

AAFC Trims Canada's Ending Stocks, Again

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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After reaching a 2015/16 crop-year high of 12.275 million metric tons in December's report, Agriculture and Agri-Food Canada has repeatedly lowered its ending stocks forecast for Canada's principal field crops, with the latest forecast at 10.410 mmt, which compares to the 10-year average of 14.9 mmt. The most recent forecast for 2016/17 shows ending stocks stabilizing at 10.435 mmt. (DTN graphic by Nick Scalise)

For the fifth consecutive month, Agriculture and Agri-Food Canada has trimmed its estimate for the 2015/16 carryout of the country's principal field crops. Since the crop year high of 12.275 million metric tons was released in December's Canada: Outlook for Principal Field Crops estimates, ending stocks have been trimmed each month since. Wednesday's May report showed an estimated 10.410 mmt, down from the 2014/15 ending stocks of 14.572 mmt and 30% below the 10-year average of 14.9 mmt.

As well, since the first estimates for 2016/17 were released in January, the forecast for the next crop-year's ending stocks have moved lock-step with the current year's forecast, with next year's ending stocks estimated to stabilize at 10.435 mmt. This month's estimates takes into account Statistics Canada's 2016 acreage estimates, along with Statistics Canada's recent March 31 stocks estimates.

Close to 29% of the total stocks consist of wheat (excluding durum), left unchanged from last month at 3 mmt, which is down 51% from the 6.112 mmt carried out of 2014/15. The current export pace is behind the pace needed to meet the current 17.5 mmt export forecast, with week 40 exports close to 700,000 mt behind the necessary pace (licensed exports only), while roughly 470,000 mt of unlicensed exports have been reported as of the end of March, which helps narrow the gap.

Wheat stocks could be subject to further revisions. Given March 31 stocks at 11.221 mmt, the five-year average disappearance in the April-through-July period would suggest ending stocks could come in near the 3 mmt level, while last year's April-through-July disappearance would suggest ending stocks could approach 1.9 mmt. Regardless, wheat stocks on the Prairies will be negligible at the end of the crop year, with just enough left to hold down the bins.

Wheat acres forecast for 2016 were lowered, given Statistics Canada's recent March seeding intentions, with a drop in acres combined with a higher estimated yield expected to result in a further contraction in ending stocks to 2.5 mmt. AAFC has projected producer prices to remain steady in the upcoming crop year.

Durum exports for 2015/16 were increased 200,000 mt in the May report to 4.7 mmt, consistent with DTN analysis for week 40 showing year-to-date exports 232,000 mt above the cumulative pace needed to reach the previous 4.5 mmt target. At the same time, domestic disappearance was trimmed, leaving ending stocks 150,000 mt lower than forecast in April at 850,000 mt.

This would result in stocks reaching a seven-year low, with July 2008 stocks reported at 809,000 mt. The 850,000 mt estimated carryout is consistent with the Statistics Canada March 31 stocks of 2.571 mmt and average disappearance in the April-through-July period.

20167/17 estimates include an increase in durum acres, while combined with higher estimated yields; this is expected to lead to a 300,000-metric-ton build in stocks, to 1.150 mmt. The range of price estimates for No. 1 CWAD 13% protein is estimated to be down $40/mt on the lower end, to down $30 on the upper end from the current crop year, to $245 to $275/mt.

Canola's ending stocks for 2015/16 were left unchanged at 1.350 mmt, while a lower revision in 2016 seeded acres and a lower estimated yield for 2016 have resulted in a forecast 2016/17 ending stocks of 700,000 mt, a 48% drop from the current crop year and the lowest since the 2012/13 crop year.

The current 2016/17 estimates for stocks of all grains and oilseeds shows a year-over-year cut in stocks of 715,000 mt to 9.485 mmt, given the multitude of assumptions made.

The current pace of exports resulted in a sharp reduction in the estimated pulse and special crop ending stocks, which saw AAFC cut ending stocks from 615,000 mt last month to 210,000 mt this month, with a slashing of pulse stocks behind the move. Dry pea ending stocks were reduced by 300,000 mt to 100,000 mt as of July 31, the lowest seen since July 2013, and more in-line with the average April through July disappearance seen in recent years.

Lentil stocks were reduced from 100,000 mt last month to 25,000 mt, the lowest level seen since July 2009, while chickpea stocks were reduced from 50,000 mt last month to 20,000 mt this month. Projections for 2016/17 are mixed when it comes to the pulses and special crops, with peas, lentils and mustard crops expected to build stocks over the upcoming year given a surge in seeded acres and despite higher expected export volumes for both peas and lentils. Dry beans, chickpeas and sunflower seed stocks are expected to tighten in the upcoming year. Overall, 2016/17 ending stocks of pulses and special crops are expected to rise 740,000 mt to 950,000 mt.

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

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