As seen on the attached chart, the continued growth in global canola/rapeseed demand in 2017/18 is expected to be largely offset by the first year-over-year increase in global production seen in four years, as indicated by the rising blue line. A significant 4.7% increase in year-over-year production is expected to result in a rise from roughly 69.2 mmt to 72.4 mmt.
Looking at the USDA's global production estimates as reported in the monthly Oilseeds: World Markets and Trade, the number that stands out is the 2.5 mmt jump in Canadian production to 21 mmt in 2017/18.
It is possible that the country's record planted acreage estimated at 22.8 million acres will produce a record size crop. At the same time, there are a number of reasons why the current USDA estimate could be questioned:
1) As of June 12, Saskatchewan Agriculture's crop report indicated that 99.5% of the province's total crop had been seeded. Producer discussions online are suggesting that the province's government and Statistics Canada has understated the number of unseeded acres in the wettest areas of the province, mostly in the Northeast and Northwest regions.
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2) Assuming all 22.8 million acres were seeded, while using AAFC's average harvested acre ratio of 98.8% and the five-year average yield of 37.1 bushels/acre, production would total 19 mmt, still far short of the forecast. In order to reach the 21-mmt forecast, an average yield of 41 bpa would be required, close to the largest ever.
3) Despite recent thunderstorms across the Prairies, all of Southern Saskatchewan and Manitoba are rated as having received 40 to 85% of normal moisture between April 1 and July 11.
4) While last week's heatwave has already taken a toll, DTN's Five-Day Highs Compared to Normal are shown to range from 4 to 9 degrees Celsius above normal through July 17. Extended forecasts online point to continued warm weather with a lack of appreciable precipitation.
5) As of June 26, Saskatchewan's canola Crop Condition Index was calculated at 145, below the five-year average of 156 for the same week. This is a similar reading to the same week in 2014 of 148, while the average Saskatchewan yield that particular year was estimated by Statistics Canada at 33 bpa, just slightly higher than the previous five-year average. Saskatchewan's crop condition ratings should be updated in Thursday's weekly report.
Given the current USDA forecast, the global stocks/use ratio is expected to fall for the fourth consecutive year to 6.3%, as shown by the grey bars measured against the secondary vertical axis on the right. This is the tightest seen since 2003/04, where stocks/use are shown at 6.1%. The current 2017/18 estimate shows ending stocks at 4.611 mmt, down just 73,000 mt from the current 2016/17 estimate.
Cliff Jamieson can be reached at email@example.com
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