Canada Markets

Latest supply and demand tables released by Agriculture and Agri-Food Canada take into account Statistics Canada's July production estimates released on Aug. 31 along with the July 31 stocks report as released on Sept. 6. Given current estimates, stocks of all of Canada's principal field crops combined are set to fall by 26.5% to 11.175 million metric tons, which would be the lowest seen in five years. The most recent high carryout was seen in 2013/14, when stocks of major grains were reported at 19.5 mmt, excluding the impact of some of the smaller special crop reports where reports have been terminated.

As seen on the attached chart, the year-over-year drop in ending stocks is significant for the large crops of wheat (30%), barley (41%), canola (51.8%) and durum (57.1%).

In the case of wheat (excluding durum), a higher carry-in in 2017/18 is offset by lower yields estimated by Statistics Canada which are estimated to average 46.8 bushels per acre. While exports are expected to nudge 3% higher in 2017/18, to 16 mmt, exports as of the first six weeks of this crop year are reported at 1.8755 mmt, which is 27.8% higher than realized in the same period of 2016/17.

Durum production for 2017 is forecast to fall by 50% to 3.9 mmt, given a reduction in seeded acres and a lower yield of 28 bpa as estimated by Statistics Canada. This is suggested to lead to lower exports of 4.2 mmt in 2017/18, although current exports of 533,600 metric tons, as of week 6, are 58.4% higher than the same period in 2016/17. It is plausible that both production and exports will be revised higher this crop year. Statistics Canada has increased production of durum in its final December report in each of the past five years, averaging a 15% increase over this period. As well, reports exist of higher-than-expected durum yields seen in some of the central areas of Saskatchewan. As of Saskatchewan's Aug. 28 crop report, the lowest yield of the five reporting regions is estimated at 29 bpa, which is higher than Statistics Canada's overall yield for the Prairies.

Canola stocks are also expected to take a large hit in the upcoming year, expected to fall by 51.8% to 650,000 mt, which would result in the fourth consecutive drop in stocks and to the lowest level reached in five years. Despite Statistics Canada's estimate of record seeded acres, a lower carry-in combined with lower yields is expected to result in lower supplies, which is viewed to curtail export activity. Exports are expected to be roughly 1 mmt lower, at 9.9 mmt, while the canola crush is expected to be marginally lower at 9 mmt. As of recent data, both crush and exports remain behind the pace needed to reach these demand targets. Over the past five years, the final canola estimate released in December was increased in four years, while averaging a 16% increase over the five years. One sign to watch is the neutral-to-bearish futures spreads seen for canola, which also may suggest that supplies may be higher than currently estimated.

Of the crop estimates shown, only estimates for oats and dry pea ending stocks are expected to grow in the upcoming crop year. Ending stocks of oats are expected to grow by 23.2%, to 850,000 mt, despite higher exports to the U.S. expected. This would be slightly higher than the five-year average carryout. Over the past five years, Statistics Canada has revised oat production higher in December in four of the five years, averaging 9.9% higher overall. At the same time, there seems discrepancy in Saskatchewan's oat crop potential, with Saskatchewan Agriculture last estimating average yield at 76 bpa for the province while Statistics Canada is calling for an 89 bpa average yield, most significant given that the province is forecast to seed 51.9% of the country's oat crop.

Dry pea stocks are expected to increase by 32.9%, to 400,000 mt, which would be the largest stocks in three years. A higher carry-in is expected to partially offset lower seeded acres and yield, while exports are expected to fall by 26.6%, to 2.9 mmt. Cumulative crop year exports are behind the pace needed to reach this target, given the bulk export data reported by the Canadian Grain Commission.

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

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