Wednesday's Statistics Canada report estimates, based on November producer surveys, shows the production for most crops higher than seen in the model-based estimates released in October while in many cases, higher than the average of pre-report estimates reported by the media. Futures markets such as spring wheat, oats and canola are trading lower, which points to an overall bearish response in these markets.
Canada's all-wheat production was pegged at 29.984 million metric tons, down 5.5% from 2016 but more than 2.8 mmt higher than the previous estimate released in October. This volume is higher than the highest pre-report estimate reported by media at 29.5 mmt, while the average pre-report estimate was looking for an estimate of 28 mmt.
Given that durum production fell within the range of pre-report estimates, the surprise largely resulted in higher-than-expected spring wheat production. Spring wheat production was estimated at 22.167 mmt, which is 8.4% higher than the 2016 estimate, the highest production in four years. An average yield of 52 bushels per acre compares to the five-year average of 47.3 bpa. Of the spring wheat produced, 86.6% was hard red spring, the highest percentage of the total spring wheat crop in five years and up 5% from 2016.
Spring wheat acres (seeded) are estimated to have increased 397,000 acres year-over-year, with a modest 165,000-acre drop in Manitoba offset by an increase of 85,000 acres in Saskatchewan and a 525,000-acre increase in Alberta. Spring wheat yields across the Prairie Provinces were increased by roughly 6-7 bpa from the past model-based estimates, while Statistics Canada provincial estimates are well above the estimates found in the final crop reports released by both Alberta and Saskatchewan.
At the time of writing, March spring wheat is down 10 cents, a bearish response. Depending on demand, Canada's wheat ending stocks (excluding durum) are poised to increase for the second straight year.
Durum production was estimated 4.962 mmt, down 36% from 2016, but over 660,000 mt higher than the previous model-based estimate and close to the higher end of the range of pre-report estimates. This is due to a 16% drop in seeded acres, largely tied to an 18% or 905,000-acre drop in Saskatchewan. Average yield was estimated at 35.3 bpa, down from the five-year average of 41.8 bpa. The increase in expected production from the September estimates is largely tied to a reconciliation with Saskatchewan's provincial estimates, with the model-based estimate pointing to a provincial average of 29.6 bpa while the provincial average reported by Saskatchewan Agriculture was 36 bpa. Canada's ending durum stocks will still fall year-over-year, but not to the extent seen in previous AAFC estimates.
Canada's canola production is estimated at a record 21.3 mmt, up 8.7% or 1.7 mmt from 2016 and higher than the highest pre-report estimate reported by media. This explains the increasingly bearish sentiment shown by commercial traders given the weakening spreads seen since the summer months. A 13% increase in seeded acres across the country, led by a 1.5 million acre increase in Saskatchewan and a 950,000 acre increase in Alberta were behind the move, while the national average 41 bpa yield is higher than the 37.3 bpa five-year average.
While there are other bearish factors weighing on today's trade, January canola futures fell as much as $5.60/mt lower in early trade but have since pared the loss to $3/mt, while continuing to hold above psychological support at $500/mt. Current demand estimates would suggest that ending 2017/18 stocks are likely to increase for the first time in four years.
Perhaps one of the few, if only, bullish nuggets in today's report is seen in the soybean estimate of 7.717 mmt, which is down from the 8.3 mmt model-based estimate released earlier in the fall and below the lowest of the pre-report estimates of 7.8 mmt. The average yield was pegged at 39.1 bpa, the lowest average yield in eight years, with downward revisions seen in most growing areas since the October report and a steep year-over-year drop in yield reported for Quebec, Manitoba and Saskatchewan. Ending stocks have fallen to minimal levels for the past number of years, while this data would suggest that crop year stocks will remain extremely tight this crop year.
As indicated on the attached graphic, combined canola and soybean production is estimated at 29 mmt for the current crop year, or just 954,400 mt below Statistics Canada's 2017/18 all-wheat production estimate. This is down from a 5.5 mmt spread seen in 2016/17 data, and the tightest spread on record.
Another crop where production was revised lower since September is seen in Canada's corn production estimate. This came in at 14.095 mmt, roughly equal to the average of pre-report estimates. This would be 6.8% or 902,000 mt higher than achieved in 2016, given an overall 7.5% hike in seeded acres. The national average yield came in at 159.7 bpa, up 1 bpa from last year and above the five-year average of 154.4 bpa. Yield potential was revised lower in both Ontario (3.7 bpa) and in Manitoba (6.2 bpa) since the model-based estimates released in October as harvest results fell short of expectations. While ending stocks may not increase as much as expected, stocks could still reach a record level this crop year.
Lentil production was estimated at 2.558 mmt, roughly equal to the average of pre-report estimates while slightly higher than the September model-based estimate. This is down 21.2% from 2016 given a 25% reduction in seeded acres while the average yield was pegged at 1,287 pounds/acre, up from 1,248 lb/acre from last year but below the five-year average of 1,462 lb/acre. This upward revision in production could be viewed as bearish for the lentil market, with significant pulse production forecast for India's Rabi crop that will weigh on Canada's export prospects.
Dry pea production was estimated at 4.112 mmt, down 15% from 2016 given an estimated 3.4% drop in seeded acres and a 12.9% drop in average yield. This results in an upward revision in production from the September model-based estimates while is also higher than the average of analyst's pre-report estimates. Higher-than-expected production in combination with challenges faced in the export markets will lead to a sharp increase in ending stocks to the highest on record, possibly in excess of 1 mmt.
Barley production was estimated at 7.891 mmt, up more than 500,000 mt from the September estimate and slightly higher than the highest pre-report estimate. At the same time, production is down 10.2% from 2016 and the lowest in three years. Given current AAFC supply and demand estimates, barley ending stocks are expected to fall in the 2017/18 crop year but may not fall as much as indicated in the most recent November tables.
Oat production was estimated at 3.724 mmt, up 16.6% from 2016 and very close to the average of pre-report estimates and the September model-based estimate. Ending stocks are expected to increase for Canadian oats in 2017/18 although may not rise as much as indicated in current estimates given the slightly lower production estimate and current pace of exports. This report could be viewed as neutral for oats.
DTN 360 Poll
This week's poll asks your thoughts on the latest Canadian Federation of Independent Business November Business Barometer Index for agriculture that shows a slight improvement in the Ag confidence index but remains close to the lowest index indicated for the 13 business sectors monitored. You can weigh in with your thoughts on this poll, located at the lower right side of the DTN Canada Home Page. Thanks for your input!
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