StatsCan final 2016 crop production estimates

Market Focus

Highlights

  • While media is focused on crop size relative to trade expectations, the trade knows the situation this year is largely about quality
  • Slightly smaller than expected canola production estimate believed to be understated
  • Big wheat crop highlighted by massive durum supply

On Tues. Dec 6, Statistics Canada released its final forecast of the year for 2016 Canadian crop production. Some surprises: wheat and oats bigger than trade expectations, while canola is smaller than expected.

Approximately 25,000 farmers were surveyed between Oct. 21 and Nov. 13, with a significant portion of the Prairie crop (20 per cent) still in the field when the survey was conducted. The first half of the survey period saw little to no harvest progress, while last half (first two weeks of November) is when harvest progress ramped-up. Regardless, what’s out in the field today is amongst the most unharvested crop at this calendar point we have seen in memory.

StatsCan pegged 2016 Canadian wheat production at 31.7 million tonnes (30.5 million tonnes expected and 27.6 last year), while canola at 18.4 million tonnes (19.0 million tonnes expected and 18.4 million tonnes last year).

This StatsCan report appears rather neutral in terms of market influence.

As a stand-alone issue, this StatsCan report appears rather neutral in terms of market influence. Canola crop of 18.4 million tonnes is below trade expectations. Traders feel the number is understated. But the canola market is being driven more these days by the gains in world vegetable oils, led by palm, but also soyoil.

Wheat crop is bigger than expected, led by durum more than hard red spring wheat. While media is focused on crop size relative to trade expectations, the trade knows the situation is largely about quality. Quality is down relative to the norm, though there is enough milling quality spring wheat to fulfil demand this year.

Canadian durum crop of 7.762 million tonnes is a whopper and well above trade ideas of 7.2 million tonnes. Especially unfortunate is durum quality. It’s going to take one to two years to meter through domestic feed channels as export channels for the lower end of the quality spectrum are limited.

Higher quality durum price hasn’t changed much, but demand-air is thinning up there. We anticipate one more demand-reload-pull, but not where No. 3 Canadian Western amber durum price makes new highs. Always a chance higher quality might, but this would be more about blending value.

Barley production rose 6.8 per cent to 8.8 million tonnes in 2016. This growth was attributable to a 12.9 per cent increase in average yield to a record high 73.4 bushels an acre, as the harvested area decreased 5.6 per cent over 2015 levels to 5.5 million acres.

Conversely, Canadian oat farmers reported that production fell 8.2 per cent from 2015 to 3.1 million tonnes. Despite a record high yield of 92.3 bushels an acre (up 8.2 per cent from 2015), the production drop was due to a 15.1 per cent decline in harvested area to 2.2 million acres.

While oat production is down from last year, this number is perhaps 100,000 to 200,000 tonnes bigger than the trade expected. Still, with notable oat supplies stranded in the field, the market for oats is more about what amount of milling quality supply is available rather than total volume.

Wrap

After the brief moment in the sun these reports typically have (15 minutes of fame), it’s back to trying to understand trade flow changes associated with profitable oilseed crush margins, large crop prospects from Australia, South American weather, a splash of China issues and how antagonistic Trump will be with Asia trade, macro-economics, Friday’s USDA report, etc.

Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call
204-654-4290 or visit 
www.pfcanada.com to find out more about his services.

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