Constant revisions erode confidence

Statistics Canada is continuing its long-running habit of heavily underestimating the size of the canola crop.

Last week, after reporting its higher-than-expected year-end canola stocks number the agency was forced to bump up its estimate of last year’s canola crop by 1.15 million tonnes to 18.38 million.

The difference between its initial July 2015 estimate of the 2015-16 crop and its final estimate is now five million tonnes or 38 percent.

The constant revisions to previous crops call into question the accuracy of the crop size forecast for the current 2016-17 crop, now pegged at 17 million tonnes.

Upward revisions are no anomaly. The crop has gotten bigger, and in many cases a whole lot bigger, in nine of the last 10 years.

In fact, it has grown by an average of two million tonnes per year between the initial and final estimates over the last decade.

The only time Statistics Canada underestimated production was in 2012-13 when a September plow wind wreaked havoc on canola swaths.

Larry Weber, analyst with Weber Commodities, can’t fathom why it keeps making the same mistake.

“Insanity is doing the same thing over and over again and expecting different results,” he said.

It is understandable that preliminary estimates are not always bang-on accurate, but being off by two million tonnes on a number that is critically important to the canola trade is unacceptable.

“It’s pretty pathetic,” he said. “It’s to the point now where the guys at the USDA (United States Department of Agriculture) are laughing at us.”

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Statistics Canada was contacted for this story but refused to make anyone available for an interview.

Instead, Yves Gilbert, unit head of field crop estimates, sent an email stating that growers tend to be conservative in their responses in the July survey because they have to account for potential future hardships such as flood, hail, frost and disease.

“It is a fact that such weather conditions have occurred many times in past years between July and November,” he said.

By the time the November survey happens farmers know what is in their bins, so that estimate better reflects reality.

The November survey is used in the report issued in December, but has to be revised again if the year end stock number comes in higher than expected.

“Finally, as a result of (the) stocks reconciliation exercise at the end of the crop year, some revisions are needed to (the) previous year’s final crop production,” said Gilbert.

Weber said it is hard to complain about the inaccuracy because consistently underestimating the crop bolsters canola prices for growers.

But farmers he has spoken to say they would rather have accurate public information than constantly second-guessing the statistics.

Statistics Canada’s track record has analysts questioning its 17 million tonne initial production estimate for this year’s crop.

“If you were a betting guy, you’d bet we’re going to be two million tonnes higher but I think it’s too early to tell,” said Weber.

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Derek Squair, president of Agri-Trend Marketing, agrees the canola crop is likely a lot bigger than Statistics Canada is forecasting. The trade expects about 18 million tonnes.

Saskatchewan Agriculture is forecasting an average provincial yield of 38 bushels per acre, up from the previous five-year average of 33.4.

Alberta Agriculture is estimating 42.3 bushels per acre, up from the average of 37.7.

Manitoba Agriculture does not provide a provincial average estimate.

So it appears that a big crop is on the way, adding to the carryout. Statistics Canada says the carryout was two million tonnes, which is well beyond what analysts had anticipated.

“We’re kind of scratching our heads on the number,” said Squair.

“We can’t really make a whole lot of sense of it.”

He believes carryout was closer to 850,000 tonnes. But even if the carryout is as high as Statistics Canada is saying and the production is north of 18 million tonnes, it will not be a burdensome supply of canola because demand is expected to be strong.

“If we have the high end of both of those numbers we will still move it all,” said Squair.

Weber said canola will benefit from strong global soybean demand as well.

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“Thankfully demand for soybeans is going to keep canola prices at or above $10 a bushel,” he said.