Statistics Canada raised its production estimates for most crops across Western Canada in its new production report, released Wednesday, Sep. 19.
Unlike traditional reports that used information gathered from phone surveys, the model-based report was comprised of satellite imagery collected during the month of August. The report has only been in existence for a few years and has yet to garner the same amount of attention as the traditional method.
On August 31, the agency estimated Canada’s canola production in 2018/19 at 19.2 million tonnes, but that number grew to 21 million in the Sep. 19 report.
“I’m shocked,” said Ken Ball of PI Financial in Winnipeg. “I kind of thought with the weather year we had this model might come out on the low end.”
Those thoughts were echoed by other traders in the industry, who thought the difference in the two estimates was extremely large.
“That’s huge, that’s like 10 percent,” said Bill Craddock, a trader who also farms near Winnipeg.
The reaction to the hike in production was somewhat muted as canola dropped around a dollar in the wake of the report.
Most of the analysts said they would be looking closely for the end-of-year numbers to see which report was more accurate.
“The two stories just aren’t the same,” noted Neil Townsend, a senior analyst with FarmLink Marketing Solutions in Winnipeg.
He said the reports from Statistics Canada tended to follow a similar trend, with the survey-based production report initially underwhelming investors. After that the satellite data would come out and exceed its survey-based counterpart, with the final numbers eclipsing them both.
“Nobody knows how seriously to take this thing,” said Ball. “Obviously the model has gone down its own path.”
Most other crops were also hiked with all-wheat growing from an Aug. 31 estimate of 28.9 million tonnes to 31 million under the satellite-based model.
“The wheat number was a little bit negative for the market,” said Keith Ferley of RBC Dominion Securities in Winnipeg.
Both Townsend and Ball agreed the end-of-year numbers for all-wheat could be over 31 million tonnes.
“If the December report comes out and lines up with the model, then Stats Can has a better argument for saying the model is the best way to go,” said Ball.