WINNIPEG, Feb. 2 (CNS Canada) – The supply-demand balance sheets for Canada’s wheat, barley, and canola crops will likely see some adjustments following the release of Statistics Canada’s Dec. 31 stocks report on Thursday.
The report will provide a better indication of feed use to date, while also helping confirm the official production estimates.
“The stocks report will confirm the production estimate from December, and provide an idea of the feed usage for wheat and barley,” said Jerry Klassen, manager of the Canadian office of Swiss-based grain trade GAP SA Grains and Produits.
Klassen said the non-durum wheat stocks will be watched especially closely this year, as production was down and exports are running ahead last year’s pace, which could eventually lead to a historically tight carryout. The question now is over how much wheat is going into feed channels.
Relatively strong feed wheat prices in Western Canada are believed to be hindering feed usage, but there are also more cattle on feed, which raises some uncertainty over what the official stock numbers will show.
The milder winter might affect feed usage, added analyst Mike Jubinville, of ProFarmer Canada. He said that while export demand is well reported, the stocks report should help provide a better sense of the domestic demand; especially for cereals.
Canadian all-wheat stocks of 25.6 million tonnes were reported on Dec. 31, 2014. For the current crop year, most industry participants are anticipating a number in the 20 million to 22 million tonne area.
Feed usage will also be important for barley, with the relatively high feed wheat prices likely leading to an increase in barley usage. The weak Canadian dollar has shut out imports of U.S. corn or DDGS, supporting demand for domestic feed barley.
Klassen said the stocks number for barley will help determine the price direction over the remainder of the crop year, with a number below the 5.4 million tonnes available at the same point the previous year deemed supportive.
For canola, feed usage is not a major factor, but the stocks number will still be watched closely as it provides confirmation of the official production estimate.
“It is going to be a very interesting report, simply because there are a lot of people out there who seem to think the StatsCan crop estimate (for canola) was way too high,” said Ken Ball, of PI Financial.
StatsCan said there was 17.2 million tonnes of canola produced.
Ball said traders will look at the stocks report to see how the numbers line up with their own production estimates.
Klassen said if canola Dec. 31 stocks came in at around 12 million tonnes it would confirm the production estimate of 17.2 million. However, if the stocks fall closer to 11 million, it would imply that production was overstated and significantly tighten the supply-demand balance sheet. Canadian canola stocks on Dec, 31, 2014, came in at 12.6 million tonnes.
“Do the big deliveries (this fall and early winter) mean that farmers are running out, or do they mean that they have too much to deliver?” asked local trader Bill Craddock, noting that there were two opinions heading into the report as to what the stocks numbers would say about the canola supply situation.
Jubinville reiterated that sentiment, noting that both canola and wheat are being exported at a fast pace. If the pace continues, it would grind inventories down to very tight levels for both crops, but there are also many other variables at play.
“It’s one small information piece of a thousand piece puzzle,” said Jubinville, adding that the report “will give some indication of how things are progressing on the demand side.”
