Huge carryout from the 2013 crop, once viewed as burdensome, is now seen as a blessing.
Excess supplies from the 2013 crop will help offset quality problems with the new crop and keep export customers happy during a seriously delayed harvest, say analysts.
“It’s nice to have that cushion,” said Bruce Burnett, the CWB’s weather and crops specialist.
Statistics Canada released its estimate last week of stocks of principal field crops as of July 31. The numbers for the major crops were well below trade estimates but still ample in comparison to previous years.
There were concerns the excess supply from the 2013 harvest would further weigh down prices and add to post-harvest pressure on the rail system but with problems caused by delayed seeding, disease and late-season rains it has become a welcome relief.
Statistics Canada estimates 9.8 million tonnes of wheat carryover, which is almost double what was on hand a year ago. That was below trade estimates ranging from 10.5 to 12.3 million tonnes.
Canola stocks were pegged at 2.36 million tonnes, which is a 300 percent increase over 2013 levels. Analysts had forecast anywhere from 2.3 to 3.85 million tonnes.
Brian Voth, senior market coach with Agri-Trend Marketing, said the government’s canola ending stocks estimate was about 300,000 tonnes below average trade expectations and the wheat number was one million tonnes smaller than anticipated.
“One thing that shows, which we’ve been saying for quite a while, is that last year’s crop was overstated,” he said.
Voth also noted the increase came primarily from on-farm stocks.
“That kind of shows a little bit that it was the farms that were bearing the brunt of the extra grain,” he said.
Prices for most grains have tanked but farmers holding good quality crop from 2013 may be able to make up some of that lost ground through quality premiums offered in 2014-15.
Voth suspects that most of the carry-out is in the hands of growers in northern Saskatchewan and northern Alberta.
Bins in the southern Prairies are empty by comparison.
Burnett suspects the government numbers came in below trade expectations due to a combination of Statistics Canada overestimating 2013 production and from increased residual use of crops through factors like feed and spoilage.
A lot of wheat had to be stored in piles on the ground and other undesirable locations, which led to losses.
That is likely not the case for canola because it is such a high-value crop. So for the oilseed the explanation is probably overestimated production from a year ago.
Plugging the lower-than-anticipated ending stocks numbers into supply and demand (S&D) estimates results in 2014-15 carryout forecasts that are within the range of normal for most crops.
“The canola and probably the barley S&D’s are tightening up reasonable significantly for 2014-15 because of this,” said Burnett.
He is thankful there was 9.8 million tonnes of wheat carryout in the system as of July 31. Last year’s wheat crop wasn’t high in protein but it had other desirable milling characteristics.
The old crop wheat can be blended with new crop supplies to improve grades depending on what the downgrading factors will be this year.
And it can be used to continue filling export orders while grain companies sort out the quality problems with the 2014 crop and await new supplies from a late harvest.
“You can still maintain a reasonably strong export program,” said Burnett.
“In a lot of years by the middle of September you do have a fairly good availability of new crop supplies and this year we probably have very little new crop supplies available for export.”
Greg Simpson, chief executive officer of Simpson Seeds, one of Saskatchewan’s largest lentil processing firms, predicted at last winter’s Grainworld market outlook conference that growers may be thankful for all the grain in their bins by the time the 2014 harvest arrived.
“It turned out to be a little bit prophetic,” he said with a laugh.
“It’s definitely a blessing that we had the large crop from last year.”
His firm was still processing old crop lentils in September.
“That will come to an end here abruptly because the guys that have anything left are now thinking, ‘Now I want to hold onto that,’” said Simpson.
Price premiums should materialize for a wide variety of crops but growers shouldn’t hold out forever be-cause if the price gets too high buyers will lower their standards and turn their attention to working with poorer quality material, he said.