Statistics Canada Booming export and domestic demand needed to avoid big stocks buildup
Regardless of what Statistics Canada finds in its Dec. 4 final crop production report for 2013, analysts, traders and commercial canola users are already using huge numbers for the true size of the crop.
“I think most people have 17 as a first digit and some are even using 18,” said Greg Kostal of Kostal Consulting, referring to the millions of tonnes of Canadian canola the trade believes was produced this year.
“(The Statistics Canada number) should get bigger than the previous number, but it’s still unlikely to reveal the biggest number of the year.”
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Analysts contacted by The Western Producer said the true size of the 2013-14 canola crop probably ranges from 16.5 million tonnes to more than 18 million. The September StatsCan estimate was 15.96 million tonnes.
Analysts also expect StatsCan to raise wheat and other crop totals, with most crops having benefitted from bigger yields than expected at the end of summer when StatsCan did its last survey.
The Dec. 4 numbers, derived through a November survey, almost certainly reflect better-than-previously-expected yields for most crops in most areas, analysts said.
The StatsCan canola number — the most watched crop because of Canada’s dominant position as a canola exporter — is expected to underestimate the 16.5 million to 18 million-plus tonnes range because the November crop production report has a history of under reporting the ultimate size of the crop.
“They’ll probably be around 16.1 (million tonnes),” said Errol Anderson of Pro Market.
“The trade is thinking that there’s 16.5 (million) or more.”
Brian Voth of Agri-Trend Marketing said his firm believes the crop is at least 17 million tonnes. Jon Driedger of FarmLink Marketing Solutions said 17.6 million tonnes is the estimate he is using.
The huge crop will require the prairie grain elevator and rail system to work at high velocity to clear supplies from Western Canada. The analysts expect exports and domestic demand will be inadequate to avoid a year-end stocks build up that will burden the new crop year market.
An even more important number than the exact size of the 2013-14 crop is the crop flow through the handlng system, a number of analysts said, because that will determine how much is left at the end of the year. Ending stocks are the primary relative price determinant for crops.
A fast clearance of crop would allow these big stockpiles to be drawn down while slow movement through the winter would leave large carry into the 2014-15 crop year.
“If you add 600,000, 700,000 tonnes (to canola production), you nudge that two million tonne mark (for canola ending stocks, from the present official expectation of 1.4 million) with assumed canola shipments,” said Ken Ball of P.I. Financial.
“We’ve only had carryouts that big once before in history.”
Agriculture Canada, using StatsCan’s September production estimates, already forsees heavy ending stocks.
“Carry-out stocks are expected to increase significantly to exceed the 10 year average,” the department’s Outlook for Principal Field Crops said Nov. 20.
Durum year end stocks would increase by 22 percent, wheat stocks by 79 percent and oats by 27 percent using the already outdated September StatsCan estimates, according to Agriculture Canada analysis.
Canola ending stocks would more than double if the September production estimate and projected demand applied for the winter.
That’s why analysts are watching crop movement statistics so closely. Speedy movement is the only way of mitigating the bearish year-end stocks assumptions in the Agriculture Canada outlook.
And so far, that movement is not enough to clear enough crop in time to eliminate the threat of burdensome ending stocks.
“I don’t get caught up on whether the (canola crop) number is 17 (million) or 18, because the end result doesn’t really change,” said Kostal.
“We’re just not moving canola fast enough.”
