Canadian non-durum wheat stocks by the end of the crop year could be the smallest since the 1930s as exports and domestic use gobble up available supply.
Statistics Canada’s Dec. 31 stocks report, which was based on producer surveys, supported this view and also supported the agency’s canola production estimate, weakening the view of some private analysts that it had overestimated the crop size.
Statistics Canada pegged Dec. 31 stocks of wheat, excluding durum, at 16.46 million tonnes, down from 21.5 million at the same time in 2014 and the smallest since 2007.
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The agency also provided its assessment of demand to Dec. 31.
Exports in the first five months of the crop year were running 2.6 percent ahead of last year at the same point, and domestic use (mainly feed demand) was running 7.8 percent ahead of last year.
Statistics Canada’s reports give us the actual supply and demand numbers while Agriculture Canada periodically makes forecasts. Agriculture Canada has forecast that wheat stocks, excluding durum, will fall to three million tonnes by the end of the crop year.
That is based on a forecast that exports and domestic use will fall short of last year’s pace. However, demand was running ahead of last year for most of the first half of the year, so it is not a stretch to wonder if Agriculture Canada is too cautious on its forecasts.
The carryout forecast of three million tonnes is already the smallest since the 1930s, and there is a possibility it could get even tighter if exports and domestic use continue to run ahead of last year.
Clearly, Canada is not contributing to the world oversupply of wheat that is weighing down prices.
Canada’s strong wheat export pace has been helped by the weak loonie, which helps exporters undersell American product.
Alas, the small carryout here won’t push wheat futures higher because the market is focused on analytics such as the U.S. Department of Agriculture’s forecast that American wheat carryout stocks will climb to 25.6 million tonnes from 20.5 million the previous year and the International Grains Council’s forecast of major wheat exporter stocks climbing to 71 million tonnes from 63 million tonnes at the end of 2014-15.
However, our tight situation should help improve the basis in farmers’ favour.
Statistics Canada’s Dec. 31 stocks report did not help the market outlook for durum. Stocks at 4.22 million were a little larger than the previous year, and exports are running well behind last year, mostly because of a slow start to the crop year.
The numbers support Agriculture Canada’s forecast that durum carryout will rise to 1.2 million tonnes, up from 982,000 last year.
As for canola, the Dec. 31 numbers for exports, domestic demand and stocks support the estimate of a 17.2 million tonne crop rather than a lower number.
The crop size is not bearish considering the strong pace of exports and domestic demand.
Agriculture Canada has forecast a carryout of 1.75 million tonnes, down from 2.32 million the previous year and three million in 2013-14. This forecast should be easily achievable, and the number might yet need trimming if exports and crush continue at their record pace.
Statistics Canada’s survey of 8,600 Canadian farmers conducted from Jan. 4-14 provided the numbers for on-farm stocks, and the Canadian Grain Commission provides the data on commercial stocks.
The report is certainly not the last word. There is another stocks report for March 31 and a final one for the end of the crop year July 31. This final report often makes adjustments to numbers in previous years.
For example, the larger than expected carryout July 31, 2015, forced an upward revision in the size of the 2014-15 crop to 16.4 million tonnes from 15.6 million.
So there is the possibility that we might yet be under-estimating the size of the canola crop, which might be even larger than 17.2 million tonnes.
