(Resource News International) — Statistics Canada on Thursday released its latest crop production survey, with a few numbers that caught market participants by surprise.
While most market participants were anticipating an increase in the December report from the October numbers, the figures for canola and all wheat generally came in above expectations. The estimates for oats were below pre-report guesses.
Statistics Canada pegged 2009-10 canola output at 11.825 million tonnes. This compared with pre-report projections that ranged from 10.5 million to 11.8 million tonnes and the previous estimate of 10.269 million. Canola output in 2008-09 totalled 12.642 million tons.
Read Also
Entomologist tests trap crops and marigolds to repel flea beetles at an Ag in Motion
An Agriculture Canada entomologist is experimenting with trap crops and marigolds at an Ag in Motion demonstration cropplot
“If the canola number is true, ending stocks of the commodity are going to be in excess of two million tonnes,” said Ken Ball, a broker with Union Securities Ltd. in Winnipeg.
Ball felt the production number for canola was overstated and did not take into account the extremely poor yields of canola that plagued Alberta due to the extremely bad growing season.
The yield potential in Alberta was indeed very poor, said Mike Jubinville, an analyst with ProFarmer Canada in Winnipeg. However, the production figure for canola was amplified by the fact record yields were achieved in both Saskatchewan and Manitoba.
Jerry Klassen, an independent analyst and futures trader, warned that canola carryover in 2009-10 could hit a record three million tonnes if demand for the commodity does not arise from China based on the production numbers released by the government agency.
“I think the yields for canola are also being overstated,” said Ron Frost, an analyst with the Frost Forecasting Corp., of Calgary.
A lot of the canola harvest was conducted under wet conditions, he noted, and once the product has been dried and both shrinkage and spoilage have been accounted for, the production number for the commodity may actually be closer to 11 million or at most 11.25 million tonnes.
An export source, who did not want to be identified, said the canola number from Statistics Canada was likely to be overshadowed by rumours of fresh Chinese demand.
The exporter said there was a vessel loading Canadian canola that appeared to be destined for China, and if this was indeed the situation, it could mean that China is close to resuming Canadian canola imports.
“Above expectations”
StatsCan estimated 2009-10 all-wheat output at 26.515 million tonnes. Pre-report projections had anticipated production to be in the 24.9 million- to 25.5 million-tonne range. All-wheat output in the previous StatsCan report was 24.58 million while in 2008-09 all wheat output totalled 28.611 million tonnes.
“There was definitely more wheat around than anticipated, with yields for spring wheat and durum coming in above expectations,” Jubinville said.
The market had anticipated higher durum yields, he said, but the bigger surprise was the jump in spring wheat yields.
“This jump in spring wheat and durum yields could add as much as two million tonnes to the carryout estimate for all wheat,” Jubinville said.
The all-wheat production figure definitely had bearish implications, coming in at least a million tonnes above expectations, Klassen confirmed. The figure was also above the expectations of the Canadian Wheat Board, he said.
“Canada’s all-wheat protein content may be only average, but the quality of the crop was above expectations,” Klassen noted.
Both Klassen and Jubinville felt producers in Western Canada will be holding onto a lot of wheat into the 2010-11 crop year.
“May be adjusted”
Canada’s oats output in 2009-10 was pegged by StatsCan at 2.798 million tonnes, which was below pre-report projections that ranged from three million to 3.4 million tonnes. Oats output in the previous report had been pegged at 2.899 million tonnes while in 2008-09 production was 4.272 million.
“There is no doubt in my mind that the oat figures from the government agency was surprising and may be adjusted upwards in future reports,” Ball said.
“Most participants were not expecting a drop in the oats output estimate, given the indications from the producers that yields were better than expected,” Jubinville said.
If the oats number is as small as the government agency claims, then the longer-term price outlook for the crop will be improved significantly, he said.
“There will be a need for the industry to work through the large carryover supply of oats from the 2008-09 season, but once that has happened, stocks of the commodity are going to tighten quickly.”
Because of the tight supply situation, oat prices in the cash market were seen holding steady and possibly firming in the near future, Jubinville said.
Mainly neutral
As for the production estimates for barley, flaxseed and peas, the industry analysts called the numbers mainly neutral.
StatsCan pegged 2009-10 barley output at 9.517 million tonnes, which was in line with pre-report expectations that ranged from 9.16 to 9.6 million tonnes and compares with the previous projection of 9.164 million. Barley output in 2008-09 totalled 11.781 million tonnes.
Pea output in Canada was pegged at 3.379 million tonnes. Pre-report projections ranged from 3.1 million to 3.2 million while the previous report from the government agency had placed the crop at 3.161 million tonnes. Output of peas in 2008-09 totalled 3.571 million.
Canada’s flaxseed production in 2009-10 was placed at 930,000 tonnes. Pre-report estimates ranged from 960,000 to 1.1 million tonnes. The previous report had pegged flaxseed output at 964,000 tons while in 2008-09 production was 861,000.
