Canada's canola stocks were, in another blow to hopes for world oilseed supplies, thinner than expected ahead of harvest, and far lower than last year, with inventories of wheat tumbling too.

The country's wheat inventories ended July - the close of the grain's 2011-12 marketing year in Canada - at 5.88m tonnes, 18.1% lower  than a year before, Statistics Canada said.

The inventory figure was more than 200,000 tonnes below investors' expectations, and some 110,000 tonnes beneath the forecast by Canada's farm ministry, AAFC.

The decline reflected a drop in supplies of non-durum varieties, for which stocks fell 360,000 tonnes below AAFC forecasts.

'Lowest level since 2004'

For canola, inventories at the close of July were, at 788,000 tonnes, down by nearly two-thirds year on year.

The figure was below the 1m tonnes that investors had expected, and reflected a rush by farmers to sell into prices which, at an average of Can$601 a tonne in 2011-12 according to AAFC, were up more than 40% over the course of two seasons.

"On-farm stocks were down 81% to 225,000 tonnes, the lowest level since 2004," StatsCan said.

Heavy rains 

The canola data represent a further blow to oilseed importers looking to Canada's canola supplies to fill a void left by poor soybean crops.

Farmers in Canada's Prairies agricultural heartland have been reporting increased incidence of canola diseases such as sclerotinia, a fungus, and aster yellows, which is spread by insect pests.

Crop problems appear to have been particularly severe in the north of Saskatchewan province, which received rainfall of 150-200% of normal in the June-to-August period, according to Gail Martell at Martell Crop Projections.

"Early harvesting results indicated yields in the 15-25 bushel-per-acre range for canola and spring wheat.  That compares with 35-55 bushels per acre last year on the same farms," she said.

'Very strong demand' 

Meanwhile, demand for the rapeseed variant has been whetted by, another, disappointing harvest in Europe, with output seen to have dropped in China too, as well as the quest by consumers for alternative oilseeds following drought damage to South American and US soybean crops.

"Demand for feed stuffs, particularly meals of all types, is very strong," the CWB said.

The boarded added that, with the Canadian crop seen coming in below previous expectations, "there is very little chance that [Canadian canola] ending stocks will increase year-on-year" in 2012-13.

Winnpeg's November canola lot, which set a contract high of Can$646.70 a tonne on Wednesday amid rumours of interest from Chinese importers, closed at Can$640.60 a tonne on Friday, a gain of Can$0.60 on the day.