Canada nudges higher canola, wheat crop estimates

Tightness in world rapeseed markets means a record harvest will limit the build-up to Canada's inventories from a strong harvest, but the same cannot be said for wheat, farm officials said.

Canada's farm ministry, AAFC, raised its estimates for domestic grains and oilseeds harvests beyond even the levels unveiled by Statistics Canada last month, reflecting the inclusion of some outlying regions.

AAFC lifted its estimate for the wheat harvest by 1.5m tonnes to 30.7m tonnes, and for production of canola, the rapeseed variant, by 180,000 tonnes to 14.8m tonnes.

"Crop development progressed well after a period of above-normal temperatures and average-to-excessive moisture," the ministry said, amid reports of strong harvest yields.

Export demand

However, the ministry kept at 700,000 tonnes its forecast for domestic canola stocks at the close of 2013-14, reflecting expectations of strong demand for exports, which were seen rising 7.4% to 7.80m tonnes during the season.

The revision tallies with an observation from Abares of tight world rapeseed inventories, which the Australian commodities bureau forecast would lead to a recovery in prices in the first half of 2014.

AAFC kept its estimated for domestic canola prices at Can$540-580 a tonne for 2013-14, compared with the Can$494.00 a tonne at which benchmark futures, for November delivery, were trading at in Winnipeg on Thursday.

Stocks rise, prices fall

Canada faces a tougher battle to encourage consumption of its wheat crop, upgraded by 1.5m tonnes to 30.7m tonnes, with the AAFC taking a slightly dimmer view of Canadian exports in 2013-14 than some other commentators.

AAFC pegged shipments at 19.85m tonnes, a 19-year high but below the 20.5m tonnes that the US Department of Agriculture pencilled in last week in its much-watched Wasde crop report.

AAFC's estimate for wheat stocks at the close of 2013-14 was higher too, at a three-year high of 7.1m tonnes, with inventories of non-durum varieties facing a particular rebuild, with "carry-out stocks forecast to increase by 51% to 5.9m tonnes".

"Canadian wheat prices are forecast to decrease from 2012-13 due to higher world and Canadian supply," the ministry added, trimming its estimate for prices this season by Can$10 a tonne to Can$265-290 a tonne for durum, and Can$235-265 a tonne for other varieties.

Price underperformance

The comments come amid a growing market expectations of a strong Canadian wheat harvest, particularly of spring wheat which makes up the bulk of nation's crop.

The Prairies, responsible for some 90% of Canadian wheat output, will see hard red spring wheat production rise 17% to 17.9m tonnes, with soft white spring wheat up 50% at 1.8m tonnes, AAFC said.

The results have helped depress hard red spring wheat prices, which have fallen more than 5% in the Minneapolis futures exchange over the past month, compared with a 1% drop in Chicago soft red winter wheat, the world benchmark.

"Spring wheat cash premiums remain under considerable pressure as the Pacific North West [ports] and mills have secured coverage," Brian Henry at Minneapolis-based broker Benson Quinn Commodities said.

"Canadian offers are more prevalent."

Quality factor

However, the Canadian crop too has suffered some of the protein shortfalls also noted in US spring wheat.

The Canadian Wheat Board said last week that the "Western Canadian harvest is about half-way complete with above average yields, below average protein and an average grade pattern so far.

"Protein premiums and discounts have already begun to widen," the board said, highlighting the concerns over a squeeze on quality supplies also flagged by the likes of the USDA and Abares.

In the US, the hard red spring wheat harvest has come in with an average protein level of 13.7%, with about 25% of samples yet to be analysed, US Wheat Associates said.

Last year, the protein level ended up at 14.6%.

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