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Canada ups wheat, canola estimates, hurting prices

Wheat and rapeseed prices retreated after Canada revealed that its harvests of both this year were far higher than investors had thought, setting records by a distance.

Canada's wheat crop hit 37.5m tonnes, up 38% year on year and 4.5m tonnes more than previously thought, Statistics Canada said.

The result trounced the previous record, of 32.1m tonnes, set 23 years ago.

"Despite a late start to the spring seeding, weather conditions that prevailed up to the end of summer led to higher-than-normal yields, especially in the West," the bureau said.

While investors had expected an upgrade, the consensus was for a figure of 33.8m tonnes, with 35m tonnes the upper end of forecasts.

Rapeseed record

For canola, the rapeseed variant, StatsCan pegged the harvest at 18.0m tonnes, up 2m tonnes from its previous forecast.

The figure was also well above market expectations of a 16.9m-tonne crop, besides the previous record of 14.6m tonnes, set two years ago.

The 30% jump in production, year on year, was "the result of a record average yield of 40.0 bushels per acre, up 42% from 2012, which more than offset a 9.0% decline in harvested area," the office said.

Market reaction

The immediate impact on prices was to send Chicago wheat, the world benchmark, from $6.71 a bushel before the data, comfortably in positive territory, to $6.61 a bushel an hour later, down 0.9% on the day.

In Winnipeg, canola, of which Canada is the world's biggest producer, fell from some Can$485 a tonne to Can$476.60 a tonne for January, the lowest for a spot contract in nearly four months.

"Big production estimates out of Stats Canada across all commodities is offering a bearish influence to today's trade," Benson Quinn Commodities said.

US Commodities said: "The report was seen as bearish for wheat, canola, and oats," for which the harvest forecast was upgraded by more than 600,000 tonnes to 3.89m tonnes.

Australia upgrades

The upgrades represent the second in two days for wheat and canola crops from a major producing country, after Australia's Abares bureau on Tuesday lifted its forecast for domestic crops.

Abares raised by 1.7m tonnes to 26.2m tonnes its estimate of Australia's wheat harvest, the third biggest on record, citing good growing weather in Victoria and, in particular, Western Australia.

Combined with the Canadian revision, that means an extra 6.2m tonnes added to world wheat output.

The Australian canola crop was upgraded by 100,000 tonnes to 3.4m tonnes.

However, separately on Tuesday, the Australian Oilseeds Federation trimmed its forecast for the canola harvest to 3.22m tonnes, with "significant impacts" from frost on New South Wales and Victoria crops offsetting improved hopes for West Australian output.

In New South Wales and Victoria, "a very warm start to spring accelerated plant development, leaving crops more susceptible to weather extremes", the federation said.

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