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Canada's 2017 wheat output to stay high - canola crop to test record

Canada's wheat production will remain elevated this year, while canola production will come within an ace of a record high yet still leave the country with only "pipeline supplies" of the oilseed, officials said.

Canada's farm ministry, AAFC, in its first forecasts for 2017-18, estimated the country's wheat harvest at 29.1m tonnes a drop of 2.6m tonnes year on year but a figure which would nonetheless rank as the fourth biggest in 20 years.

The harvest of durum wheat, the type used to make pasta, will plunge by 25% to 5.8m tonnes as the impact of a 15% drop in area, "due to large carry-in stocks is compounded by a return to trend yields" from the record results achieved in 2016.

However, the decline will be offset in part by growth in spring wheat sowings, wchih account for the majority of Canada's crop, and are seen rising by 6% as a "result of low carry-in stocks, a shift out of winter wheat and durum, and increased interest in growing high yielding varieties", AAFC said.

A harvest at the forecast level will allow Canadian wheat exports, including durum, of 21.3m tonnes in 2017-18 a marginal rise year on year, and a result which would also rank as the fourth largest in the past two decades.

'Attractive returns'

For canola, meanwhile, sowings will rise by 258,000 hectares to 8.50m hectares, "as returns remain attractive compared to other field crops", AAFC said, stressing the short-term support to values from weakened palm oil supplies.

Forecasts for Canadian crop sowings, 2017 and (year-on-year change)

Durum: 2.13m hectares, (-15.0%)

All-wheat (incl durum): 9.33m hectares, (-1.0%)

Canola: 8.50m hectares, (+3.1%)

Barley: 2.50m hectares, (-3.3%)

Soybeans: 2.435m hectares, (+10.0%)

Corn: 1.325m hectares, (-1.5%)

Oats: 1.225m hectares, (+6.8%)

Source: AAFC

"World consumption of palm oil is expected to exceed production into the spring of 2017, leading to a tightening of world vegetable oil supplies, demand rationing and higher prices of Canadian canola."

Canola, when processed, yields high levels of vegetable oil in proportion to meal, tending to make it more responsive than soybeans a meal-heavy oilseed - to the palm oil market.

The rise in sowings will see Canada's canola output to rise by 76,000 tonnes to 18.5m tonnes a result second only to the 18.6m tonnes produced in 2013.

'Strong world demand'

A harvest at this level would allow exports to remain unchanged at 9.50m tonnes next season, "on strong world demand", with buoyant domestic use and the need to maintain carryout inventories at 2.0m tonnes, equivalent to a stocks-to-use ratio of 11%, curbing the potential for further shipments.

"This level of carry-out is considered to be the minimum 'pipeline' level necessary to service demand prior to the next year's harvest," AAFC said.

Canola prices, as measured in Vancouver, are expected "to ease slightly" in 2017-18 to Can$490-530 a tonne, from the Can$500-540 a tonne forecast for this season, with the drop "in line with an expected decline in world palm oil and soyoil prices".

'Situation is positive'

Among other crops, Canada's soybean harvest was seen hitting a fresh record high of 6.80m tonnes, supported by a rise of 220,000 hectares to 2.44m hectares in plantings, "due to relatively attractive returns compared to alternate crops".

Forecasts for Canadian crop output, 2017 and (year-on-year change)

Durum: 5.80 tonnes, (-25%)

All-wheat (incl durum): 29.10m tonnes, (-8.3%)

Canola: 18.50m tonnes, (+0.4%)

Barley: 8.0m tonnes, (-83%)

Soybeans: 6.80m tonnes, (+5.2%)

Corn: 12.85m tonnes, (-2.6%)

Oats: 3.30m tonnes, (+4.9%)

Source: AAFC

Plantings at that level would overtake those of durum, and come within 70,000 hectares of area expected to be seeded with barley.

Oats sowing are also seen rising, by 80,000 hectares to 1.23m hectares, "due to higher oat prices which have contributed to very competitive new crop pricing versus other cropping choices.

Still, with US plantings down, it look like North America's oats supply will "tighten for 2017-18".

Indeed, for next season "the situation for Canada is positive, with better pricing and a high level of oat grain and product export movement to the US to 2016-17 and the highest since the 2007-08 crop year", AAFC said.

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