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Canada trims wheat price hopes - but lifts forecast for canola values

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Canada trimmed its wheat price hopes, as it upgraded its harvest forecast by 1.30m tonnes - but nudged higher hopes for canola prices, after a faster-than-expected export pace.

 

AAFC, Canada’s farm ministry, reduced by Can$5 per tonne to Can$210-240 per tonne its forecast for average wheat prices, as measured in Saskatchewan, for 2020-21 leaving the estimate in line with the Can$225 per tonne achieved last season.

 

For durum, the average Saskatchewan price this season was trimmed by Can$5 per tonne to Can$245-275 per tonne, “forecast to decrease by 4% from 2019-20 due to the higher Canadian supply”.

 

Indeed, AAFC hiked by 500,000 tonnes to a four-year high of 6.50m tonnes its forecast for production of durum this year, helping lift the estimate for the overall wheat harvest to 34.90m tonnes - a result second only to the record 37.59m-tonne crop reaped seven years ago.

 

‘Improved condition’

 

The production upgrades reflected increased estimates for harvest yields, “due to improved crop conditions”.

 

The major Prairies growing province of Alberta, for instance, reported in its latest crop report, as of August 11, that 80% of its spring wheat was in “good” or “excellent” condition, and 87% of durum.

 

Overall, “77% of crops in Alberta are in good or excellent condition, compared to the five-year average of 59%”, the province’s ag department said.

 

In Saskatchewan, the top producing province, the last condition ratings, as of July 27, came in at 84% for spring wheat and 74% for durum, compared with figures of 73% and 59% respectively a year before.

 

The raised production would see Canada’s all-wheat stocks end 2020-21 at 6.70m tonnes, up 1.40m tonnes year on year, and an upgrade of 300,000 tonnes from last month’s estimate.

 

Canola stocks downgrade

However, for canola, the estimate Canada’s inventories as of the close of 2020-21 was slashed by 675,000 tonnes to a four-year low 1.68m tonnes.

 

The downgrade reflected weaker carry-in stocks, after 2019-20 exports, at 10.12m tonnes, were seen coming in more than 500,000 tonnes ahead of previous expectations.

 

The estimate for the domestic canola crush in 2019-20, at 10.0m tonnes, was raised by 750,000 tonnes.

 

‘Usage accelerated’

AAFC put the changes down in part to weaker fuel demand prompted by Covid-19, which loosened the grip of the energy sector on Canada’s constrained rail infrastructure, and by the recovery in vegetable oil demand evident too in the revived prices of palm oil and soyoil.

 

Canola and rapeseed - which give relatively high levels of oil, rather than meal, when crushed – are particularly sensitive to vegetable oil markets.

 

“After a slow start to the crop year, usage accelerated during the second half of the crop year on strong world demand for vegetable oils and relaxed constraints on rail movement of grains due to the drop off in shipments of non-agricultural commodities,” the ministry said.

 

The forecast for Canada’s canola prices in 2020-21 was raised by Can$10 per tonne to Can$490-530 per tonne, taking it clear of the 10-year low of Can$484 per tonne recorded last season.

 

Record lentil exports

AAFC also made a significant cut to its forecast for Canadian lentil stocks, by 75,000 tonnes for both last season and 2020-21, reflecting a surge in exports in 2019-20 to 2.65m tonnes.

 

That was up by more than 600,000 tonnes year on year, and by 250,000 tonnes from the ministry’s estimate last month.

 

“Lentil exports rose to a record 2.65m tonnes, up 30% from the previous year,” AAFC said, noting that the overall figure comprised 1.8m tonnes of red lentils and 850,000 tonnes of green lentils.

 

“The main markets were India, the United Arab Emirates, Bangladesh and Turkey.”

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