An increase in expected production may have been expected, as discussed in Monday’s Canada Market Blogs, while Wednesday’s release included production estimates for crops such as wheat, durum and canola that were close to the upper-end of the range of pre-report trade estimates reported by media and released in late August ahead of the first survey-based results release.
To further cloud signals sent from Canada to the world, Agriculture and Agri-Food Canada released updated supply and demand estimates earlier in the week, with tables including the July estimates reported on August 31 and the July 31 stocks estimates released by Statistics Canada on September 6. A perfect example — this week, AAFC reduced their canola ending stocks estimate by 1 mmt to 1.250 mmt for 2018/19. Following Wednesday’s report, they may find themselves adding 1.8 mmt to 2018 production while hiking 2018/19 stocks estimate. This whipsaw in data will be viewed as a head-scratcher on both the supply and demand side. The canola market seems confused, closing lower on Tuesday despite a downward revision in estimated ending stocks while nearby contracts closed higher on Wednesday despite an upward revision in estimated production.
In total, estimated output from the 17 crops monitored increased by 7.618 mmt in Wednesday’s estimates. All-wheat production was increased by 2.032 mmt to 31 mmt, with a 1.351 mmt increase seen in spring wheat to 22.9 mmt and a 672,000 mt increase seen in durum to an estimate of 5.7 mmt. Estimated canola production is pegged at 20.999 mmt, up 1.837 mmt from the previous report and only modestly lower than estimated for 2017.
As noted with canola, estimated corn production is also facing wild swings. In August, AAFC supply and demand tables estimated Canada’s corn production at 14.3 mmt, revised it to 13.789 mmt on Monday of this week while Wednesday’s September estimate was released at a record 14.461 mmt. The most recent findings may be in line with a recent crop tour of Ontario that pointed to record potential. If achieved, this year’s corn crop would be 7% or close to 1 mmt higher than the five-year average.
In some respects, 2017 conditions on the Prairies were similar to 2018, with dry conditions in the southern Prairies offset by more favorable conditions in northern growing areas. For what it is worth, production prospects showed improvement in the September estimates when compared to the earlier July estimates in 2017 while production estimates were revised higher yet for most crops in the final December estimates.
Discussion surrounding the wide range of estimates will remain ongoing. One producer immediately called to vent frustration following the report, given the mixed signals shown by government over the past two days. Dow Jones quoted Neil Townsend from Farmlink Marketing Solutions in Winnipeg, stating, “The Statistics Canada reports tend to follow a similar trend, with survey-based production reports initially underwhelming investors. After that the satellite data would come out and exceed its survey-based counterpart, with the final numbers eclipsing both.” Indeed, this has been the findings in past Canada Markets Blogs on this subject, while proof may be once again found in the December data, which may clear the air over which report is best or prolong the confusion.
