Huge Canadian canola crop beats expectations

CNS Canada — An upward revision to Canada’s 2015-16 canola crop was widely anticipated in the industry, but Statistics Canada’s latest survey results have surpassed even the most optimistic forecasts — and will lead to major adjustments in the country’s supply/demand balance sheet.

StatsCan on Friday pegged the year’s canola production at 17.2 million tonnes, nearly three million above the previous October estimate and well above average trade guesses that had hovered around 15.5 million. Canada grew 16.4 million tonnes of canola in 2014-15.

“It’s a shocker,” said Ken Ball of PI Financial in Winnipeg on the larger than expected canola production.

“It’s a game-changer in a way… and carryout estimates will be going up, but demand estimates will also go up,” said Ball. Canola was attractively priced for end users, he said, with the futures only showing modest weakness in immediate reaction to the numbers.

“Ultimately, I think we can gobble this up,” added Mike Jubinville of ProFarmer Canada. He said projected exports could easily increase by half a million tonnes, while the domestic crush also has room to grow by a similar amount.

The big supplies won’t necessarily result in canola prices falling to new lows, he added, but they may keep the market rangebound and sluggish for a longer period.

“It was definitely a surprising number for canola,” said Jon Driedger of FarmLink Marketing Solutions. However, he was also of the opinion that a home would be found for most of the extra production, “as long as we stay competitively priced.”

Most other crops also saw upward revisions from October, although the increases were less dramatic than canola.

Canada’s all-wheat production is now forecast at 27.6 million tonnes, up from the 26.1 million tonnes forecast in October, but still below the previous year’s level of 29.4 million. Of that total, durum production was pegged at 5.4 million tonnes, which was up by 700,000 tonnes from an earlier estimate and also above the 5.2 million-tonne crop grown in 2014.

Jubinville said the all-wheat number doesn’t do much to change the larger picture for spring wheat, but durum could come under pressure.

Barley production, at 8.2 million tonnes, was also above trade guesses and compares with the 7.1 million-tonne crop grown the previous year.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

Table: A quick summary of Statistics Canada crop production estimates for 2015-16, released Dec. 4, 2015. Pre-report estimates included for comparison. Production in millions of metric tonnes. Source: Statistics Canada.