Canada will carryover more grain than usual when the crop year ends July 31, but analysts say it may be less than some people think.

That mountain of Western grain created from a record harvest last fall, combined with poor rail service until spring, is being whittled away. In its July Outlook for Principle Crops Agriculture and Agri-Food Canada (AAFC) forecasts 21.6 million tonnes of principle crops will be carried over, more than double last year’s 9.5 million tonnes.

That’s big, but it’s two million tonnes or 8.5 per cent lower than its March estimate, probably because the railways started moving a lot more grain in March. That’s when the federal government ordered them to pick up the pace, but also when weather conditions started to improve.

Anecdotal reports say Manitoba farmers have little grain left in their bins, leading to speculation carryover stocks will be lower than earlier forecasts suggested.

“We could be surprised on the smaller commodities, but not likely on the wheat and canola,” Bruce Burnett, CWB’s weather and crop specialist said in an interview July 23.
“We’ve started to move more grain, but there’s still a pretty large pile.”
AAFC is forecasting 8.9 million million tonnes of wheat, excluding durum and three million tonnes of canola will be carried into the 2014-15 crop year. That’s down six and 10 per cent from its March forecast.
“A lot of grain is moving now,” said Wade Sobkowich, executive director of the Western Grain Elevator Association. “Thunder Bay is humming and Vancouver and Prince Rupert are operating at historic levels.”

Statistics Canada’s reported July 24 grain deliveries between January and June 2014 are up 27 per cent compared to the same period a year ago. But the big difference between the two years started this March. January and February 2014 deliveries were almost 7.6 and 12 per cent lower than in 2013, but 2014 March, April, May and June deliveries were 34, 68, 52 and 53 per cent higher than in 2013.

Grain shipping is expected to remain brisk even after the new crop, said Mike Jubinville, president of Pro Farmer Canada. Harvest in many parts of the West will be delayed, which means more elevator space for old crop deliveries and more time for farmers to deliver.

“Manitoba and Alberta are drained of grain, but there is still a surplus in Saskatchewan,” he said.

Burnett agrees there’s still a lot of grain in Saskatchewan partly because it’s the biggest grain-producing province. But there’s another factor. When the government ordered the railways to collectively move a million tonnes of grain a week or face fines of $100,000 a day, the railways focused on loading at elevators with the quickest turn around, he said.

Most of those points were in Alberta for West Coast movement and Manitoba for Thunder Bay. But there are also regional pockets of surplus grain, such as in northern Alberta and durum in southern Saskatchewan, Burnett said.

A lot of southern Manitoba farmers, frustrated by the wide basis (difference between elevator and futures prices), shipped their grain to the United States. Even more would have gone had their been more trucks available, Jubinville said. Some grain went out in producer cars from shortline railways.

Statistic Canada data shows Canadian wheat and durum exports to the U.S. as of June 30, 2014) at 3.3 million tonnes , up 47 per cent from the same period a year ago.
Mark Hemmes, president of Quorum Corporation, the firm hired by the federal government to monitor Western grain transportation estimates that could work out to five million tonnes for the crop year.

That would leave a Western Canadian all-grain carryover of 15 million tonnes — close to double the average 7.9 million tonnes, but well under earlier forecasts of 23 million tonnes or more.
Whether Manitoba farmers continue to export wheat south or go back to dealing with local elevators will depend on local versus American prices.

During the first year of the open market for wheat starting Aug. 1, 2012 the two markets arbitraged, Jubinville said. But this crop year the delay in shipping forced Canadian elevators to widen their basis to discourage deliveries to a plugged elevators.
Even with extra trucking costs many Manitoba farmers earned more shipping south.
As for carryover projections, Jubinville said they could continue to shrink.
“I think canola exports could be the biggest in history at nine million tonnes, despite the slow start,” he said. “I suspect the carryover could be 2.2 million to 2.5 million tonnes versus the three million projected by Agriculture Canada.”

The narrowing canola basis for both new and old crop supports the idea that canola supplies are tightening, he added. In some parts of Manitoba and Alberta the canola basis is positive.
While the wheat basis has improved, it’s still generally wider than usual, but it varies — a sign that some areas still have a lot of wheat around, Jubinville said. For example, the basis at Fannystelle, Man. July 22 was $32 under the futures, compared to $51 under at a point in Saskatchewan.

Earlier this year market analysts were predicting the grain backlog to persist well into the new crop year based on a huge carryover and an average yielding crop this year.

But AAFC has revised its 2014-15 carryover forecast too. In March it predicted the carryover of all crops would total 20.1 million tonnes as of July 31, 2015. But its July report dropped the number almost in half to 12.3 — just 2.4 million tonnes over the 2013 carryover. That forecast assumes average yields this fall.