Grain and oilseed market analysts at Agriculture and Agri-Food Canada expect plentiful world grain supplies to pressure prices but a weaker Canadian dollar could provide some support to prices in Canada. The analysts released their Situation and Outlook Report for Principal Field Crops in Canada on May 16.
According to the report, Canadian production of all field crops in 2013-14 is estimated at 96.6 million tonnes (Mt), about 25% higher than the previous year. Production of grains and oilseeds increased to 90.1 Mt, 27% higher than the previous year, and production of pulses and special crops increased to 6.5 Mt, 14% higher than the previous year.
The increased supply has generally supported significantly higher exports and domestic use, although the relatively cold winter resulted in significant transportation, storage, and marketing issues this crop year. Due to the record supplies and lower international prices, grain prices in Canada are expected to average 10-30% lower than the 2012-13 crop year.
For 2014-15, carry-in stocks from the 2013 crop will be a major concern. The Statistics Canada seeding intentions report indicated the total area seeded in Canada is expected to increase slightly due to lower area left in summer fallow.
For grains and oilseeds, due to lower production, supply is forecast to decrease by about 3%, while exports are expected to increase significantly and domestic use increases marginally. As a result, carry-out stocks are expected to decrease by 23% to 16.9 Mt, only slightly higher than the average of the previous 10 years which was 14 Mt.
In general, abundant world grain supplies are expected to continue to pressure world prices, but the weak Canadian dollar, which is anticipated to remain at a 10-15% discount to the US dollar, is expected to provide some support to prices in Canada. In general, average grain prices in Canada are forecast to be similar to, or slightly lower than, prices for crop year 2013-14.
For 2013-14, exports are forecast to decrease by 31% from the record high in 2013-13 due to the recovery in US and world corn production. Imports are forecast to increase 6% due to early season logistic problems but remain well below the previous five and 10-year averages. Total domestic use is forecast to increase by 3% following trend increases in livestock feeding and industrial demand. Carryout stocks are forecast to increase sharply to a new record level of 3.1 Mt. The Chatham in-store elevator price is forecast to decrease with the large North American, world corn crop and the decline in US and world corn prices.
Strong US domestic use and export volumes has allowed old crop US corn futures to gain nearly US$1.00/bushel since the beginning of the calendar year. For 2013-14, when compared to the previous three crop years, Canadian corn prices remain below average and have contributed to good export volumes despite being lower than the record high set in 2012-13 of 1.7 Mt.
For 2014-15, seeded area is forecast to decrease by 8% from the record area of 2013-14 due to the lower corn prices and a strong recovery in soybean prices. Production is forecast to decrease by 23% to 12.4 Mt due to the lower area seeded. Due to record high carry-in stocks, supply
will only decline by 2%. Imports are forecast to decrease by 17% due to the continuing high domestic supply and trend changes in usage. Total domestic use is forecast to increase by 2% due to trend increases in ethanol production, industrial use and livestock feeding. Exports are forecast to decrease by 17% to 1.0 Mt. Carryout stocks are forecast to decease by 13% but remain near record levels at 2.7 Mt. Prices are forecast to decrease due to lower US corn prices related to large supplies in North America and a general downturn in grain commodity prices led by US corn.
Corn prices in the Chatham, Ontario market have been abnormally stable due to the combination of flat US corn futures prices and virtually identical old and new crop basis levels. With large carryover supplies in Ontario, the nearby market has not been able to price in much of a premium as in prior years.
For 2013-14, exports are forecast to rise marginally from last year to 3.4 Mt, although the expected competition from increased supply in the US and Brazil is being moderated by unexpectedly strong Chinese buying. Similarly, the domestic crush is forecast to rise by 4% on readily available domestic stocks and generally attractive crush margins. Carry-out stocks are forecast up by 16%, to 0.20 Mt. Prices are expected to decline marginally from 2012-13, although the losses are being moderated by the surprisingly strong late season rally in world soybean prices.
For 2014-15, a record planted area is expected for soybeans, 2.5 mln ha, up 2% from 2013-14. The area producers intend to plant with soybeans is rising in both eastern and western Canada with Quebec and Ontario up 9% and 11%, respectively. A record soybean area is expected for Manitoba, at 0.53 mln ha, while Saskatchewan area rises by 76% to 0.12 mln ha.
Production is forecast to rise by 9% to 5.7 Mt as the rise in area is partly offset by a return to slightly lower normal yields. Supply is forecast to increase by 9% on higher carry-in stocks. Exports are forecast at a record 3.9 Mt, up 0.5 Mt from 2013-14 with strong shipments expected out of eastern Canada shortly after harvest. Carry-out stocks are forecast to be unchanged at 0.2 Mt. Prices are forecast to decline moderately under pressure from large US and South American soybean supplies with offsetting support provided by strong Chinese demand.
Wheat (excluding durum)
For 2013-14, exports are forecast to increase 12% from 2012-13 to 17 Mt due to growing world demand, especially in the food market. Domestic use is expected to increase by 6% with growth in all markets: food, feed and industrial. Carry-out stocks are forecast to increase by 138% to 9.3 Mt. Crop year average Canadian producer prices for wheat are forecast to decrease from 2012-13 due to higher world and Canadian supply.
Total use is forecast to rise by 24 Mt to 703 Mt. Carry-out stocks are forecast to rise by 11 Mt to 187 Mt. All wheat production in the US decreased by 3.7 Mt to 58 Mt. Domestic feed use is expected to fall because of a recovery in corn production. Exports are forecast to rise due to stronger world demand. Carry-out stocks are forecast to decrease by 3.7 Mt to 15.9 Mt.
For 2014-15, producers intend to decrease the Canadian wheat seeded area by 6% from 2013-14 because of lower prices and higher carry-in stocks. Canadian winter wheat area decreased by 5%, with an 11% decrease for eastern Canada and no change for western Canada. However, 8% of the area was expected to be re-seeded to other crops due to winter damage when the survey was done in late March, which would be lower than a year ago.
Production is forecast to decrease by 21% to 24.55 Mt due to the lower seeded area and lower yields. Supply is expected to decrease by only 3%, as the decrease in production is partly offset by higher carry-in stocks. Domestic use is expected to decrease slightly due to lower feed use. Exports are forecast to rise by 3% to 17.5 Mt due to growing demand in the food market. Carry-out stocks are forecast to decrease by 16% to 7.8 Mt. Average Canadian producer prices for wheat are forecast to increase from 2013-14 due to lower world, US and Canadian supply and carry-out stocks, and the forecast weaker Canadian dollar.