Agriculture and Agri-Food Canada has released its October outlook for principal field crops. The report, prepared by grain and oilseed market analysts, includes an examination of the current crop year, 2015-16. Here are some highlights:
For 2015-16, production is forecast to increase 6% to 12.2 Mt due to the higher area and slightly above average yields. However, due to lower carry-in stocks and lower imports, total supply is expected to decrease slightly. Imports are forecast to decrease by 34% due to the higher domestic production and a return to a historical grade patterns. Total domestic use is forecast to increase marginally. Exports are forecast to increase significantly due to a higher quality crop. Carryout stocks are forecast to decline to 1.0 Mt, a 15-year low. The Chatham corn price is forecast to increase from 2014-15 due to a stable U.S. corn future’s price and a weaker Canadian dollar.
The average corn yield is estimated to be comparable to the previous five-year average for the three main corn producing provinces. Harvest conditions in Eastern Canada are much improved compared to last fall which suffered from cool temperatures and wet conditions making it one of the most difficult on record. Imports of US corn are expected to decrease as the size and quality of the crop in eastern Canada increases. In 2014-15, the Chatham basis levels had remained above the previous five-year average for the entire crop year.
The USDA September Grain Stocks report had a neutral effect on the U.S. corn futures market as stocks were in line with most trade estimates. The market focus will now turn to U.S. corn harvest progress and the quality of the crop. Harvest pressure will lower prices for the next couple of months; it will take good domestic and export disappearance numbers to get generate a boost in the U.S. corn futures.
For 2015-16, production of soybeans decreased slightly to 5.93 Mt due to a decline in planted area which was partly offset by a marginal slight rise in yields to 2.72 t/ha. Production of soybeans in western Canada reached a record 1.47 Mt, compared to 0.93 Mt in Quebec and3.45 Mt in Ontario. Supplies increased marginally as sharply higher carry-in stocks mostly offset the decline in output. Exports are forecast to remain at 3.8 Mt despite competition from burdensome world soybean supplies. Canadian soybeans are expected to be competitively priced into the world market on the strength of the U.S. dollar and the wide basis levels. Domestic crush of soybeans is forecast to rise slightly to 1.9 Mt while carry-out stocks are projected at 0.45 Mt.
Soybean prices are expected to fall to $380-410/t, under pressure from lower U.S prices.
For 2015-16, the USDA is forecasting world soybean production to increase marginally, to a record 320 Mt, on higher output in Brazil. Brazilian farmers are reportedly receiving near record prices for their soybeans and this has allowed them to be more flexible on prices.
For 2016-17, there are early indications that soybean area and production in South America will increase. With Chinese demand expected to remain stable, the growth in South American soybean exports is expected to occur at the expense of North America. Factors to watch are exchange rates, U.S. export sales pace, South American planting intentions and China’s import pace.
WHEAT (excluding durum)
For 2015-16, production fell by 12% from 2014-15 to 21.3 Mt due to a 5% decrease in seeded area and lower yields resulting from the drought in Saskatchewan and Alberta. The average crop year producer price in Canada for wheat is forecast to be higher than for 2014-15 because of the lower Canadian supply and the weaker Canadian dollar. Prices have increased since the end of July.
World all wheat (including durum) production increased by 7 Mt to a new record of 733 Mt. Supply rose by 26 Mt to 945 Mt, as the increase in production was compounded by higher carry-in stocks. Total use is forecast to increase by 9 Mt to 716 Mt, mainly in the food market. Carry-out stocks are forecast to rise by 16 Mt to 228 Mt.
U.S. wheat production increased by 0.7 Mt to 55.8 Mt, while supply increased by 4.4 Mt to 79.7 Mt because of higher carry-in stocks. Production increased for hard red winter and hard red spring wheat, and decreased for soft red winter and white wheat. U.S. domestic use is expected to rise by 5% and exports are forecast to rise by 3%. Carry-out stocks are forecast to increase by 2.9 Mt to 23.4 Mt.