Highlights from the November 15 Principal Field Crop Outlook from Agriculture and Agri-Food Canada
Market analysts at Agriculture and Agri-Food Canada expect that 2018-19 corn production will increase to a record 14.5 million tonnes (MT) due to higher area planted and the second highest average yield on record. The Market Analysis Group released its latest Outlook For Principal Field Crops report on Nov. 15.
The report notes that total domestic use is forecast to increase 3% to a record of 14.4 Mt due to trend increases in ethanol production, industrial use and livestock feeding. Exports are forecast to decrease by 2% due to higher international competition. The nearby Chatham corn price is forecast to increase due to higher U.S. corn prices and the low value of the Canadian dollar.
The report also takes the vomitoxin issue into consideration. The analysts say prices for No. 2 low-vomitoxin corn at Chatham will remain strong this crop year but with sharp discounts for corn that is above 2.0 ppm. In the U.S., the damage to the corn crop was much below the damage experienced in Ontario. This could lead to higher than average corn imports into Eastern Canada as the market searches for sound product.
Soybean production is estimated at 7.5 Mt, a drop of 0.2 Mt from last year, based on a harvested area of 2.54 million hectares and yields of 2.76 tonne/hectare. The total supply of soybeans is estimated at 8.6 Mt, virtually unchanged from last year as higher carry-in stocks, at 0.65 Mt, offset the drop in output. Imports are forecast at 0.4 Mt, down slightly from last year. For the marketing year to-date, running from Sept. 1 to Oct. 25, the USDA reported export sales of 0.35 Mt to Canada, up from 45,000 t for the same period last year. Accumulated exports of U.S. soybeans into Canada are estimated at 0.19 Mt for the 2 month period compared to 22,000 t for September to October 2017. This pace of sales and shipments is consistent with increased Canadian imports of U.S. soybeans for processing in one of the three crush plants in eastern Canada.
Very little, if any, U.S. soybeans appear to be entering Canada for shipment into export markets in response to Chinese tariffs on US soybeans. The discount of the Canadian dollar relative to the US dollar at US$1.00=C$1.30 is expected to support Canadian shipments against competition from burdensome world soybean supplies, especially in the U.S. and Brazil.
One of the critical factors being closely watched is the extent to which China scales back imports in response the its higher tariffs on U.S. soybeans or whether it is willing to pay a price premium to ensure stable domestic consumption. Similarly, industry analysts are monitoring the USDA’s export sales reports to detect any shift in trade flows and whether the U.S. can diversify its markets for soybeans. To-date, the pickup in sales and exports to ex-China countries is not matching the drop off in the sales and export pace to China. This suggests U.S. ending stocks may end the crop year above USDA projections given the lack of evidence of market diversification to-date.
Wheat (excluding durum)
For 2018-19, Canadian wheat production is estimated by Statistics Canada to increase by 1% from 2017-18 to 25.3 Mt as an 8% increase in seeded area was mostly offset by lower yields, resulting from below normal precipitation in most wheat growing areas. Total supply is estimated to decrease marginally because of lower carry-in stocks.
Exports are forecast to rise by 3% because of strong demand for wheat in world markets and less competition from Australia, Russia and Ukraine. Wheat exports were strong during the first three months of the crop year. Total domestic use is forecast to increase by 2%.
The average crop year prices for various types of wheat in Canada for 2018-19 are forecast to increase from 2017-18, because of the lower world supply and strong export demand. However, protein premiums are lower than for 2017-18 because the protein content for U.S. hard red winter wheat is higher and the production for U.S. hard red spring wheat increased.