Canada Markets

As producers wait for the final set of rules which will govern Bill C-30 or the Fair Rail for Grain Farmers Act, a combination of increased rail performance starting in March as well as a return to more normalized yields in the 2014/15 crop year has resulted in cuts to Canada's July 31 ending stocks for both the 2013/14 and 2014/15 crop years by Agriculture and Agri-Food Canada (AAFC).

As seen on the attached chart, the total carryout of Canada's principal field crops was 9.591 million metric tonnes for 2012/13 (green bar) which is expected to swell to 21.61 mmt as of the most recent data release from AAFC. While this marks a stark improvement from the 23.645 mmt released in the March forecast, there is a very real chance ending stocks will be tighter than suggested by AAFC. One obvious example is seen in the case of canola, where AAFC reported total 2013/14 exports at 8.5 mmt, while the Canadian Grain Commission has reported year-to-date licensed exports at 8.495 mmt as of week 50. My research earlier this month suggested that total exports could exceed the 8.7 mmt record set in 2011/12. The 2013/14 carryout for canola could easily be closer to 2.5 mmt than the 3 mmt suggested by AAFC.

The one bright spot here is the tightening carryout estimates reported since the federal government's Order-in-Council was implemented in March which legislated minimum weekly volumes for both railroads, with AAFC reporting a forecast of 23.645 mmt carry-out for the country's principal crops in March, a forecast which has since been trimmed by just over 2 mmt to 21.61 mmt.

Given the enhanced rail movement as well as a smaller 2014 crop, the 2014/15 carry-out has been estimated at 13.085 mmt, 39% below the current 2013/14 forecast, which compares favorably to the 125% increase in carryout from 2012/13 to the most recent 2013/14 estimates. This number may prove to be inflated as 1) 2013/14 carryout may not be as high as forecast as discussed above and 2) AAFC's estimates are based on Statistics Canada data which has not captured acres lost to flooding in their June data release.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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