Canada Markets

The Wall Street Journal ran a piece today on Canada's continued struggles in moving grain into United States markets, suggesting that the U.S. share of Canada's total grain exports in the first three months of this crop year is at a six-year low. Further study shows that looking at just three crops with sizeable volumes expected to move south -- wheat, durum and oats -- the share of Canada's U.S. exports when compared to total exports of these grains has ranged from 12% to 18.8% in the 2009 to 2013 period, while the five-year average is 15.4% according to the Canadian Grain Commission's data of exports through licensed facilities. In the first three months of the 2014/15 crop year, the share of U.S. exports has slipped to 9.9% of the total Canadian exports for these three grains.

The Wall Street Journal quoteed Mark Hemmes, president of Quorum Corp, the company charged with the mandate to monitor railway performance, saying "That's one of the major unintended consequences of the government order." He was suggesting that railways (maybe even grain companies) would prefer to haul east-west rather than north-south. Railways prefer this move because they can move grain to the coast in half of the 28-30 days needed to move grain into the U.S. Midwest. Meanwhile grain companies focus on maximizing the use of their West Coast assets while potentially even avoiding U.S. opportunities due to the risks associated with this movement, which may include both quality and logistics.

One thing is for certain: The slowing of grain movement south does not appear to be demand-related. According to the USDA's most recent World Agricultural Supply and Demand Estimates report (WASDE), import demand for wheat, durum and oats from all sources has grown year over year, with yesterday's report adding an additional 10 million bushels or approximately 272,000 mt of additional durum imports expected this crop year. Total estimated demand for the three grains in 2013 indicates imports of roughly 6.07 mmt, while in 2014, the latest forecast for the current crop year would suggest imports to total 6.41 mmt.

The attached chart shows the August to October exports of the three grains as a percentage of the total estimated or forecast import volume as reported by the USDA's WASDE report from all sources. In the first three months or 25% of this crop year, Canada has shipped 9.2% of the total wheat volume expected to be imported by WASDE from all sources over the 2014/15 crop year. This has fallen from 14.2% shipped in the fall of 2013 and is below the average of the previous three years of 15.7% shipped.

In the August-through-October period of 2014, Canada shipped just 3.9% of the total volume of durum expected to be imported into the U.S. this crop year. This is down from 10.7% last year and the three-year average of 8.5%.

The chart also indicates that 17.8% of the oat import volume expected by the USDA has been shipped across the border, up from 15.3% last year but trailing the three-year average of 23.4%.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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