Canada Markets

The first thing that sets this week's United States 2015/16 crop projections apart from those seen in Canada is the fact that major crops in the U.S. are expected to see a drop in planted acreage, as opposed to Canadian government projections which are calling for an increase in planted acres across all crops.

While its early days and numbers on both sides of the border will be challenged while change is a constant, USDA yesterday suggested that American producers would plant 1.8% fewer corn acres, .2% fewer soybeans and a 2.3% reduction in wheat acres planted. In total, 3.1 million fewer acres are estimated to be seeded which would result in the lowest planted acreage in four years.

Compare this to Agriculture and Agri-Food Canada's projections for 2015/16. Total acres seeded to grains and oilseeds are forecast to grow 4.2% to 66.6 million acres, while acres dedicated to pulses and special crops is expected to grow by 5.8% to 8.7 million acres. While Canada's all-wheat seeded acres are expected to grow by 3.2% from last year, corn is expected to see 6.3% more acres, soybeans forecast at 4.4% higher and canola acres are expected to climb by 2.1%.

Given Friday morning's USDA supply and demand projections for U.S. wheat in 2015/16, it would appear that North America is in for another sluggish year in the wheat markets with little hope for improved prices barring an issue outside of the continent.

The end result of the U.S. data released is a projected increase in ending stocks of 10.3% to the highest level in five years of 763 million bushels or 20.765 million metric tonnes. Should this occur, this would be the second consecutive increase in ending stocks, which would represent a 34.6% stocks to use ratio, the highest level in six years.

Projections released by Agriculture and Agri-Food Canada would suggest a far different situation for Canada. Ending stocks for all-wheat are projected to fall for the second straight year based on current supply and demand estimates, with the country's all-wheat stocks/use ratio estimated at 14.6% for 2015/16. The attached chart shows the divergence in the U.S, stocks/use ratio (blue line) and the Canadian stocks/use ratio (black line).

Adding both country's' ending stocks together, we see that ending stocks are relatively flat in the 2011/12 crop year through to the end of the projected 2015/16 crop year. Ending stocks for the two countries ranged from 24.593 mmt in 2012/13 to 26.153 mmt in 2011/12, with the sum of the current 2015/16 projections totaling 25.365.

Growing inventories in the U.S. have resulted in a projection for lower prices in 2015/16, according to the USDA, with the average price of all-wheat indicated at $5.10/bu as compared to the current year's $6.00/bu. The Canadian government has forecast an approximate 25% drop in new crop durum prices as global production recovers while current spring wheat prices are forecast slightly higher than seen in the current crop year, with Canadian dollar weakness improving returns for Canadian growers.

DTN 360 Poll

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

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