Canada Markets

Canada's exports in January fell 2.8% to $42.6 billion while imports remained steady, which resulted in Canada reaching its second-largest trade deficit on record at $2.5 billion, well above the $1 billion expected by economists. The decline in energy exports is playing a large role, down for eight consecutive months, while the data excluding energy exports would result in a small .2% increase from December and 3.4% above year-ago levels.

The aggregate of the Farming, Fishing and intermediate Food Products category indicates January exports at $2.722 billion, the highest level since August. This dollar volume is 4.5% above the December and 12% above January 2014.

The dollar value of wheat exported in January was reported at $724 million, up 12.9% from December and 21.9% above January 2014. The dollar value of canola exports is reported at $329.7 million, up .7% from December and down 11.3% from January 2014.

The attached chart indicates the year-over-year change in export volumes seen in some of Canada's smaller crops. The largest year/year gains for the first six months of the crop year are seen in the pulse crops such as peas and lentils while sunflower and mustard exports are lagging.

Cumulative lentil exports in the August through January period, at 1.174 million metric tonnes is 34.1% above the same period last year. Movement is well ahead of the pace needed to hit the 1.650 mmt export target set by AAFC, while overall supply availability will be the determining factor as we move into the spring and summer months.

Dry pea exports for the first six months of the crop year are reported at 1.893 mmt, 30.4% above the same period last year. Movement is also well ahead of the pace needed to reach the 2.9 mmt export target set by AAFC and once again, supplies will be the determining factor this crop year.

Canary seed exports in the August through December period are reported at 91,631 metric tonnes, 13.6% ahead of the cumulative volume reported in the same period for 2013/14. This pace is ahead of the cumulative volume needed to reach the most recent AAFC target of 170,000 mt.

Falling behind year ago export volumes are mustard and sunflower seed. Mustard exports in the August through January period total 61,143 mt, 13% below year ago levels. At the same time, the year to date volume remains the second highest in the five years from 2010/11 to 2014/15. Year to date volumes remain behind the cumulative volume needed to reach the current AAFC target of 135,000 mt.

Sunflower seed exports to the end of January total 15,596 mt, 30% behind the volume moved in the same period of time last year. Over the past four years, exports have been weighted in the latter half of the crop year. Year to date exports remain well behind the cumulative volume needed to reach the current 45,000 mt export target.

DTN 360 Poll

When asked how best one can explain the failure of U.S. wheat bids to translate into Canadian bids that reflect the Canadian dollar weakness against the U.S. dollar, respondents suggested:

13% indicated that grain companies are penalizing their customers

9% felt that Canadian producers are too eager to share target prices through the use of pricing orders which distort the market

6% felt that Canadian producers are not aggressive enough at forcing markets to arbitrage by delivering direct to the U.S

24% answered that basis is simply a tool which reflects local supply and demand conditions, with current wheat basis suggesting grain companies have all they need and

45% responded with all of the above. A further 3% chose "Other" reasons.

While responses from Saskatchewan and Alberta were dispersed across the list of choices, Manitoba responses seemed more polarized, with 38% responded that grain companies were penalizing customers while a further half of the responses choose all of the above. With grain pricing in Ontario much more transparent and tied to U.S. markets, roughly one third of responses suggested that producers could do more to arbitrage markets while another one-third felt that basis is simply signaling the current need for product.

Thanks to all those who responded. This week we ask if there is such a thing as an optimal range or sweet spot for the Canadian dollar exchange against the U.S. for your operation. You can answer on the lower right of your DTN Home Page.

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

Follow Cliff Jamieson on Twitter @CliffJamieson

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